Top Ten Myths About Scholarships

Mark Kantrowitz

October 02, 2011

Top Ten Myths About Scholarships

There are many myths about who wins private scholarships and the benefits of winning scholarships.

These myths can be harmful if they give students and their families unrealistic expectations about their ability to win scholarships. Some myths cause students to underestimate their eligibility for scholarships, discouraging them from applying for scholarships. Other myths cause students and parents to overestimate their eligibility for scholarships, making them overlook other forms of financial aid and opportunities to save to cover college costs. These myths can lead to bad decisions concerning college affordability.

Scholarships are part of the plan for paying for college, but not the entire plan. Most students will need to rely on a combination of different types of financial aid from a variety of sources, including grants, student employment and student loans from the federal and state governments and the colleges and universities, not just private scholarships. But scholarships can help reduce the student’s debt and work burden, saving some money on college costs. Scholarships also provide the student with an opportunity to contribute to the cost of their college education instead of relying only on the bank of mom and dad.

This article discusses some of the most common myths about who wins scholarships. Some myths suggest that eligibility for scholarships is limited to just students with a particular characteristic, such as good grades, minority status, athletic ability, low income or enrollment in a private high school. Other myths concern the availability of private scholarships, suggesting that many scholarships go unclaimed, that it is very easy for a student to win a completely free ride, that applying for scholarships is too much work or that only high school seniors can apply for scholarships. Finally, there are myths about the impact of winning a scholarship on eligibility for need-based student financial aid.

This article is based on a talk given by Mark Kantrowitz as part of a panel on “The Myths Versus Realities of Successfully Applying for Postsecondary Scholarships” presented at the 2011 National Conference of the National Association for College Admissions Counseling (NACAC) on September 23, 2011. (presentation, handouts)

Only Straight-A Students Win Scholarships

Myth: Only students with the best grades win scholarships.

Reality: Students with better grades are more likely to win scholarships, but B and C students do win some.

Slightly more than half (54.4%) of scholarships are won by students with grades in the A- to A range, a 3.5 to 4.0 grade point average (GPA) on a 4.0 scale. But almost a third (30.0%) are won by students with a B average (3.0 to 3.4 GPA), 8.1% by students with a B- average (2.5 to 2.9 GPA), 6.2% by students with a C average (2.0 to 2.4 GPA) and 1.3% by students with less than a 2.0 GPA.

The odds of winning a scholarship for students with an A average are more than double the odds for students with Bs and Cs, Students with above-average SAT and ACT test scores are twice as likely to win scholarships as students with below average test scores. Two-thirds of private scholarships are won by students with above-average SAT and ACT test scores.

But you can still win scholarships even if your grades aren’t stellar. Less than 10% of private scholarships are based on academic performance. Every scholarship sponsor is looking for the students who best match their criteria. Instead of academic talent, they might be looking for artistic talent or athletic talent or even something a bit unusual.

For example, the Duck Brand Duct Tape Stuck at Prom Contest involves making a prom costume out of duct tape. (Most people’s first reaction when they hear about this contest is that the costumes must be gray and boring, but duct tape comes in many colors, a key point of the competition.) Winners are selected based on creativity, originality, workmanship and the quantity of Duck Tape used, not grades. The winners make amazing costumes. Each member of the winning couple wins a $5,000 scholarship.

Majors also matter. Students studying STEM fields (mathematics, engineering and the sciences) are much more likely to win scholarships. Of students enrolled full-time at 4-year colleges, 17.0% of students majoring in STEM win scholarships compared with 12.1% of students majoring in non-STEM fields. More than a third of private scholarships are won by students studying STEM fields.

Most Scholarships are Just for Minority Students

Myth: Most scholarships are restricted to minority students.

Reality: White students win more than their fair share of scholarships, not minority students.

Minority students are less likely to win scholarships than white students enrolled full-time at 4-year colleges. White students represent 61.8% of the college population, but win 71.5% of the scholarships. Minority students represent 38.2% of college population, but win only 28.5% of the scholarships.

The odds of winning a scholarship are 14.4% for White students compared with 11.2% for minority students. The odds of winning a scholarship are 11.4% for Black or African-American students, 9.1% for Hispanic or Latino students, and 10.5% for Asian students.

This is probably not due to intentional discrimination, but rather because the sponsors of scholarships establish the scholarship programs based on their interests and values, and these criteria resonate more with students of the same race. For example, minority students are much less likely to pursue equestrian sports or water polo as Caucasian students and are more likely to major in business than in mathematics, science or economics. Geography may also have an impact.

Additional background and analysis concerning this myth may be found in a recent student aid policy analysis paper, The Distribution of Grants and Scholarships by Race.

