COLLEGE SAVINGS 101

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Be realistic regarding free college money
by Joe Hurley, founder, Savingforcollege.com
Tuesday, May 22nd 2007

[Updated March 13, 2008]

The 2007 High School Graduate Survey from the job-search company Monster found that 80 percent of high-school students surveyed plan to use scholarships to finance college, and that fewer than half the students planned to rely on their parents for financial help. Just how realistic are students' expectations?

You can find reams of research data on the Internet concerning the cost of college and how students and their parents pay those costs. Of particular interest to many families is the amount of grant aid that may be available to their students, since this is the "free money" that does not have to be repaid.

And yes, there is a substantial amount of free money. In its publication "Trends in Student Aid 2006," the College Board reports that Federal grants to undergraduates amounted to $16.5 billion for the school year 2006-07, representing 17 percent of all undergraduate financial aid, while state grants were $7.5 billion (8%), institutional grants totaled $20.6 billion (21%), and private scholarships and employer assistance amounted to $7.3 billion (7%). Of course, much financial aid ($39.1 billion or 40%) is loans, and that includes only federal loans, not the billions in private student loans.

At the graduate level, federal loans represent 61% of aid.

Comprehensive data is available from the U.S. Department of Education's National Center for Education Statistics (NCES). Its most recent survey found that in 2003-04, 62 percent of all full-time undergraduates received grants, with the average grant amount being $5,600. Of course, averages don't tell the whole story. The vast majority of Federal grant money is awarded on the basis of financial need, while most institutional aid consists of merit scholarships and tuition discounts that are non-needs-based.

Looking at income, NCES found that 85.5 percent of full-time dependent students who reported income of less than $32,000 received grants, averaging $5,500, while 43.5 percent of students who reported income of $92,000 or more received grants, averaging $5,400. Naturally, the lower-income students relied primarily on Federal grants while the higher-income students were for the most part receiving institutional grants.

And what about outside scholarships? In "Private Scholarships Count," a report by the Institute for Higher Education Policy, total private scholarship money was estimated at $3.1 - $3.3 billion in 2003-04, representing only 7 percent of total grant-based aid. Approximately 7 percent of undergraduate students received private scholarships, with an average value of $1,982.

If your child is a star athlete, perhaps he or she will be fortunate enough to be one of the 126,000 student-athletes receiving a Division I or II athletic scholarship. According to the NCAA, schools have about $1 billion available for this purpose.

» Claiming a state income tax deduction - 12/20/16
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