Wednesday, October 4, 2017

I spend a lot of time talking with parents of college bound kids. At some point, the conversation gets around to “where do I get the money I don’t have to pay back?” With the tough economy and continuing news about rising tuition, this is a fair question. So, who does have the free money and who gets it?

For starters, here are some general statistics: In 2009 (last numbers available), there were over 20 million students enrolled in post-secondary education. In the decade between 1999 and 2009 the population of 18-24 year olds increased by 14%. During that same time period, the number of 18-24 year olds enrolled in post-secondary education increased from 36% in 1999 to 41% in 2009. There are more kids, and more kids enrolled in school, than ever before. In 2009-10 over $154 billion was awarded in financial aid, and 75.5% of all those undergraduates receive some type of aid. The average amount of aid is $11,500 per year, and includes loan programs.

According to the National Center for Educational Statistics, Federal Pell Grants (need based grants to low income families, max amount $5500) are awarded to 27% of all undergraduates and the average award is $2600. CA has a program called the Cal Grant Program, which grants up to $10,302, depending on the school you attend and other eligibility factors. Cal Grants are an entitlement program, meaning if you meet the eligibility criteria you will receive the grant. Predictably, California’s fiscal problems are having an impact on this program, resulting in more restrictions on the eligibility of students and institutions to participate.

Athletic scholarships are another source of aid that does not have to be paid back. At NCAA Division I and Division II schools the average athletic award is $8707.00. The cost of DI and DII schools ranges from approximately $25000 to $55,000 per year. Just fewer than 2% of all high school athletes earn a sports scholarship, with the vast majority of those being partial awards. There are very few full ride scholarships for athletics, and most of those are concentrated in football and basketball. Each sport is limited in the number of scholarships they may award, and often divide those among several players. For example: in 2008 there were 713,305 participants in HS track and field, there were 3112 scholarships awarded, and those were spread among 8414 student athletes. The average value of the track scholarship was $6491. How many are available each year depends on how many kids graduate and make their share available to new students. More desirable, and recruited, is the athlete that is also an outstanding student. Athletes who can tap into merit based aid at the school are much more attractive to coaches since merit money does not come out of their budget. DIII schools cannot award athletic scholarships, but in reality they are very competitive and use other resources to enable students to attend their schools and participate in sports.

Work-Study programs are sponsored by the federal government and also the colleges themselves. These are funds that are earned by the student for performing various jobs on campus and are credited toward tuition and fees. Work assignments could be anything from office work to doing laundry for the sports teams. Financial aid from work-study programs, which does not have to be paid back, averaged $2400 per student in 2008. 7.4% of all undergraduates participated in a work-study program.

Approximately 2.1% of college students qualified for and received veteran’s benefits averaging $5400 per year. There are also several scholarships exclusively for service personnel.

Another source of funds that don’t need to be paid back are those that have been saved for the student by parents, grandparents or other generous family members. There are several tax advantaged ways to save for college: 529 plans, Coverdell Savings plans and Pre-paid tuition plans are the most popular. In the right circumstances, an IRA might be the best option to save for college. Funds that are in the parent’s name or student’s name will be part of the calculation that determines the Expected Family Contribution, which is calculated when you complete the Free Application for Federal Student Aid (FAFSA). Funds held in the grandparent’s names are not considered by FAFSA, and may increase a student’s eligibility for other financial aid.

Every year there are millions of dollars available from thousands of private scholarships from a huge variety of sources. These are sponsored by service groups such as Elks, trade groups such as the Christermon Foundation, or from individual sponsors. These scholarships can be very general or very specific as to who can apply and awards can range from a few hundred dollars to tens of thousands of dollars. While it’s true some of this money gets left on the table every year, it is often the scholarships that have very restrictive conditions to be eligible that have no takers. Many of these awards do not require the best grades but often are rewarding other qualities or interests that the group seeks to promote. The bottom line with these awards is they amount to 4% of the total scholarship money available, free money – but a small piece of the pie. There are many good websites that can help with searching for scholarships that your student may qualify for. Start your search with FastWeb.com or MeritAid.com.

Lastly, both public and private schools will provide financial aid in the form of various grants, although the vast majority of this money is available at private colleges. Private schools can, and do, reward both need and merit. Some of the more elite (and expensive) schools claim to be income blind – meaning if you can get in then they have the resources to make sure you can afford it. The most recent statistics show that schools are spreading the tuition discounts, ie. grants, to more students but that the average award has gone down slightly, meaning less of the student’s overall costs are covered. Tuition discounts averaged 41.6% for freshmen and 36.1 % for all students in 2009. Next to federal aid, this is the largest source of free money available to students.

In conclusion, there are many sources of funds to help defray the cost of college. When faced with costs averaging $100,000 over a 4 year period, all opportunities should be explored. Understanding and taking advantage of “free money” can help students afford school and start their working careers with less debt.

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