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The College Solution: Where to Find the Money

Lynn O'Shaughnessy shares where to find cash for college in the form of grants, awards, and scholarships.
This chapter is from the book
  • Among the elite private schools, tuition is driven by what the market will bear. It’s that simple. They charge a higher tuition because they can.
  • —Edward R. Fiske, author of Fiske Guide to Colleges

When teenagers are looking for colleges, the price is often not something they think much about.

That’s why I wasn’t surprised when a mom told me about the experience of her daughter’s boyfriend, who was thrilled to get an acceptance letter from the University of Notre Dame.

The teenager, who was a phenomenal student, was shocked at how little money Notre Dame gave him to defray the cost. The future journalism major was even more worried because his parents weren’t going to provide much financial help to this young man, who now assumed he will have to juggle multiple campus jobs with a tough course load and graduate with an excessive amount of debt.

While money was an issue, the teenager had never researched whether he had a realistic chance of receiving any sort of price discount from Notre Dame. Some pricey schools are more generous than others. The teenager had also never considered less expensive alternatives. For instance, the University of Missouri, which has one of the finest journalism schools in the country, charges a fraction of the price. The mother, however, noted that the teenager was only interested in “prestige” schools.

Many of you, I’m sure, can relate to this student’s dream of attending Notre Dame. Who wouldn’t want to boast about graduating from a brand-name institution that makes others envious? But the glow of attending a nationally prestigious school will surely fade when a graduate is overwhelmed by student debt and wondering if he’ll be eating Cheerios for dinner on a regular basis.

What this cautionary story illustrates is this: At the start of the college search process, parents and teenagers need to appreciate what kind of help they can realistically expect from not only colleges, but also from other potential sources of financial assistance. Knowing where the money is located can help narrow the hunt to realistic college choices. And by realistic, I don’t always mean those with the cheapest price tags. Some of the most expensive schools in the country can actually be the most affordable for the right students.

The Largest Sources of College Cash

So where exactly are all those billions of college dollars stashed?

As you can see, from the table, the federal government represents the largest source of grants (free money) and colleges are the No. 2 source.

Scholarships/Grant Sources

Percentage of All Grant Aid

Federal government




State government


Private scholarships


The majority of college students will receive grants from at least one of these sources. What’s important to understand is which of these sources do you have a realistic chance of tapping into. Let’s take a look at all four of them.

Federal Government Grants

Household income is what makes or breaks a family’s chances for federal help. To qualify for federal grants, your family has to be struggling financially.

The big daddy of all federal grants is the Pell Grant. The maximum grant can change annually, but the top award for the 2013-2014 school year is $5,635—admittedly, not a princely sum.

More than two-thirds of students who qualify for the Pell Grant have families living within 150% of the poverty line. As a practical matter, to qualify for the full Pell Grant, families must have an adjusted gross income of less than $23,000. About a quarter of the remaining families making under $50,000 qualify for a smaller Pell award.

Even if you won’t qualify for a federal grant, you will be eligible for federal college loans. Federal student loans are the superior choice for borrowers. To qualify for parent and student federal loans, you must complete the Free Application for Federal Student Aid (FAFSA), which you’ll learn about later.

Institutional Awards

Private and state colleges and universities routinely provide grants to students of all income levels. The average grants at private institutions are especially high. Recently, the typical student at a private institution received grants that equaled a tuition discount of 49.1%, according to the National Association of College and University Business Officers. At a school where the tuition is $36,000, for example, a 49.1% price break would drop the tuition to $18,324. These grants, by the way, are not reserved solely for the brainiest of applicants. About 88% of students attending private schools receive some type of award.

As you’ll learn, there are a variety of reasons why private schools often cut their prices as aggressively as stores on December 26. One prime motivator is this reality: Private institutions must compete with less expensive state institutions, which is where the majority of students attend. What many families don’t realize is that the price gap between private and public schools has been narrowing in recent years as state support of public universities has shrunk and private schools have scrambled to maintain or even increase their financial aid levels. Because of the proliferation of grants, private schools can cost the same or less than a public university for some students.

Private colleges and universities also use grants to compete against each other. The competition for talented students (and not just those 4.0 students) is actually fierce and in conflict with the stubborn conventional wisdom that the majority of schools reject most students. That’s untrue. Actually, only a small fraction of schools reject most of their applicants.

Like their private counterparts, state universities provide grants to students who need financial help, as well as wealthy teenagers. State grants typically aren’t as high, but then the published price tags aren’t as steep either. The percentage of students receiving grants also tends to be much lower than at private schools.

According to a study by The Education Trust, state institutions award at least half of merit awards to affluent students. At the typical state flagship university, which is the premiere public university in each state, half of the money goes to well-off students. The percentage rises to 55% at other public universities.

State universities dispense awards to affluent students for the same reason that their private peers do. They are jostling for top students to help boost their own reputations. Both state and private schools use grants to attract students, which they hope will help them inch up US News & World Reports’ rankings or at least prevent them from slipping to a lower rung. This focus on attracting rich teenagers has created a situation where student bodies at some flagships are more affluent than at expensive private universities. The phenomenon, prompted Kati Hancock, president of The Education Trust, to comment, “It’s almost as if some of America’s best public colleges have forgotten that they are, in fact, public.”

State Government Grants

States routinely award money to college students, but often the states impose formulas that hand out grants based on such factors as standardized test scores, grade point averages, and class ranks.

Some states restrict their grants to low- and middle-income students, while other merit-based programs are also open to wealthy teenagers who meet the academic standards. These latter programs have been particularly popular in the South and have attracted criticism for using limited state funds for students who don’t need the help.

You shouldn’t assume that state grants are available only for students who will be attending in-state public universities. In some states, such as California, residents can use the grants to help pay for private schools within their borders.

To learn more about these public grant programs, contact your state higher education agency. You can find the contact information for your state by Googling the terms “state higher education agencies” and “gov.”

Private Scholarships

Many families mistakenly believe that private scholarships—those sponsored by nonprofit organizations, foundations, and companies—represent the most lucrative source of cash. These scholarships, however, represent the tiniest source of money, and yet that’s where many students focus their hunt.

Because the federal government requires a college to consider outside private scholarships when calculating financial aid awards, these scholarships can actually reduce a student’s aid package. Because of this reality, private scholarships can be a bigger benefit to affluent students. You’ll learn more about private scholarships in Chapter 10, “Capturing Private Scholarships.”

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