The Ins and Outs (and Pluses and Minuses) of College Scholarships.
One question Scott always asks in his workshops is “Who here is expecting to get a lot of information on scholarships?” Invariably at least a third of the room raise their hands and half nod their heads. Scholarships are always looked at as a solution to the college funding problem. In fact, many times parents and students will bring up the “fact” that there is college scholarship money just waiting out there to be claimed if you know where to look for it. Then I give them the shocking truth. But we’re getting ahead of ourselves. Before we get into the juicy details, let’s highlight some takeaways on college scholarships.
Things to Know About College Scholarships
- Internal Scholarships
- External Scholarships
- A Sliver of the College Financial Aid Pie
- College Scholarships: A Zero Sum Equation?
- When to Pursue Scholarships
Also called merit awards, internal scholarships are monies that are awarded by the colleges and universities themselves as part of their financial aid award. Internal scholarships are always good.
These are the monies that most people think of when you hear the word scholarships. These are typically awarded by some kind of academic, civic or personal competition by a well-intentioned corporation, non-profit organization, or foundation.
A Sliver of the College Financial Aid Pie
Here is something that will probably surprise you. All of that scholarship money that you hear about? Those billions of dollars just lounging around waiting for someone to pick it up off of the ground? That pot of gold at the end of the scholarship rainbow? It's practically non-existent!
Before you close your browser or hit another website, hear us out. Scholarships from the DAR, the Rotary, Wal-Mart, your local church, from any organization to which you apply make up only 2% of the money that is available to help pay for your college education. TWO PERCENT! How in the world are you going to pay for college on only 2% of the money?
Why do you think that the scholarship search sites like FastWeb.com are sponsored by the student loan companies? Because these companies know there is a huge myth surrounding the scholarship search game, and they take full advantage of that myth. They know that student after student is going to the scholarship search websites hoping to find that scholarship pot of gold. In the end, what they will likely leave college with is a kettle full of debt.
Or, worse, a group comes into town and convinces you to pay them a nice little fee to help you get in front of all the scholarship search committees. They are going to make you look like the greatest thing since sliced bread and you are just going to rake in the scholarship dollars. Don’t believe the hype. If you’re still skeptical, read on.
College Scholarships: A Zero Sum Equation?
Much like the lottery, there are always going to be stories of students who hit it big in the scholarship game. $8,000 for college. $12,000 for college. Many of those students have been Scott’s clients and some students do get awarded big dollars to attend college.
Unfortunately, the part of the story you don’t hear, and the part that stuns so many people, is that for most colleges in the country, the standard policy is to reduce the student’s financial aid package by the same amount of external scholarship the student is awarded. We’ll say this again: for every dollar in external scholarship money you bring to the table, virtually every higher education institution in the country will reduce your financial aid package by that amount. Essentially, scholarships, even for those lucky few who get them, gain you almost nothing and can even cost you in lost time and effort (read the story at College Finance 101 > A Word on Scholarships).
When to Pursue Scholarships
We advise students who have the academic credentials to make them very attractive to scholarship committees that there are only two occasions when hunting for external scholarships makes sense:
1) Your heart is set on attending a college with a very poor financial track record and has a history of not giving money to anyone, or,
2) Your chosen university only awards financial aid based on need and your Expected Family Contribution is so high you’re excluded from the need-based pool of aid.
We are very unhappy to report that, other than in these two instances, hunting for scholarships is likely to be an exercise in frustration.