The Scholarship Question Every Parent Asks (And the Answer That Changes Everything)
⚠️ Policy Update — Parent PLUS Loans Have Changed: Starting with the 2025–2026 academic year, Parent PLUS Loans are now capped at $20,000 per year and $65,000 aggregate. This is a significant change from the previous unlimited borrowing policy. Families who need to borrow more than $20,000 should act now to understand their private loan eligibility.
How does my kid get scholarships? It sounds like a simple question, but unpack it a little and you’ll find it covers need-based grants, merit awards, private scholarships, and a whole lot of strategy that most families skip entirely. In a recent episode of Ol’ College Try, Matt Carpenter, CAP Co-Founder and CEO, and Peg Keough, Director of Education, tackled that question alongside two more: what to do if you don’t qualify for a Parent PLUS Loan, and whether a family making $200,000 a year can actually get help paying for college.
The answers are more nuanced, and more hopeful, than you might expect. Here’s everything they covered.
How Your Kid Actually Gets Scholarships (And Why Most Families Look in the Wrong Place)
When most families hear “scholarship,” they picture a competitive essay contest or a national award. That’s actually the smallest piece of the puzzle. The bigger picture starts with one word: discounts.
Every college is in the business of discounting its sticker price. That discount can arrive in two forms: need-based grants (tied to your family’s finances) or merit scholarships (tied to your student’s academic profile). Both reduce what you pay. Understanding which ones apply to your family is the first job.
Step 1: Find Out If You Qualify for Need-Based Aid
Need-based grants are the largest source of institutional financial aid, and a lot of families assume they won’t qualify without ever checking. That’s a costly mistake. Income alone doesn’t determine eligibility. The number of kids you have in school, your assets, your family size, and how different colleges calculate your Expected Family Contribution all play a role.
💡 Free Tool: Set up a free account at mycap.collegeaidpro.com and enter three schools. MyCap will show you what each college expects your family to pay — the fastest way to find out where need-based aid applies to you.
Step 2: Look at Merit Scholarships From the College
Merit scholarships are how colleges compete for the students they want. Unlike need-based grants, these have nothing to do with your income. They’re the admissions office saying, “We want your student, and we’re willing to cut the price to get them here.”
Some schools are extremely generous with merit money — offering $20,000, $30,000, or even $40,000 per year regardless of family income. Others, like Ivy League schools and highly selective liberal arts colleges (Amherst, Williams), offer zero merit scholarships. That’s a business decision on their part, not a reflection of your student’s qualifications.
CAP’s rule of thumb: Build your college list with merit money in mind from the start. Don’t pick schools first and check the price tag after. MyCap shows merit scholarship data for colleges across the country — use it before your list is finalized, not after.
Step 3: Fill the Gap With Private Scholarships (If Needed)
Private scholarships — the kind from organizations, foundations, and community groups — get a lot of attention but represent only about 5% of all financial aid awarded each year. The other 95% comes from colleges themselves and the federal government.
That doesn’t mean private scholarships are worthless. They’re a valuable gap-filler, particularly for families whose target school offers no need-based aid and no merit money (think Yale or Stanford for a high-income family). But they should be the last step in your strategy, not the first.
When you do search for private scholarships, start local. Community foundations, employers, local civic groups, and regional awards are far less competitive than national programs. Your MyCap account also includes a searchable private scholarship database where you can filter by location, intended major, ethnicity, and extracurricular activities.
Important: Don’t let the noise around private scholarships pull your family’s time and energy away from the 95% of the pie. Maximize what you can get from the college first — need-based grants and merit awards — before chasing outside scholarships.
One More Thing: Start Early
The single biggest mistake families make with scholarships and financial aid is waiting too long. If your student is a rising junior or senior, now is the time. The college list you build should reflect what each school will actually cost your family, not just the published tuition price. That means running the numbers before you fall in love with a school, not after.
What to Do If You Don’t Qualify for a Parent PLUS Loan
Parent PLUS Loans are federal loans for parents who need to borrow money for college beyond the student’s federal direct loan. Historically, parents could borrow an unlimited amount. That changed in 2025.
The New PLUS Loan Caps
| Loan Type | Annual Cap | Aggregate Cap |
|---|---|---|
| Federal Direct Student Loan (Freshman) | $5,500 | $27,000 total over 4 years |
| Federal Direct Student Loan (Sophomore) | $6,500 | |
| Federal Direct Student Loan (Junior/Senior) | $7,500 | |
| Parent PLUS Loan (New 2025 Cap) | $20,000/year | $65,000 total |
A recent study estimated that 40% of families who need to borrow for college won’t qualify for private loans. Their only option is the federal PLUS loan. That number jumps to 60% for Pell-eligible families (lower-income households that qualify for the most financial aid). If you’re a family that needs to borrow more than $20,000, you need to find out now whether private loan options exist for you — because if they don’t, your college choice may need to change.
If You’re Denied the PLUS Loan
Getting denied is not a dead end, but your options are specific. Here’s what to know:
Option 1
Request Additional Federal Student Loan Funds
When a parent is denied the PLUS loan, the student becomes eligible to borrow an additional $4,000 via the federal direct student loan. The student must contact the financial aid office directly, mention the PLUS denial, and request the additional funds. This is not automatic. Note: the $4,000 increase is a one-time total, not per year.
Option 2
Dispute the Denial
If there are extenuating circumstances in your credit history, you can dispute the PLUS denial. In practice, you’ll need something tangible — a documented error, a resolved delinquency, or similar. This doesn’t work for every family, but it’s worth exploring.
