What you should know about private college scholarships

Every year, countless high school students spend hours searching for and applying to private college scholarships, hoping to ease the financial burden of higher education. However, there's a dirty secret in the world of private scholarships that many families don't discover until it's too late: these awards often provide little actual benefit and can even lead to reduced financial aid from colleges.

Private scholarships are marketed as "free money" for college, enticing students with the promise of thousands of dollars in aid. Websites like Fastweb and Niche claim to simplify the scholarship search process, offering personalized recommendations to millions of hopeful applicants.

However, the reality is far less rosy. According to financial aid expert Mark Kantrowitz, only about 15% of college students receive any private scholarships at all. And for those lucky few who do win awards, the amounts are often disappointingly small.

As James S. Murphy reports:

"The average scholarship, Kantrowitz found, was under $5,000. And 97% of recipients received $2,500 or less."

For most students, these modest sums barely make a dent in the ever-rising cost of college tuition and fees.

The Time-Consuming Scholarship Hunt

Despite the low odds of success, many students and parents devote countless hours to the scholarship search. They scour databases, fill out lengthy applications, write essays, and gather recommendations - often with little to show for their efforts.

This is the story of Maggie Beam, a high school senior who applied for nearly 100 scholarships:

"'I didn't get any of them,' Maggie told me. 'I mean as far as I know, since I didn't hear anything from them. It was a complete waste of time.'"

Maggie's experience is far from unique. Many students find themselves trapped in an endless cycle of applications, chasing after elusive scholarship dollars that never materialize.

The Scholarship Search Industry

So if private scholarships are such a long shot, why do so many students pursue them? Part of the answer lies in the booming scholarship search industry.

Websites like Fastweb and Niche have turned scholarship matching into big business. These sites collect vast amounts of personal data from students under the guise of providing "personalized" scholarship recommendations.

As Jeff Levy, an independent education consultant, explains:

"The primary reason these sites exist is to gather data from students and sell names to other companies."

In other words, students' personal information becomes a valuable commodity, even if they never win a single scholarship dollar.

The Trap of Scholarship Displacement

Even when students do manage to win private scholarships, there's no guarantee the money will actually reduce their college costs. This is due to a practice known as scholarship displacement.

Many colleges reduce their own financial aid offers dollar-for-dollar when students bring in outside scholarships. As Murphy reports:

"If a student receives a $2,000 scholarship from their local Rotary club, say, the college simply slashes its institutional aid to the student by that amount. In effect, they pocket the scholarship the student worked so hard to find."

This means that all those hours spent hunting for scholarships may ultimately have zero impact on a student's bottom line.

The True Impact of Private Scholarships

To understand just how little private scholarships contribute to overall college funding, Murphy analyzed data from 1,400 schools:

"On average, I found, private scholarships account for only 5% of the aid going to students. At half the schools, it was 3% or less."

These numbers reveal the harsh truth: for the vast majority of students, private scholarships play an insignificant role in making college more affordable.

A Better Approach to College Affordability

So if private scholarships aren't the answer, what should students and families do to manage college costs? Experts recommend focusing on more impactful strategies:

Choose affordable schools: Look for colleges that offer generous institutional aid and have a track record of meeting students' financial need.

Understand net price: Focus on the actual out-of-pocket cost after all grants and scholarships, not the sticker price.

Maximize need-based aid: File the FAFSA early and accurately to ensure you're considered for all available federal, state, and institutional aid.

Consider merit aid: Research colleges that offer substantial merit scholarships based on grades and test scores.

Explore local scholarships: While national scholarships are highly competitive, local awards from community organizations often have better odds.

As college admissions consultant Chris Reeves advises:

"It's a hard argument to tell students not to apply for scholarships. But most of the money is going to come from colleges."

The Future of Private Scholarships

Despite the current challenges, there is some hope for improvement in the private scholarship landscape. Several states, including Maryland, have passed laws banning or limiting scholarship displacement at public universities.

Additionally, some scholarship providers are becoming more savvy about how they structure their awards to avoid displacement. The Michael and Susan Dell Foundation, for example, offers flexibility in how and when students can use their scholarship funds.

Key Takeaways for Students and Families

While private scholarships shouldn't be completely dismissed, it's crucial to approach the process with realistic expectations:

Prioritize your time: Don't let the scholarship search consume all your free time. Focus on your grades, standardized tests, and meaningful extracurricular activities.

Start local: Look for scholarships from community organizations, employers, and local foundations before tackling national competitions.

Understand displacement policies: Ask colleges about their policies on outside scholarships and how they might affect your financial aid package.

Focus on college choice: Selecting affordable schools that meet your financial need is likely to have a much bigger impact than winning small private scholarships.

Be wary of scholarship search sites: Use these resources cautiously and be mindful of the personal information you share.

The dirty secret of private college scholarships is that they rarely live up to the hype. While the occasional student may hit the jackpot with a large award, most find the process to be a frustrating and unproductive use of time.

As families navigate the complex world of college financing, it's essential to look beyond the allure of "free money" and focus on strategies that will have a meaningful impact on affordability. By understanding the true nature of private scholarships and prioritizing more effective approaches, students can make informed decisions about their educational futures without falling into the scholarship trap.