There are two major delusions/misconceptions about paying for college that too many parents have. The first is that by not saving for college, parents claim this will make their kids eligible for more financial aid. Why bother saving if it means they won’t get any financial aid? This falls into the delusional category. I generally give people the benefit of the doubt but I can’t help but think this has more to do with preferring to spend money now rather than saving for later. Oh, FYI, financial aid doesn’t work that way.
The second is really a misconception that I can’t fault parents for having-scholarships will pay for college. By the senior year in high school, there’s every reason for parents to believe that their bright, high achieving seniors will be able to pay for college if they just apply for enough scholarships. There are easily a dozen different websites just to search for millions of scholarships worth billions of dollars.
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So what exactly is my problem with private scholarships? Honestly, I don’t have anything against free money and if you get one-more power to you. But the truth about scholarships is that they will come nowhere close to paying for college for the vast majority of people. It’s simply a matter of numbers.
Defining Private Scholarships
First, let’s be clear on what I’m referring to as a private scholarship. These are scholarships that are not awarded by the school or any government agency. These are scholarships that students apply for that are sponsored by corporations, non-profits, and community groups.
When you see the statement that “over $100 million dollars in scholarships money goes unclaimed” each year, they’re talking about private scholarships. The statement comes from the National Scholarship Providers Association (NSPA) so they should probably know. They also know that this isn’t because of grades but rather the strict eligibility requirements demanded by these scholarships.
Yet, that’s not what the media makes of it. Instead, this information is included in a list of ways to pay for college with the implication being that if only students would apply to more scholarships, they wouldn’t graduate with so much debt!
In fact, a survey by Accounting Principles found that a third of college graduates would have actively pursued more scholarships and financial aid options knowing what they now know about the cost of living. Which goes to show while they obviously have learned something about debt, they haven’t learned much about scholarships or how to pay for college.
Show me the money
Let’s get back to the numbers. According to Mark Kantrowitz, the National Postsecondary Student Aid Study found that 81% of undergraduates had an average scholarship of $3,852. Furthermore, “Of all undergraduate students, only 0.1% got $25,000 or more in scholarships. 97% of scholarship recipients receive $2,500 or less in scholarships.
The How America Pays for College 2022 survey found the scholarship average for undergraduates at four-year institutions to be $3,745. The survey shows a larger percentage of students receiving scholarships, 15%. However, this includes scholarships (non-grants) received from the school as well. According to the survey, 33% of students received scholarships “From nonprofit or company” for an average amount of $1,688. This was lower than the $1,905 from state scholarships and $6,408 from school scholarships. The survey also found 29% of students applied for scholarships but didn’t report using any to pay for college.
The College Board’s Trends in Student Aid 2021 report lists “Private and Employer Grants” as making up 7% of all undergraduate student aid and 12% of all grant aid. This means that the total amount of money from scholarship sources is somewhere around 10% of all of the available free money. Yet, it’s split by nearly a third of all undergraduates which explains why the amounts are so small.
You could take this information as an argument that students aren’t applying for enough private scholarships. If they were, then the NSPA wouldn’t be able to talk about all of that unclaimed scholarship money. If only students would take the time to apply!
I’m not saying it couldn’t happen but be prepared to submit a lot of scholarship applications. Let’s start with the average cost of attendance for college. A good state school is going to be anywhere from $25,000 to $35,000 a year while a private school is going to set you back a minimum of $45,000. Now how much are these private scholarships offering?
What are the odds?
Forbes has a list of the “10 High Dollar Award Scholarships for College.” There’s the Buick Achiever’s Scholarship Program that offers a multi-year $25,000 scholarship-that’s singular, as in one person gets it. An additional 1,000 students will receive a one-time award of $2,000. So probably at least 1 in 1000 odds?
There’s the National Merit Scholarships where “At Auburn University hundreds of students apply for 6 elite scholarships which range from $2,500 – $7,500 per year over four years.” Room and board almost covered!
National finalists in The Siemens Math, Science and Technology (now Regeneron STS) Award Scholarships receive awards that range “from a low of $10,000 to a high of $100,000 for the first place winner.” Again, what are the odds?
I could go on through all 10 programs but the conclusion would still be the same, there is probably more competition for any medium to high value scholarship award than there is to get into Harvard. You can take a look at ThoughtCo’s 54 College Scholarships Worth $10,000 or More for a larger listing. Just remember, even with the more limiting requirements of some of the scholarships on this list, any scholarship that a lot of people know about will have a lot of people applying.
Best bets for private scholarships
Your best shot for private scholarships is to go for the local ones that come through your high school guidance counselors’ office. Not as much competition but also not as much money. It’s going to take a lot of $500 scholarships to start making a dent in just your state tuition.
Of course, there are people who do collect enough private scholarships to make it the equivalent of a full-time job. If you think about it, it makes sense. Calculate what your hourly wage would be if you spent it applying to scholarships and winning a certain percentage. But people who take this approach are definitely the exception rather than the rule.
They could hurt your financial aid
Students eligible for need-based financial aid need to check with their schools for their policy on out-side scholarships. After a minimum amount, many schools will deduct the outside scholarship from any need-based financial aid awards. Ideally, the school will use the outside scholarship to reduce the loan amounts first, but that isn’t always the case. You can read about a case at Swarthmore here. At Georgetown they reduce College Work Study rather than loans first. You can look up individual school’s displacement policies at DisScholared.
And just in case you’re wondering, students must report outside scholarships to the financial aid office. So yes, in a worst case scenario, students can work hard for outside scholarships only to find that none of it can be used to reduced their EFC. If you want to see how messed-up the system can get, read about how students can’t use scholarships to fund mandatory student contributions. At some schools such as Columbia, students are expected to contribute based on summer and term earnings.
Where to find the biggest scholarship
My problem isn’t with private scholarships but with the suggestion that if only students applied to enough of them, they would be able to pay for college or avoid large amounts of debt. Of course, there will be some students who receive enough scholarships to pay for college. And if you have time to apply for scholarships, you should. But the truth about scholarships is that most students would be better off if they used their time figuring out which schools are most likely to give them the most money before they ever even apply for admissions or scholarships.