The Truth About Scholarships

hand stacking coins representing the truth about scholarshipsIf January is FAFSA month, February must be Scholarship Month. Actually, I think it’s a double team kind of effort-while you’re waiting for your admission results, complete the FAFSA and start looking for scholarships! I’ve already told you about the problem I have the FAFSA hype. Today I’m going to vent on the scholarship hype.

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.

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.

There’s this belief that if a student just applies to enough scholarships, she’ll be able to pay for college without going into debt. Here’s the perspective one high school junior, “scholarships are quite attractive in terms of funding.” And here are the regrets of a college graduate who believes that he wouldn’t be so deep in debt if only he had “viewed [scholarships] like jobs, could’ve been the highest paying jobs of my life…”

In fact, according a survey by smarterbucks.com, “If our respondents knew then what they know now about their student debt: 80% would have applied for more scholarships/grants.” 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.

Let’s get back to the numbers. The National Scholarship Providers Association (NSPA) sponsored a Private Scholarship Count that was published in 2005. It found that “Approximately 7 percent of undergraduate students received private scholarships, with an average value of $1,982.”

It’s not likely the numbers have changed much since then. The College Board’s Trends in Student Aid 2015 report found lists “Private and Employer Grants” as making up 6% of all undergraduate student aid and 14% of all grant aid. This would appear to be double the number provided by the NSPA study. However, this includes employer tuition reimbursement programs which are likely to be at least half of the category.

You could take this information as an argument that students aren’t applying for enough scholarships. After all, the NSPA study states the amount of aid that went unawarded “may be approximately $100 million annually.” 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 around $25,000 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?

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 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. Any scholarship that a lot of people know about will have a lot of people applying.

Your best shot at a private scholarship 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 scholarships to make it the equivalent of a full-time job. But they are definitely the exception rather than the rule.

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.

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 mess-up the system can get, read Poor Scholars Hit by Money Squeeze From Wealthy Colleges.

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.

  1. This matches up with what I’ve personally heard; the best bet is the scholarship the college you attend will give you. I know one stellar student, with lots of unique extracurriculars, who applied for 100 outside scholarships and received only one, for something like $1500.

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