In the early 1970s the U.S. auto industry received warnings from economic experts—if they continued to focus on the wrong thing, Japanese car companies would soon put them out of business. Detroit’s Big 3 of GM, Ford, and Chrysler were told that if they remained attached to producing oversized, inefficient American-style models, they would soon be surpassed by the compact, fuel-efficient cars being made by the Japanese if the price of gasoline were to drastically increase. Laughing off these dire warnings, U.S. auto execs continued with business-as-usual. Over the course of the decade, due to a changing atmosphere in the Middle East, the price of oil skyrocketed and the American car companies crumbled. If you’ve ever seen Eminem’s 8 Mile or an episode of Hardcore Pawn, you have an idea of how things turned out in the Motor City.
It’s easy to become fixated on details that are new, shiny, and fun (like a ’72 Corvette) and ignore others that are counter to our belief system. Such is the case with how prospective high schools students and their families seek financial aid. For whatever reason, students and parents alike spend an inordinate amount of time seeking out private scholarships from employers, non-profits, and local organizations and not enough time focusing on where the bulk of aid money actually comes from.
The shocking numbers
Let us quickly disabuse you of this notion through simple numbers. In the 2011-12 academic year roughly $185 billion in student aid was awarded to undergraduate students. The overwhelming majority of student aid comes from the federal government, representing 49.6% of all aid awarded. Institutional aid from colleges and universities is the second largest source at 33.3%, and state governments give 10.3% of total aid. A mere 6.8% comes in the form of employer and private scholarships, a number that doesn’t quite support all of the hype.
Many parents mistakenly believe that the majority of aid comes in the form of private scholarships, and so they spend precious time scouring through scholarship websites, books and other sources looking for what amounts to only a fraction of total aid awarded each year. According to the College Board, only 6.8% of all student aid consists of employer and private scholarships, and yet we hear each year how there are millions of dollars in scholarships that go unused. While there is some truth to that statement, the fact also remains that many of those scholarships are inaccessible because the qualifying requirements are so limiting. For example, there may be a scholarship at a regional university specifically aimed at a student from a particular county, with a high school GPA of 3.5 or higher, who is majoring in interior design. If no incoming student meets these criteria, the scholarship may go unclaimed.
Private Scholarships can hurt your financial aid package
It is also important to note that since the federal government requires postsecondary institutions to consider private scholarships when calculating financial aid, outside scholarships can actually reduce your total aid package. Let’s say, for example, that a family’s expected family contribution (EFC) is $17,000 and the cost of the college is $30,000. In order to meet this cost the college offers $13,000 in its financial aid package to assist the family. Now let’s say that the student wins a $3,000 scholarship from a local employer. In this instance, most schools would then reduce their respective financial aid offers by $3,000. Hopefully, these reductions target loan awards, rather than grant awards, although that isn’t always the case at every school. All in all, private scholarships have very little impact on the “bottom line” for students requiring need-based aid since scholarships often lead to a reduction in their original financial aid award. For affluent students who do not require aid, however, scholarships will undoubtedly impact out-of-pocket costs by reducing the amount they owe.
By no means do we want to discourage you from applying for private scholarships; we just encourage you not dedicate an excessive amount of time to these pursuits. Should you remain interested, we will attempt to expedite and enhance your quest by offering the following ten tips for pursuing private scholarships.