My Child Will Win a Free Ride with Scholarships

Myth: It is very easy to win enough scholarships to cover all college costs.

Reality: Very few students win a completely free ride each year.

Students and parents often overestimate their eligibility for merit-based scholarships and underestimate their eligibility for need-based aid. It is important to apply for both forms of financial aid. This includes filing the Free Application for Federal Student Aid (FAFSA) to apply for financial aid from the federal and state governments and most colleges, and searching for scholarships on free scholarship matching services like Fastweb.

Achieving top ranking in your school may be an impressive accomplishment, but there are more than 85,000 high school valedictorians and salutatorians each year. Even among talented students there’s a lot of competition for scholarships.

Of students enrolled full-time at a 4-year college, only 0.3% get enough grants (including private scholarships) to cover the full cost of attendance, 1.0% get enough grants to cover 90% or more of the cost of attendance, 3.4% get enough grants to cover 75% or more of the cost of attendance, and 14.3% get enough grants to cover 50% or more of the cost of attendance. Of students winning scholarships, more than two-thirds (69.1%) receive less than $2,500 per year.

So while it is possible to win a completely free ride, only a small number of students are able to do so each year.

Scholarships are part of the plan for paying for college, but not the entire plan. Most students will have to rely on student loans, student employment and need-based grants, as well as scholarships, to pay for college.

I’m Not an Athlete, So I Won’t Win Any Money

Myth: Only athletes win scholarships.

Reality: Students are much more likely to win private scholarships than athletic scholarships.

In 2007-08, the most recent year for which data is available, only 1.4% of students in Bachelor’s degree programs received athletic scholarships. This includes all college-controlled athletic scholarships.

The average athletic scholarship was $7,855, a third of the total cost of attendance.

Athletic scholarships represent only 5.4% of institutional grants and 2.1% of all college grants.

Athletic scholarships enable students to attend more expensive colleges, but do not necessarily yield a significant financial advantage. The average of total institutional grants for students receiving athletic scholarships is $3,979 higher than for non-recipients, but the cost of attendance is $4,560 higher, yielding no net gain.

Men received 53.7% of athletic scholarships in 2007-08 (women 46.3%), even though they represent 45.2% of the student population (women 54.8%).

Additional details may be found in the Backgrounder on Athletic Scholarships.

Only the Poor Win Scholarships

Myth: Only poor students win scholarships.

Reality: Middle-income students are more likely to win private scholarships than low-income or upper-income students.

Of full-time students enrolled at 4-year colleges, 13.8% of middle-income students won scholarships, compared with 10.6% of low-income students and 10.8% of upper-income students.

(Low income is defined as having a family adjusted gross income (AGI) less than $50,000. Middle income is defined as having a family AGI of $50,000 to $100,000. Upper income is defined as having a family AGI of $100,000 or more.)

Middle-income students still come out ahead even if the data is restricted to just the students who apply for financial aid. Of full-time students enrolled at 4-year colleges who applied for financial aid, 15.6% of middle-income students won scholarships, compared with 11.3% of low-income students and 14.3% of upper-income students.

Low-income students outnumber middle and upper income students and are more likely to apply for financial aid, so the lower percentages for low-income students are not due to self-selection.

Most private scholarships are not based on financial need.

Only High School Seniors Can Apply for Scholarships

Myth: Only high school seniors are eligible to apply for scholarships.

Reality: Students can apply for scholarships at every grade level, including kindergarten, elementary, middle and high school, as well as current college students.

Many families wait until spring of the senior year in high school to figure out how to pay for college. But there are scholarships with deadlines in every month of the year. The deadlines tend to peak in the fall and spring, so a student who waits until spring of the senior year in high school will miss about half of the deadlines for seniors.

But there are also many scholarships for students in lower grades, even elementary school. These include scholarships for making a peanut butter sandwich (with a $25,000 top prize!), the national spelling bee, the national geography bee and many art, writing and community service scholarships.

You won’t find scholarships for children under age 13 in any of the free online scholarship matching services because a federal privacy law precludes collecting information from underage children. The Children’s Online Privacy Protection Act (COPPA) requires verifiable parental consent to collect information from children under age 13. The scholarship sites work by matching the student’s personal background profile to a large database of scholarships. This necessarily involves collecting personal information from the student. But verifying parental consent in an online setting usually involves collecting a credit card number, which is antithetical to the nature of a free scholarship matching service.

Instead, the FinAid web site, which doesn’t require registration, makes available a list of scholarships for students in younger grades at www.finaid.org/age13.

If a younger student wins a scholarship, most scholarship programs will hold the scholarship in escrow until the student matriculates in college. A few scholarship providers will contribute the scholarship funds to a 529 college savings plan in the student’s name.

