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The Big Scholarship Lie
By Al
Ruechel | 06-04-02
Before you start punishing yourself
or your child because they can’t seem to find any scholarships out
there let me break it to you gently. The cold, hard truth about
scholarships is unless your kid is Albert Einstein, or your in debt
up to your ears, or you are a minority, or you belong to some
bizarre organization, or your from a single parent home-all the
supposedly “free” money out there is nothing more than a zephyr in
the air, a marketing ploy, another slap in the face for the middle
class kids who do their absolute best and get nothing for it.
Please, don’t get discouraged. That doesn’t mean your wonderfully
gifted child won’t be able to find some money out there someplace.
It just means the task is much more difficult than you ever
imagined. You deserve to know the truth and very few financial aid
professionals and school counselors seem to be willing to “fess-up”.
Like most parents I’ve discovered the scholarship fallacy the hard
way. I talked to dozens of different colleges, filled out endless
forms for my kids, ridden the roller coaster of emotions from
optimism to disappointment, all the while believing if we just kept
trying we’d find that pot of gold for our deserving children. I’m
not sure which is worse, knowing the constant optimistic speeches I
kept delivering to my kids urging them on to academic excellence
were very nieve, or the reality that despite their Herculean efforts
their ability to gain scholarship dollars is decided by formulas
that seem to have been dreamed up in Walt Disney’s never-never land.
Enough belly aching! Let’s get to the facts.
1. The FAFSA.
This is the government form you must complete if you are seeking any
type of financial aid. It is also used by many scholarship funds to
determine if your child has a demonstrated financial need.
Demonstrated financial need is not determined by you. The government
has a large computer that takes into account a zillion variables
such as your income, your child’s savings, your age, your
investments, the college your child plans to attend, the number of
children in your household, the state in which you live, on and on.
The EFC, or the expected family contribution is the magic number.
This is how much money the government says you should be able to
contribute each year for your child’s education. You will pass out
when you see it! For a typical family making $50,000 the FAFSA will
suggest you can afford the price of a new economy car each year. I
guarantee, unless you have tons of cash stashed away, or a few
thousand shares of stock ready to cash, you will not be able to
afford it.
“This isn’t the amount of money you have in hand or even can afford,
“ Jane Glickman, an information officer with the U.S. Department of
Education informed me. “This is a numerical value given to you based
on all those variables and based on the amount of money Congress has
made available to distribute each year as financial aid.”
“So can you give me this formula, the percentages, so parents know
what they’re up against?” I asked.
“No, I don’t have that formula. I’m not sure anyone has. It’s all
done by computer so it’s consistent across the board.”
Well, that’s not exactly accurate! There is a 32-page work sheet you
can stumble through that makes the IRS form 1040 look like a walk in
the park. It doesn’t change the bottom line. Federal Student Aid is
for the poor. The unfair part of this equation is that many
non-government and corporate scholarships base their award amounts
on the EFC or your demonstrated need. Translated! Middle class kids
are screwed.
“I don’t think you realize how many poor families are out there, “
Glickman went on to explain. “Federal grants are meant to ensure the
poorest Americans have the opportunity to attend college. Middle
class families generally will find a way to send their kids to
college even if it involves taking out second mortgages to do it.”
Another comforting thought!
2. Private Schools offer more Scholarships
It’s true. On a percentage basis, more kids (up to 67 percent in
1998) get scholarships to attend private schools than public. In
order to attract the best and brightest kids private schools must
offer scholarships and grants to cover their HUGE expenses.
Statistically, the scholarships are counted in the general pool of
scholarship dollars available to all students across the U.S., which
isn’t accurate. In fact, to call them scholarship at all is
misleading. They are actually dollars generated by huge endowment
funds to offset the staggering costs of attending these private
schools. This can play to your advantage since these schools are
generally more willing to “negotiate financial packages” than public
schools. Here’s the warning though. Schools like Duke or Wake Forest
may offer you a “scholarship” or financial package worth $20,000 a
year or more. But that still leaves you responsible for $10,000 a
year or more. That’s $40,000 in debt after 4 years, not to mention
the prospect of graduate school. Plus, according to two recently
publish reports there is no direct relationship to the relative
success of students who attend private schools versus those
attending public schools.
“You have to make that decision, “ a financial aid advisor from Wake
Forest reminded me. “We think investing in a quality education in a
smaller setting is worth the financial sacrifice many of our
students and their parents make. But if handling a lot of debt is a
problem then you need to consider other options.”
3. Specialty Scholarships abound
According to the Department of Education, of all the scholarship
dollars available in 1998:
- 52 percent were specialty
oriented. The primary criteria included things such as: union
membership, church affiliation, civic club membership, occupation,
geographical location, area of educational specialization, college
booster clubs.
