In today’s college search, students put so much stress on themselves to find the right “fit.” Often, they focus on schools where they can get in and get a great education. In other words, finding a good academic and social fit. However, with the rising cost of education, finding a good financial fit must be a part of this equation in the 21st century. Understanding the financial fit includes understanding sources of what we like to call “free money.” Free money is funding that the student will not have to pay back and includes grants and scholarships.
In general terms, the money to pay for college is coming from a few different buckets–from the government, from the college, from private entities, from loans, and of course from your client’s pocket. Loans, work study, and a family’s savings are not “free,” so let’s dig into free!
So where can you find “free money”?
- Need Based Aid
- Government Grants
- Institutional Grants and Scholarships
- Private Grants and Scholarships
A family’s financial situation determines if they qualify for need-based aid. A student’s academic prowess determines if they qualify for merit scholarships.
The government has set formulas to determine how much a family can “afford” to pay, their Expected Family Contribution or EFC. I put “afford” in quotes because when you see that number you may laugh at the thought that this large figure is what your clients are supposed to be able to afford from their income and assets! For families with a low EFC, the student may be eligible for need-based aid. The EFC is determined by filling out the Free Application for Federal Student Aid (FAFSA). Your client’s can get an estimate of their EFC with this calculator. (They can dig deeper into need calculations here.)
Need-based aid is awarded in two ways:
- Gift Aid – does not need to be paid back so is a form of “free money”
- Self Help – Either a loan that they must repay in the future or “work-study”
Self help listed above is not free money. A loan will need to be repaid over time, and work study requires effort and time by the student.
If your clients are a need-based aid candidate, students may be eligible for free money from the government. For example, these programs can include Pell Grants, programs for teachers, and programs for children of those who died serving in Iraq and Afghanistan. These grants aren’t available to everyone, but if your clients can take advantage of this free money, great!
The good news is that if they fill out their FAFSA every year the university should facilitate getting them the funds they deserve when they receive their financial aid package for the year. HOWEVER, on numerous occasions we have found that students had to ask the financial aid office about the TEACH Grant. So don’t assume anything!
College Gift Aid – Grants and Scholarships
Did you know that the largest amount of free money comes from the colleges themselves? Yes, it’s true! Colleges award “free money” in two ways–based on need and based on merit. How much money your client’s students need is determined by this formula:
Cost of Attendance (COA) – Expected Family Contribution (EFC) = Demonstrated Financial Need
If a school costs $30,000 to attend and your client’s family’s EFC was $10,000, their Demonstrated Financial Need is $20,000.
Not every school will make up that missing $20,000. However, some do. In 2018, 18 schools met 100% of a family’s demonstrated need. (Note, a family still must pay their EFC.) Other colleges will meet a portion of that demonstrated need.
Those 18 colleges and universities are some of the hardest academically to get into, but if your client’s student can be accepted and they financially qualify, they will receive some great free money. If your clients are a need-based aid candidate, they should seek out schools that meet at or near 100% of their demonstrated financial need.
Merit based scholarships
Colleges also award free money in the form of scholarships based on merit to talented students. Some merit scholarships are automatic and some are competitive. Some colleges like the University of Alabama will award set amounts of free money to every incoming student who has a certain GPA and ACT score. Other schools like The Ohio State University will award scholarships based on talent but only to a select group determined competitively.
This free money is awarded without regard to financial need so those families whose earnings are too high for need-based aid want to search out those colleges with a high percentage of merit awards to students like theirs.
When schools determine who is eligible for merit aid, they often look at the top 25% of their incoming class as the eligible students. They want to attract the most talented students. Colleges like the University of Alabama award $6,000 per year for four years in merit money to ALL incoming out-of-state students who in 2019 had an ACT score of 27 and a GPA of 3.5. They tier their awards so higher scores and grades receive more free money. However, the 27 and the 3.5 represent the beginning of the top 25% of their incoming class.
Knowing the deadlines, the qualifications, and having a target for test scores not only for admissions but for scholarships is critical. Take a look below. Improving a student’s score just one point from a 28 to a 29 would mean an additional $28,000 over 4 years! WOW!
Be aware of application deadlines. At Alabama the deadline is December 15th this year. If your client applies on December 16th, they would receive $0 even if they had a 35 on the ACT! So, how much is test prep worth? I guess as much as $104,000 in this scenario!
UNIVERSITY OF ALABAMA – Out-of-State Scholarships for 2019-20
|ACT Score (+3.5 GPA)||Per year award||4 Year Award|
If your client’s students are applying to a college that awards free money scholarships competitively, they’ll want to be in the top 25% to have the best shot of receiving an award. It is not guaranteed, but their chances are better. Collegedata.com can help them figure out the top 25% mark for test scores. Look up Ohio State University, and you will see that the middle 50% of the incoming class scored anywhere from 27 on the low end to 31 on the high end. So, 25% of students scored over 31 on the ACT.
Scoring a 31 won’t guarantee your clients free money from OSU because merit money is awarded competitively, but at least they’ll know they have a higher probability of receiving an award. Be aware that many competitive scholarships are awarded not only for academics and test scores but the full body of work of the students that are desirable to the institution. Things like leadership and volunteerism are extremely important to the fabric of a university, and the schools want and need those types of students just as much as the high academic achiever.
Another source of free money is from private entities in the form of scholarships from sources like a parent’s employer or local community groups. Your clients can also look at scholarships from associations in the major and career their students are working towards. For example, the local Financial Planning Association has an annual scholarship of $2,500 for someone in a financial planning related area of study!
Also remember, the number one resource for community scholarships is your high school’s guidance office.
If your client’s student could earn $50 per hour, wouldn’t they?! Yes, finding private scholarships takes work and effort, but the rewards can add up.
For national searches, the College Board hosts one of the largest data bases, and they won’t spam your client with a bunch of advertisements. For those in Ohio, check out the Columbus Foundation for scholarship opportunities!
Private scholarship challenges
If someone “promises” your client they can find them scholarship money they should RUN! The old cliché “If it sounds to good to be true, it probably is” applies here. Your clients do not need to pay someone to search for scholarships in the age of the internet.
In my experience, the hardest part about searching for private scholarships is motivating a high school senior that just submitted 10 college applications and essays to do MORE applications and essays. But it can pay off big.
I would recommend advising clients to apply to 6 to 10 scholarships that match their profile. Deadlines are often as early as December, and some are open for applications through April of the student’s senior year.
Keep your expectations realistic and understand that over 80% of the scholarships awarded are from the colleges and universities themselves.
Something you may not know…
If your clients are a need-based candidate, private scholarships can have an impact on the amount of financial aid they receive from their college. Private scholarships will reduce their need-based aid from the institution. Sometimes the gift aid or grant amount is reduced by the amount of the private scholarship, and sometimes the school will reduce their work study and/or need-based federal loans. This practice is called scholarship displacement. It depends on the school. Reducing the loan amount is the ideal situation because they are replacing free money with money that your clients would need to pay back!
Report all private scholarships to the financial aid office to avoid having to pay money back to the institution later.
What to take away from all this?
Your client’s need to be an informed consumer of higher education, they need to understand the ways to make college affordable for their family.
- Will you qualify for need-based aid?
- What schools meet that need?
- How does the student compare academically to other students for a particular college in order to win free scholarship money?
- And how do all these pieces of your client’s personal puzzle fit together?
The college search process must be focused on creating the best possible outcomes for students and families. This means graduating on time (4 years) with manageable student loan debt without robbing retirement.