Students should also continue searching for scholarships after enrolling in college. There are many scholarships that are open only to students who are already enrolled in college. Fastweb automatically notifies students of new awards that match their personal background profile throughout high school and college as the awards are added to the Fastweb scholarship database. The Fastweb site assumes automatic grade progression at the end of the academic year, but it is a good idea for students to update the personal background profile periodically.

It is important to start searching for scholarships as soon as possible. Students who wait until the summer after their senior year in high school will find very few scholarships available for the fall. Most of the scholarships with deadlines in the summer months are for scholarships that will be awarded for the subsequent academic year. The FinAid site offers a set of last minute tips on paying for college, such as applying for federal student aid, using education tax benefits like the Hope Scholarship tax credit, and looking into employer tuition assistance programs, tuition installment plans and student employment.

Private High School Students Win More Scholarships

Myth: Students who graduate from private high schools win more scholarships.

Reality: Students from private high schools do win more scholarships and merit-based grants than students from public high schools, but not enough to compensate for the cost of private school tuition or the cost of college.

Some parents figure that by paying for private K-12 school their students will win enough scholarships to cover the cost of college. It usually doesn’t work out that way. There are many valid reasons for enrolling in a private school, but saving money isn’t one of them.

On average, students from private high schools win about $1,000 more in merit-based aid, including private scholarships, than students from public schools. About 1 in 10 private high school students (10.0%) who enroll full-time in a 4-year college win private scholarships worth $2,631 on average. This compares with about 1 in 8 public high school students (12.3%) winning private scholarships worth $3,463 on average. When other forms of merit-based aid are included, 30.9% of private school students receive $6,705 in merit-based aid on average, compared with 27.0% of public school students who receive $5,700 in merit-based aid on average.

However, the differences in the receipt of merit-based aid may have a lot to do with differences in college enrollment patterns. Private school students are much more likely to enroll at private non-profit colleges. Nearly half (48.5%) of college-bound private high school students enroll at private non-profit colleges, compared with more than a quarter (26.7%) of public high school graduates. The higher cost of private non-profit colleges may account for the difference in amount of aid. Private high school graduates have an average cost of attendance that is about $4,400 higher than public high school graduates. The out-of-pocket cost — the difference between the cost of attendance and all grants, scholarships and other forms of gift aid — is about $3,500 higher.

The bottom line is that a private high school education does not lead to a free ticket to college.

$6.6 Billion in Scholarships Went Unclaimed Last Year

Myth: $6.6 billion in scholarships went unclaimed last year.

Reality: Very few private scholarships ever go unclaimed. The scholarships that sometimes go unclaimed do so because they can’t be claimed.

The unclaimed aid myth is based on a 1976-77 academic year study by the National Institute of Work and Learning (NIWL). NIWL estimated that $7 billion was potentially available from employers in the form of employer tuition assistance, but only $300 to $400 million was being used each year. Subtract one figure from the other to arrive at $6.6 billion.

Thus this myth is more than 30 years old, is based on an unsubstantiated estimate and has nothing to do with scholarships.

The only scholarships that go unclaimed can’t be claimed due to restrictive eligibility criteria. For example, the Zolp scholarship at Loyola University in Chicago is for a Catholic student at the university who was born with a last name of Zolp. Most years they have a few students who qualify, but some years they have none. You can’t change your name to qualify, as the Zolp surname must appear on your birth certificate and your christening certificate.

The unclaimed aid myth is often used by scholarship scams that are trying to convince you to pay them money. Beware: If you have to pay money to get money, it’s probably a scam. Never invest more than a postage stamp to get information about scholarships or to apply for a scholarship.

Colleges Reduce Need-Based Aid When You Win Scholarships, So Why Bother?

Myth: Colleges will cut their aid when you win a scholarship, so why bother?

Reality: Colleges do cut need-based aid when a student is overawarded, but many will use the private scholarship to reduce the student’s debt and work burden, saving the student some money.

When a student receives total financial aid, including private scholarships, that exceeds the student’s financial need, the student is considered to be overawarded. Federal regulations and college policies require the colleges to adjust the overawarded student’s need-based financial aid package when financial aid exceeds financial need by more than $300. After all, when a student wins a private scholarship, the student’s financial need is lower. The reduction in the student’s need-based financial aid package is often referred to as displacement.

Although the colleges must reduce the student’s need-based financial aid package, they do have some flexibility in how they cut the financial aid package. Most colleges will try to ensure that the students still get some financial benefit from winning a scholarship. These colleges will use the private scholarship to replace all or part of the student’s debt and work burden.

Every college has an outside scholarship policy which dictates how the college reduces need-based aid when a student wins a scholarship.