- 12 percent were based purely on race with the highest
percentages going to African American, Hispanic, and Asian
students in that order.
- 12 percent were based on participation in sports
- 8 percent were based strictly on academic performance
- 4 percent were industry and academic partnerships
- 1 percent were National Merit Scholarships
- 4 percent were defined in the “other” category
- 6 percent were “general” scholarships based on a variety of
criteria
Let me translate. Your best chance of
getting a scholarship is to be a minority that belongs to some kind
of organization, have excellent grades, a relative who works for a
big company, participate in sports and play a musical instrument.
4. Academic Scholarships
Assuming your child is a good student and will score well on their
SAT’s and ACT’s at the end of their Junior year, the most important
test they will every take is the PSAT. If they score in the top 1
percent in that test they may qualify for a National Merit
Scholarship. Schools don’t automatically dump money at their feet if
they score in the upper percentile but it is a tremendous bargaining
tool.
5. Negotiate and get it in writing
Your child is a commodity. If your son or daughter has the academic
credentials, you need to work like a used car salesman and pit
school against school. You need to ask for the maximum scholarship
dollars. And I do mean ASK. Start in the middle of their junior year
and get things finalized in writing by January 1st of their senior
year. You can wait longer and bargain harder if you choose but have
the antacid bottle handy. You will need it.
6. Don’t pay for a Scholarship Search Company
There’s no evidence to suggest private companies that search for
scholarships are any more successful then you would be on your own.
There are fabulous scholarship search engines available on the web
for free. Just remember that most of the scholarships they list will
be specialty scholarships for which most of your kids don’t qualify.
7. Your High School Guidance Counselor
Get to know your counselor by first name. Don’t count on your kids
to remember to bring you all of the college materials you’ll need to
complete BEFORE they graduate. Ask for a calendar of due dates on
college and scholarship applications. And if there’s anything you
don’t understand keep asking questions until it’s clear. Plus, keep
a file of all those important papers in a place where it’s easily
accessible. In other words, YOU keep a file, not your kids!
8. The Best Scholarship Program
In Florida, there is no doubt the Bright Futures Program is your
safest bet. Many other states have similar programs. Basically, if
your son or daughter ends up with at least a 3.00 or better, the
State of Florida will pay 75 percent of your tuition to attend a
state college or university. If your GPA is a 3.5 and you’ve scored
at least a 1250 on your SAT, the state will pay 100 percent of your
tuition. This is truly gold in your pocket. No funny business, no
jumping through hoops. If you do well academically the State wants
to keep you here and reward you for your efforts.
9. Loans
There are a variety of sources for educational loans that are well
below traditional consumer loans. If you can demonstrate any need at
all you may be eligible for these subsidized or unsubsidized
government loans. Second Mortgages and special bank loans might also
come into play. And if it makes you feel any better, the D.O.E. says
the average debt facing college graduates in 1998 was just over
$28,750. No wonder the default rate hit a record high of 11.3
percent in that same year.
“We have to face the facts,” says Jim Willminton, a financial aid
officer for Equity Alliance. “Twenty years ago college graduates
were able to earn more money at a faster rate. Paying back their
loans, as a percentage of their annual income, was easier for the
most part. Today, the gap between the dollars most of our students
owe versus the dollars they are able to make is much larger.” In
short, it will take kids longer to pay-off their loans at a higher
rate than most of their parents.
Still, as discouraging and maddening as this process is, don’t let
it sour you on the value of a college education. Attack the process
much like you would put together a budget. Start putting away a few
bucks the minute your child is born. Compounding can make that nest
egg grow a lot faster then you may image. Invest in one of those
prepaid college funds that freeze tuition at today’s rates. Go to a
state university and save yourself thousands and thousands of
dollars.
Finally, borrowing for an education may be your only option.
Consider this though! Over a lifetime, a college graduate will earn
5 to 10 times more than a non-college graduate. Even if you had to
borrow every single penny to get through college it will pay off in
the end. And if you child isn’t a straight A student don’t toss in
the towel. Academic performance is wonderful but is no guarantee
that your child will turn out to be a decent human being. Success in
life or in the business world isn’t limited to those who just pull
down A’s and B’s, or have a college education handed to them on a
platter by their parents. There is value to working hard and
sacrificing. That’s the route most of us take into adulthood. The
promise of free scholarship money is, after all, like much of our
society, a hyped-up sales technique the leaves most of us
disappointed. We are disappointed we believed the hype, and
disappointed no one is doing anything to stop it.
(Originally printed November 2001)
Al Ruechel, copyright 2002, all
rights reserved
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