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The problem with private college scholarships

May 7, 2014

I’ve read that a number of small privately-offered scholarships go unclaimed each year because of lack of qualified applicants. My students tell me it’s just not worth the effort to apply for them. Before today, I concluded that their attitudes showed a lack of motivation triggered by too many other resources (parents willing to pay the bill). Now I understand that, in fact, there is an economic reason for the students’ disinterest in these small private scholarships.

One scholarship application I viewed today is offered by a trade association. The application form requested a surprising amount of information that I did not have available. It seemed that I would need assistance from the school to complete the scholarship application. I estimated that it might take a combined 5 hours for parent and student to complete the requested documentation. The scholarship amount is $1,500 and for purposes of this discussion I estimate that there may be 10 applicants. That lets is calculate the economic “value” of each application at $150. It we arbitrarily value the parent/student time spent at $25 per hour then the net “value” of completing the application is only $25. I can understand why some students don’t get excited by the possibility. The solution? Invest some time into making the application process easier. there is no reason why a $1,500 scholarship application needs to be more than one page long.

Despite this basic frustration, the application form might not even be the biggest deterrent to potential scholarship applicants. Applicants should consider the likelihood that their total financial aid award from the school will be reduced dollar-for-dollar by any third-party scholarship received. Financial aid through the college or university is based on a formula that considers the dollars of unmet need as calculated on a standardized basis for all students. In this case there may be absolutely no economic incentive to apply for the scholarship. In other words, the student who had been earmarked for a $2,000 alumni scholarship would now receive only a $500 alumni scholarship plus the $1,500 trade association scholarship. There is no net gain to the student except in the unlikely event that the student would have received less financial aid than the amount of the third-party scholarship.

So between the low economic return for spending time on scholarship applications combined with the likelihood of having other financial aid reduced by the college, it is difficult to make a case for small third-party scholarships.

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