Private Scholarships: The Billion Dollar
Rip-off!
by Reecy Aresty
College Admissions/Financial Aid Expert and Author
Towards the end of every school year, most
non-profit organizations hold their Awards Banquets where worthy students
are honored with various scholarships. Often, the names of recipients
appear in the newspapers as an acknowledgment of all their hard work and
dedication. Since the awarding organization is primarily giving the money
to be used for the student’s education, they simply ask the family where
the student will be attending, and parents, unaware of the pitfall, tell
them. Virtually all such organizations are responsible for the fatal error
of making the check payable to the student
and the college. So
sets the stage for the billion dollar scholarship rip-off.
No, congratulations are not in order. In
fact, pity the poor student who dedicated several years of blood, sweat
and tears to the Red Cross, YMCA, Kiwanis, Rotary, or other similar
non-profit organization, only to see all of their well deserved
scholarship money evaporate into thin air and wind up in the “scholarship
fund” of their college of choice instead of their own financial aid
packages.
Most schools send out their financial aid
offers between January and April, with a May 1st decision date.
As the majority of colleges consider private scholarship awards a resource to help
pay for a student’s education, they reduce their share of the
student’s financial aid package dollar for dollar, and this is where the
problem lies.
What a kick in the teeth it is for a family
to read a revised award letter showing that the school’s portion of
financial aid was reduced by the exact amount of the private scholarship the
student earned! The bad news is usually listed on the award letter as
private scholarship, outside aid, or very often as other.
Here’s a typical before and after scenario:
Before Receiving a
Private Scholarship:
$45,000 - Cost of Attendance (COA=tuition, fees, room/board, books,
etc.)
$10,000 -
Expected Family Contribution (EFC)*
$35,000 - Financial Need (FN =
the max. amount of aid a family will
qualify for)
* EFC = the
minimum the federal gov’t determines a family will pay at any college
We’ll assume the student qualifies for the
following aid:
$ 3,500 - Stafford Loan
$ 4,000 - Perkins Loan
$ 2,500 - Federal work-study award
$ 3,000 - State grant
$22,000
- College
scholarships, grants, tuition waivers, etc.
$35,000 - Total
The student will qualify for a maximum of
$22,000/yr in financial aid from the college.
After Receiving a Private Scholarship:
$45,000 - COA
$10,000 - EFC
$35,000 - FN
The student qualifies for the following aid:
$ 3,500 - Stafford Loan
$ 4,000 - Perkins Loan
$ 2,500 - Federal work-study award
$ 3,000 - State grants, etc.
$10,000 - Private Scholarships
$12,000 -
College scholarships, grants, tuition waivers, etc.
$35,000 - Total
While the student still qualifies for a
maximum of $22,000/yr in financial aid from the college, the private
scholarship money has now become a bonus for the school, not
the student. All of the student’s hard work actually saves the college
money, and the benefit to the student is reduced to nothing!
It should be no great surprise to anyone
that our greedy institutions of higher learning laid the groundwork for
this clever thievery months in advance. Students who apply to any
of the 225 elite private and state colleges that require the CSS Financial
Aid Profile are asked to indicate whether they expect to be
scholarship recipients. Section SR (Student Resources), #150 asks for the dollar
amount anticipated from student resources for
school year 2007-2008, such as “grants, scholarships and fellowships,” and
they must be listed individually in Section ES.
The majority of schools that only
require the FAFSA (Free Application for Federal Student Aid), simply send
out a questionnaire asking about private scholarships. They are less
devious, but just as deft.
Who could imagine in their wildest dreams
that colleges would stoop so low and play so dirty? Truth be told – and
have no doubt about it - it’s all about the money. Every year there are
billions of dollars awarded in private scholarships, and who benefits from all the hard work that earned them is none other than our poor,
underfunded institutions of higher learning, enriching their billion dollar endowment funds at the expense of their hard working, deserving
students.
The best way for a family to avoid the
injustice is to personally discuss this sordid state of affairs with the
scholarship committee either at the time of application or well in advance
of their award announcements. In that way, the check can be made payable
to the parents instead of the student! If that fails, parents
should ask them to postpone sending the check until after the student has
enrolled.
As a last resort, have
the parents call the college financial aid administrator, explain the
situation, and kindly ask (grovel if you must), that because of all their
hard work, the student is really entitled to the money and the college
should not penalize them by reducing their aid by the amount
of the scholarship. If they take a hard line, try to negotiate some
of the money back into the student’s pocket, because half a loaf is better
than none. Never lose sight of the fact that financial aid is a commodity,
and like all commodities, it is negotiable!
About The Author:
Reecy Aresty has been a financial advisor since 1977, and
is founder and president of College Assistance, Inc., located in Boca
Raton, Florida. He is the author of the critically-acclaimed, How To Pay For College
Without Going Broke, an invaluable, parent/student
manual. Arguably the most revealing book ever
written on college admissions and financial aid, it is the only book of its
kind also available in Spanish.
Reecy
has been interviewed by financial experts on radio and television, and by
many of the nation's most respected publications including Money
Magazine, US News & World Report, Bloomberg News, Scripps Howard, The
Washington Post, financial icon Terry Savage for the Chicago
Sun-Times, Consumers Digest, The Education Times and AOL. An Internet
search for Reecy Aresty will result in thousands of links to sites
all over the world that feature his articles, advice and methods.
Recently, he created the College Information Network™,
which includes The High School Blog, The College Blog, PayLess For
College and The Way To College.
For
almost three decades, Reecy has helped thousands of families send their
kids to the college of their choice for less than they ever dreamed
possible.
The critics agree.
The way to college is Reecy Aresty's, How To Pay For
College Without Going Broke. It reveals the trade secrets and insider
information our colleges, universities and the federal government don't want you to know. For
further information on the best college funding book on the market today,
click here. For more information on admissions and
financial aid -
Ask Reecy!
