By Paula Wethington / Monroe on a Budget

When I was a high school senior, I won a scholarship of $1,000 a year, renewable for four years, from a private foundation. It could be used at any eligible college or university, and transfers were acceptable as long as I kept the foundation information of my situation.

I earned that scholarship through good grades, an interview with a committee, recommendation letters and the fact that I had been a newspaper carrier at a Gannett newspaper during the required time frame. That particular program ended many years ago, but I’m explaining the criteria so that readers understand that it was an earned, merit-based scholarship.

Because the money would be payable directly to my college (this is a normal procedure for scholarship awards), I reported the award to each college where my applications and financial aid reviews were pending.

Much to my surprise, one of the colleges returned a letter that indicated a reduction in financial aid corresponding to the $1,000 a year.

As far as I was concerned, the Gannett scholarship wasn’t financial aid. That was MY money that I EARNED in part through delivering newspapers.

Luckily, not all of the colleges I applied to treated my private scholarship in the same way. Most other letters showed it would be considered student contribution.

The reason I’m telling this story is I came across an article this week at Money Talks News: When a Full College Scholarship Really Isn’t. It explains the scenario I noticed in 1984, or circumstances that result in similar decisions, is happening today at some campuses and catching students by surprise.

Keeping in mind that such decisions and actual impact on student will vary by college or university, this is what Brandon Ballenger wrote:

Schools call it a minimum student contribution. Families might call it unaffordable.

Dozens of schools make students pay some of their education costs out-of-pocket — even when they have enough financial aid to cover everything, MarketWatch says. The site tells the story of Beatriz Barros, who was a freshman at Cornell forced to pay $8,100 even though she had a scholarship large enough to cover everything.

Here’s the MarketWatch report: The end of the full ride scholarship?

When a student gets private scholarships—from a corporation or community group, say—some schools will actually scale back their own aid offering. In other cases, even when aid is enough to cover every penny of financial need, some schools require students to still pay a portion of the college bill out of their own pockets. These policies are in place at roughly 10 out of the 61 colleges surveyed in a report released last month by the National Scholarship Providers Association, a nonprofit that represents scholarship providers. …

Many colleges require students to pay a portion of their annual college costs, and they will not accept any type of need-based financial aid for this amount, no matter how poor or wealthy the student is. The reasons: Some believe that students should have skin in the game. If they’re required to pay even a small amount, they’ll theoretically be more engaged in their studies. Other colleges say it’s because of the way they determine financial need.

If you want the detailed discussions, you can find it at the National Scholarship Providers Association White Paper. The report criticizes the potential impact of such policies on first-generation and lower income students, who are less likely to have a family savings cushion or the ability to designate summer job and part-time pay to the specific list of expenses that are considered Cost of Attendance.

To be fair, the full ride scholarship, or a combination of funds that leads to the equivalent, was a scarcity even before the recession. Michelle Singletary from Washington Post’s Color of Money, explained that situtation in an interview with financial aid expert Mark Kantrowitz.

In response to this financial aid dilemma, is it still worth applying for the private scholarships of $500 to $1,500 that dozens of Monroe County, Mich., students win every year from local foundations, memorial funds, civic clubs and sponsors?

Yes.

Given the fact that scholarship deadlines are so early in the process, I recommend you scramble for as much money as you can find. Any such awards could help keep your student loan totals down, and it’s likely you will need loans at some point while pursuing a degree. The Project on Student Debt reports that 62 percent of students who graduated from Michigan colleges and universities in 2011 graduated with debt, with an average of $27,451 of student loans in their names.

But when the financial aid letters arrive, pay attention to impact of those private scholarships.

To be fair, colleges will be required to adjust other funding amounts to equal the Cost of Attendance formula. They also need to follow the rules of specific programs to what drops off the financial aid package when changes take place.

As far as student and family budgets are considered, the impact you want to see is that merit-based money you earned through private scholarships goes toward reducing loan amounts, out-of-pocket expenses, or a work requirement.

If it replaces in-house or “institutional” scholarship money or grants, or you run into a “minimum student contribution” requirement, it’s time to decide whether that college really is affordable with your available resources.

 

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