Scholarships Often Don’t Help

We all love free money, and hours upon hours of time gets invested into applying for the $1,000 Rotary Scholarship, the $500 BECU scholarship, and so on. The sad news is that for students applying to private schools, this money will most likely not benefit them AT ALL!

When determining financial aid, schools calculate your expected family contribution (EFC), and then they look at how to fill the gap between what you can afford (your EFC) and the cost of the school. Most of us would view money earned in a scholarship as counting towards the family’s part of the pie, we think, “The FAFSA says our EFC is $18,000/year and Sally got a scholarship for $2,000, so now we’ll only have to come up with $16,000!” WRONG.

Let’s assume this particular school costs $35,000/year and the school meets 100% of need. The school is thinking, “Sally’s family can afford $18,000/year and we were going to have to come up with $17,000 of aid to meet their need, but now that she got a $2000 scholarship we only have to come up with $15,000!” In other words, the school still views the family as being able to spend $18,000/year and looks at the scholarship as a “resource of the student” and a direct reduction in aid that is given.

Note that for public schools, this is less likely as fewer people are getting scholarships to attend these institutions. Here, the scholarship actually does benefit the student…but don’t count on them benefiting you at a private college. This is part of the reason we encourage you to focus on institutional grants as the #1 source of free money for college.

This tip is one small piece of the puzzle. If you are interested in finding out more about the whole picture give me a call at (425) 329-2609.