The most favorable outside scholarship policies use the private scholarships to first fill the gap, reducing or eliminating the unmet need, if any. Then some of the private scholarship money will be used to reduce need-based loans and student employment. Finally, any remaining money will be used to replace the college’s own grant funds. Substituting scholarship for loans cuts the student’s costs because loans have to be repaid while scholarships do not.

The least favorable outside scholarship policies use the private scholarships to replace the college’s own grant funds first.

Scholarship providers do not like outside scholarship policies that use private scholarships to replace the college’s grants first. They especially dislike college policies that insist on forcing students to borrow. Students who graduate without debt are about twice as likely to enroll in graduate and professional school as students who graduate with some debt. (See Undergraduate Debt Causes “Pipeline Leakage” from Undergraduate School to Graduate and Professional School.)

Scholarship providers are investing in the success of specific students, not institutions. When the college fully displaces the scholarship, there is no financial benefit to the student and hence no net improvement in student outcomes. This makes it more difficult for the scholarship provider to justify the cost of the scholarship program to their board of directors.

Colleges need to adopt outside scholarship policies that ensure that both the student and the institution benefit when the student wins a private scholarship. Otherwise they risk having scholarship providers ban awards to students at their institution, which will make it more difficult for the college to attract talented students.

Note that the federal Pell Grant is never reduced when a student wins a private scholarship, even if the student is overawarded. While colleges may blame federal regulations for the reduction in need-based financial aid, in most cases it is the college’s own policies that require the displacement and that dictate the reduction in the college’s grant funding.

Before enrolling in a college, students should review the college’s outside scholarship policy to understand how their bottom-line cost will be affected by the college’s treatment of private scholarships. The bottom-line or out-of-pocket cost is the difference between the cost of attendance and all grants, scholarships and other forms of gift aid. All else being equal, the out-of-pocket cost will be lower at a college with a favorable outside scholarship policy than at a college the reduces need-based grants first. Differences in outside scholarship policies can yield significant differences in cost for students who win many scholarships.

If a college reduces grants first, the students should ask the scholarship providers for help. Sometimes the scholarship providers can encourage the college to adopt a more favorable policy, especially if they collectively contribute significant sums of money to the institution. The scholarship provider may also allow the student to defer all or part of the scholarship to maximize its impact.

Searching and Applying for Scholarships is Too Much Work

Myth: Searching and applying for scholarships is too much work, especially for small scholarships and essay competitions.

Reality: The amount of work is minimal compared with the potential rewards. Students are unlikely to find a more productive use of their time. After the first few scholarship applications, the amount of work for each additional application is reduced, since students can reuse and adapt previous application essays.

Searching for scholarships is the easy part. Fastweb matches the student’s personal background profile with a very large database of scholarships, updated daily. It takes only about half an hour to register and complete the profile. (Answer all the optional questions in the personal profile for about twice as many matches on average.) The targeted matching process lets the student concentrate their time and effort on completing scholarship applications.

Other places to find scholarships include the library, the high school guidance counselor office and local college financial aid offices. Look for local scholarships on bulletin boards near the guidance counselor or financial aid offices, or the library’s jobs and careers section. Use scholarship listing books in your library or bookstore for random exploration. Also look in the coupon section of the newspaper, since some national scholarship programs advertise their scholarship programs there.

(Before relying on any book, however, check the copyright date. Any book that is more than a year or two old is too old to be useful, since about 10% of scholarship programs change in a significant way each year. For example, the address or selection criteria might have changed.)

Applying for scholarships is hard, but then so is applying for college admission. It gets much easier after the first half-dozen applications, since the student can reuse and adapt previous application essays.

Small scholarships and essay contests are easier to win because some students don’t like them. Small scholarships can also add up. These scholarships add lines to your resume, making it easier for you to win bigger awards. Winning any scholarship is a vote of confidence. It means the scholarship provider thought highly enough about you to invest their money in your future. That will impress other scholarship providers, and may make the difference between winning and losing the next scholarship.

Apply for every scholarship for which you are eligible to increase your chances of winning a scholarship. It’s a numbers game. Even among talented students, winning involves a bit of luck, not just skill. It is very difficult to choose a winner from among several excellent finalists, so it is often a bit random who wins and who doesn’t. Most students who win many scholarships have more rejections than successful applications. Perseverance is a key to winning more scholarships.

(But don’t apply if you don’t qualify. You might be a wonderful student, but if you don’t qualify for the scholarship, it is a waste of your time to apply. Scholarship sponsors receive far more qualified applicants than they have funds available. They use the selection criteria to arbitrarily narrow the number of applications they have to review.)

Winning scholarships is also easier than repaying student loans. Every dollar you win in scholarships is a dollar less you will need to borrow. Every dollar you borrow will cost you about two dollars by the time you’ve repaid the debt.

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