Option 3
Add an Endorser to the PLUS Loan
An endorser is similar to a cosigner — someone who lends their credit profile to the application. However, there’s an important distinction: the federal government does not pursue an endorser on a PLUS loan the same way a private lender pursues a cosigner on a private loan. If you need to have this conversation with a family member or trusted person, that nuance matters and is worth explaining to them.
“Just because there are different entities that might enable you to borrow the money doesn’t mean it’s the right call. Sit back and look at affordability, not just for year one, but for all four years.”
— Peg Keough, Director of Education, College Aid Pro
Can a Family Making $200,000 Get Help Paying for College?
Yes. More often than families realize.
$200,000 sounds like a lot of income until you factor in where you live, how many kids you have, and what you’ve had the opportunity to save. Many families in their prime earning years simply haven’t had 18 years to build a college fund. And many of them qualify for more help than they think.
The Counterintuitive Reality: Private Can Cost Less Than Public
Here’s a real scenario: a family of four living in Beverly, Massachusetts, earning $200,000 with limited non-retirement savings. Amherst College, with a sticker price around $105,000 per year, may end up being more affordable for that family than UMass Amherst at $45,000. Why? Because Amherst’s need-based aid formula produces a lower out-of-pocket cost for this family’s specific profile. UMass gives nothing.
There Is No Hard Income Cutoff
It’s a common misconception that there’s a definitive income threshold above which families don’t qualify for financial aid. In reality, the calculation is far more nuanced. Families with income over $1,000,000 have, in some cases, qualified for need-based aid at certain institutions. Family size, number of students in college simultaneously, asset structure, and which specific college you’re applying to all factor in.
Strategies for $200K+ Families
- Do your homework early. The need-based aid calculation uses tax data from your student’s sophomore year of high school (January 1 of that year). Families who begin planning before that window can sometimes reduce their financial aid liability through legal, proactive strategies.
- Target merit-generous schools. You don’t need a 4.0 and a 1600 SAT to earn merit money. Many schools offer merit awards to a broad range of students. Find those schools and put them on your list.
- Consider a professional assessment. If your family has financial nuances, presenting that picture accurately to colleges can make a meaningful difference in your aid offer. This is something CAP specializes in.
- Don’t beat yourself up. You are where you are. What matters now is understanding where you fit and building a smart list from that foundation.
Should You Start a 529 If Your Child Is Already in High School?
The short answer: it depends, but it’s rarely a bad idea.
A 529 savings plan grows tax-free, and withdrawals for qualified education expenses (tuition, fees, room and board, books, required technology) are also tax-free. The power of a 529 is in the long runway — years of tax-free compounding. If your child is a rising senior, that runway is short.
That said, here are the key considerations:
| Situation | 529 Makes Sense? | Notes |
|---|---|---|
| Child starting college in 1–2 years | Possibly | Tax-free growth benefit is limited. Invest conservatively. Check for state income tax deduction. |
| Child currently in college | Yes, if you have more than one child | Benefits transfer to siblings. Also usable for grad school. |
| Your state offers a 529 tax deduction | Yes — check the rules | Some states have holding-period rules before withdrawal. Read the fine print. |
| You want full spending flexibility | Consider a regular savings account | A 529 restricts spending to qualified expenses. A money market account at 4% gives flexibility for clothing, travel, and other costs. |
💡 529 Tip: If your student is within two years of college, shift any 529 holdings into conservative investments. You don’t have enough time to recover from a market downturn, and the last thing you want is a big loss right before tuition bills start.
Frequently Asked Questions
What’s the difference between a scholarship and a grant?
Functionally, not much. Both are free money that reduces your college bill. The terminology varies by school: some call need-based aid “grants,” others call it “scholarships.” What matters is whether the money is tied to financial need, academic merit, or both.
Is there an income level where families definitely won’t get financial aid?
No hard cutoff exists. The calculation depends on your specific school, family size, assets, and other factors. Even families with seven-figure incomes have qualified for need-based aid at some institutions. Always run your numbers at the specific schools you’re considering.
What happens if you’re denied a Parent PLUS Loan and can’t find a cosigner?
It may mean a particular college simply isn’t affordable for your family under the new loan caps. This is a hard conversation, but it’s far better to have it before your student falls in love with a school than after an acceptance letter arrives. That’s why running the numbers early matters so much.
Can a 529 affect financial aid eligibility?
Yes, though the impact is relatively small. A 529 owned by a parent is counted as a parent asset in the FAFSA formula, which has a lower weighting than student assets. At most it will modestly reduce need-based aid. The tax benefits of a 529 generally outweigh the small reduction in aid for most families.
Should I focus on local or national private scholarships?
Local, every time. National scholarships attract thousands of applicants. Local scholarships from community foundations, employers, and civic organizations are far less competitive and often go unclaimed. Start there, then expand outward.
See What College Will Actually Cost Your Family
Set up your free MyCap account and enter up to three schools. In minutes, you’ll know what each college expects you to pay, where merit money is available, and what private scholarships you may qualify for.
Click here to listen to the full episode!
This post is based on a recorded episode of Ol’ College Try, the College Aid Pro podcast. Financial aid policies, loan caps, and eligibility rules are subject to change. The information in this post reflects current policy as of 2025. Families are encouraged to consult a financial aid professional for guidance specific to their situation. College Aid Pro is not a lender and does not provide loan products.
