As families try figure out how to pay for their children’s college costs in the fall, scholarships are an important avenue to explore.
“Every dollar won in a scholarship could potentially eliminate a dollar borrowed for the student,” said Elaine Rubin, director of corporate communications at Edvisors.
More than $6 billion in scholarships are awarded to college students each year, according to an analysis of U.S. Department of Education data by higher education expert Mark Kantrowitz.
To begin, scholarships are gifts that don’t need to be repaid, and there are thousands of them offered. Some of the awards are based on merit while others are granted because of financial need.
Here’s what else you need to know.
Cast a wide net to find scholarships
Students can use free scholarship matching services to search for the awards, Kantrowitz said. Some of the services he recommends include Fastweb and the College Board’s Big Future.
“These websites match your background profile against a large database of scholarships, showing you only the ones for which you are eligible,” Kantrowitz said.
Scholarship-listing books can also be helpful, he said: “You can find them in the jobs and careers section of your local public library or bookstore.”
(Make sure the book is not more than 1 or 2 years old, Kantrowitz cautioned, because many awards change or end.)
You can also try Googling for different scholarships, Kantrowitz said.
During your search, you’ll want to consider what sets you apart. For example, if you are the first person in your family to attend college, you might type in: “First-generation college student scholarships.”
According to the U.S. Department of Education, students also should ask both their high school counselor and the college’s financial aid office about scholarship opportunities.
The U.S. Department of Labor has a scholarship search database, too.
You should never have to pay to apply for scholarships, Kantrowitz warned: “If you have to pay money to get money, it’s probably a scam.”
Scholarships shouldn’t be ‘the entire plan’
According to calculations by Kantrowitz, around 1 in 8 college students has won a scholarship. The average award is around $4,200. Around 0.1% of undergraduate students received $25,000 or more in scholarships.
“Scholarships are part of the plan for paying for college, but not the entire plan,” Kantrowitz said.
Most families will still want to save for their children’s higher education, file the Free Application for Federal Student Aid, or FAFSA, form, and be wise about not borrowing too much.
Some scholarships are huge, though.
For example, the Regeneron Science Talent Search has a top prize of $250,000 for young scientists. The Coca-Cola Scholars Foundation offers $20,000 college scholarships for those “recognized for their capacity to lead and serve, as well as their commitment to making a significant impact on their schools and communities.”
Scholarships may reduce grants, trigger taxes
One thing to keep in mind when applying for the awards is that some colleges reduce their grants to a student if they receive one, Kantrowitz said. These so-called displacement policies are something to be on the lookout for as you weigh college offers — although some states have actually set limits on the practice.
And while many scholarships are renewable, you may be required to maintain a certain grade point average to remain eligible.
Kantrowitz recommends students search for scholarships every year. “Some scholarships are open to just high school seniors,” he said. “There are also some scholarships that are only open to students who are already enrolled in college.”
In addition, some scholarships may be taxable, Kantrowitz said. It all depends on what you use the money for.
The awards are shielded from taxation if they’re directed only at tuition and books. Amounts applied to room and board, transportation or other living expenses, meanwhile, can count as taxable income.
“They can also ask the scholarship provider for help,” Kantrowitz said. “Some will allow the student to defer their scholarship for a year to avoid needing to spend it on taxable expenses.”