myUsearch blog

Today, we have a guest blogger, Linda P. Taylor, author of “Insider Secrets to Scoring Scholarships”. The following is a short excerpt from her book:

Good news, there is nearly $1.6 BILLION in scholarships available each year. So finding the $5,000 to $50,000 per year you need for college should be easy if you just knew the “secret” of where to look, right? Sorry, no. Bad news is, there are 4 “dirty little secrets” that no one shares about scholarships. If you don’t know how these will 4 secrets will impact your cost of college, you may be wasting your time looking for scholarships. Once you know the truth, you will focus your efforts where you have the chance for REAL success.

Dirty Secret # 1 – There is NOT as Much Available as You Have Been Told
How does that $1,600,000,000 REALLY  break down per family?  And how much can you get if you are a normal student looking for scholarships on the internet?
Assuming that every single one of the 17.5 million college students found every single scholarship dollar available, the per student reward works out to: 

 $1,600,000,000 / 17,500,000 = $91.43 per student

Yes, that’s right.  Less than $100 per student.  In today’s college bookstore, that barely buys one science class textbook!  But let’s say that only 1% of students get all the money.  That means the other 99% get nothing.  So now the “winners” get         
 $1,600,000,000/175,000 students = $9,143 per student
That probably sounds like a lot of money to most people UNTIL they compare that

$9,143 to the average cost of a 4-year college per year.  And please note that over 75% of students at state colleges and universities take 5 years to graduate.

Live-away state college =  $17,500 year x 5 = $87,500

Live-away state University = $25,000 x 5 yrs = $125,000

High End Private college =  $45,000 year x 4 = $180,000

Elite/Ivy League =  $50,000+  year x 4 years = $200,000+

Good news is a hard-working student will find $1,500 to $5,000 for their freshman year. So scholarships can help offset some costs but PLEASE don’t count on them to provide all your money. 

Dirty Secret # 2  –  RESOURCING
In the catalog and websites of many college financial aid sections is a cryptic sentence or two that talks about how “outside resources may reduce a student’s financial aid”.  Few, if any, parents or students even know what this means. Surprisingly, many private scholarship providers don’t even know about Resourcing.

Let’s say your student received a $5,000 merit scholarship from the college for their GPA.  This plus a student loan meets 100% of your need according to the FAFSA equation. This leaves you with a cost of $30,000.  Your student goes out and finds a $5,000 private scholarship. You assume your costs have now gone down another $5,000 to $25,000 RIGHT?

WRONG!  The college treats this new money as “a resource” and the college ABSORBS the private scholarship replacing their scholarship dollar-for-dollar!  The reason will be, college aid cannot exceed need.

FYI, colleges consider any gifted money as a resource – not just private/outside scholarships.  Financial and tax professionals tell relatives to gift directly to a college to avoid the $12,000 per year gifting limit. BUT if a grandparent writes a check to the college on behalf of a grandchild, it can be treated just like a private scholarship and resourced to reduce aid!! 

Dirty Secret # 3 – Scholarships as Marketing Tools
The Internet is both a blessing and a curse for finding scholarships.  It is a blessing in that it makes finding leads for scholarships the easiest it’s ever been. The “curse” is companies are using scholarships as marketing tools, selling applicant information and even using it for identity theft. 

The safest sites are usually run by a foundation or by a community or service groups with no agenda other than providing scholarships to deserving students (NOTE: a dot “org” after the web address does not mean they are a non-profit). Legitimate sites are visible about how they use your information including selling it.  The ‘bad guys” are not honest about selling your e-mail and your information to virtually anyone for money. And the REALLY “bad guys” combine the information with other searches for identity theft.  Unfortunately, aggregator sites like FastWeb and CollegeBoard are now unwitting tools for the bad guy sites. 

It’s okay to use websites, just READ the Privacy information to know what they will do with your information!

Dirty Secret #4 - Scholarships MAY Be Taxable
The IRS has very clear standards on what an outside scholarship can be applied to and still be considered tax-free.  If the scholarship is used for anything other than tuition, fees and required supplies, it becomes taxable to the recipient! Room and Board, Travel, books, or equipment and other expenses that are not directly required for enrollment do NOT qualify for the tax-free exclusion.
 
You also need to know whether or not your student is considered an INELIGIBLE STUDENT for receiving tax-free scholarships. According to IRS code in id § 1.25A-3(d), an Ineligible student is enrolled less than part-time (less than 6 credit hours) at an Eligible Educational Institution or is enrolled over half-time at an ineligible institution.

Good news is that most colleges are careful to apply outside scholarships to your tuition and fees first.  Bad news is, that reduces any tuition discounts, grants or scholarships they were going to apply to tuition and fees.  Discuss where outside scholarships will be applied with the college!  If you use the money personally, it may be taxable if you tuition and fees were covered by college scholarships!

So if you STILL want to look for scholarships, make sure you know how it may impact you and your cost of college!  It’s not the “free lunch” the media and myth make it out to be!

To find out more about scholarships read this post or to apply for the myUsearch scholarship, click here.
 

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