What are Scholarships and How Do They Work? (Guide) | Cappex (2024)

Paying for your college education with scholarship money is smart. But many students are confused about what scholarships are and how they work.

How is scholarship money awarded? What can you spend scholarship money on? How can you find scholarships? If you have questions like these, we're here to help.

What Are Scholarships?

Scholarships are financial aid awards designed to help students pay for an undergraduate or graduate degree. Sometimes a scholarship comes in a one-time check. Other scholarships are renewable and provide student with money each semester or school year.

These financial awards differ from student loans because they don't have to be repaid. So, to answer a question we often hear,you do not have to pay it back if you get a scholarship.

Students might receive the money directly as a check in their name. In other cases, the money is given to the student's school. When that happens, the student would pay the school for the difference in any money owed for tuition, fees, room, and board. If the scholarships and other forms of financial aid are enough to cover the direct college costs, the excess money is refunded to the student.

Where Do Scholarships Come From?

Scholarships come from various sources, including clubs, organizations, charities, foundations, businesses, colleges and universities, the government, and individuals.These scholarships can be merit-based, need-based, or a combination of both, giving you opportunities to continue your education without taking on a significant financial burden.

Merit-based scholarships are granted based on your academic or extracurricular achievements, including high grades, test scores, athletic or artistic accomplishments, or community service. These scholarships reward and encourage excellence and usually require students to meet specific eligibility criteria to be considered.

On the other hand, need-based scholarships are awarded according to your financial need. Therefore, factors such as your family income, assets, and other circumstances that may impact your ability to pay for college are factored into the eligibility decision.

Eligibility for need-based scholarships is typically determined after you complete the Free Application for Federal Student Aid (FAFSA) or other financial aid applications like the CSS Profile. Need-based scholarships can help cover tuition, fees, room and board, and other college expenses for students who may not have the financial means to pay for college independently.

In some instances, scholarships may encompass merit-based and need-based components, considering your academic achievements and financial needs. Therefore, it is crucial to research the specific eligibility criteria for any scholarship you're interested in so you'll know if you're eligible to apply.

What Are the Main Sources of Scholarships and Grants?

There are four major types of free money available to college applicants. We will list and discuss them below with the percentage of total grants and/or scholarships that comes from each source:

  • Federal grants: 47% of all financial aide
  • State grants and scholarships: 8%of all financial aide
  • Scholarships and grants from schools: 35%of all financial aide
  • Private scholarships: 10%of all financial aide

1. Federal Aid (about 47% of all aid)

It's estimated that the federal government gives out $120 billion each year in federal aid. But if you are looking for merit scholarships from the federal government, you will be out of luck. Almost all grants from the federal government require demonstrating financial need. You must complete theFree Application for Federal Student Aid(FAFSA) to qualify for any federal grants.

Expert tip:Complete the FAFSA, even if you don't think you'll qualify for aid. Each year money goes unawarded simply because students fail to complete the application.

In 2023 alone,$3.6 billionin Pell Grants went unclaimed because students didn't complete the FAFSA.According to theNational College Attainment Network (NCAN), 47% of the class of 2022, who would have been eligible for the Pell Grant, did not complete the FAFSA.

Soon, you'll see the new and improved Better FAFSA, which you can read about by clicking the link.

Types of Federal Student Aid

  • Pell Grant

By far, thePell Grantis the biggest federal grant. Pell Grants are available to students with demonstrated financial need. For context, during the award year 2020-2021, 78percent of Pell Grant recipients had a family income of less than $40,000 a year.

The current full grant, which is adjusted annually, is $6,895 for the 2022-2023 award year.

Is FAFSA a Pell Grant?

Answer: No. The FAFSA is the application, and a Pell Grant is one type of financial aid available to students who complete the FAFSA.

  • Federal Supplemental Educational Opportunity Grant

The FSEOG is available for students who have "exceptional financial need." If you don't qualify for a Pell Grant, you won't be eligible for this grant that ranges from $1,000 to $4,000 annually. The FSEOG will not be available on all campuses, and the money can run out.

  • Education Tax Benefits

The federal government provides several education tax benefits, which are claimed on your federal income tax return. Some are based on tuition and textbook costs. These include the American Opportunity Tax Credit (AOTC), Lifetime Learning Tax Credit (LLTC), and Tuition & Fees Deduction.

Of these, the AOTC yields the most significant tax savings per dollar of qualified higher education expenses, but it is limited to four years. As a result, the LLTC is used mainly by graduate and professional students and continuing education students after they exhaust eligibility for the AOTC.

Another popular education tax benefit is the Student Loan Interest Deduction, which provides an above-the-line exclusion from income for up to $2,500 in interest paid on federal and private student loans.

  • Veterans and Military Student Aid

The federal government provides several types of military student aid to members of the U.S. Armed Forces and veterans. These include ROTC Scholarships, the Montgomery G.I. Bill, the Post-9/11 G.I. Bill, the Yellow Ribbon Program, U.S. Armed Forces Tuition Assistance (TA), and the Student Loan Repayment Program.

  • Federal Loans

You can turn to federal loans if you aren't eligible for federal grants.

TheDirect Loanis for those who file the FAFSA and attend school at least half the time. During five years, students can borrow a maximum of $31,000.

ThePLUS Loanis designed for parents of undergraduate students and graduate and professional students. Parents can borrow the difference between the cost of the school and what their child received in financial aid.

2. State Aid (about 8% of all aid)

Almost every state education agency has at least one grant or scholarship program available to state residents. Some offer several programs.

States in the South are more likely to award money based on grade point average and possibly test scores. States on the East and West coasts are more likely to provide awards based on financial need.

An easy way to learn more about aid programs in your state is to head to the website of theNational Association of Student Financial Aid Administrators(NASFAA).

On the NASFAA website, you can find links to your state aid programs by following these steps:

Some state programs, such as those in California and New York, have centralized systems, meaning state-level formulas set awards. In other states, the government sets essential criteria, but they allow public universities to exercise some discretion when making the awards. States in this category include Texas and Virginia.

3. Institutional (School) Grants and Scholarships (about 35% of all aid)

Here is how the award process often works. A student applies to a school, and the admission office decides whether to accept the applicant. If the school gives merit scholarships, the decision typically will be made during the acceptance process, usually based on the student's grades and test scores.

This often happens before the school knows if a student qualifies for need-based aid. Then, when the school reviews the financial aid form, the admission staff decides whether a child still needs assistance, even after considering merit scholarships.

If the school is willing to give additional assistance, it will award a need-based grant on top of the scholarship. Unfortunately, the most highly-ranked research universities and liberal arts schools offer no merit scholarships.

Their aid is exclusively in the form of need-based grants. Consequently, if you don't qualify for need-based aid, you will pay the total price at these institutions. Because of the wide variety of assistance you can encounter, it's essential to use a net price calculator when evaluating the generosity of any school.

4. Private Scholarships and Employer Grants (about 10% of all aid)

Outside groups such as foundations, civic groups, companies, religious groups, professional organizations, and charities award private scholarships. Many people assume that private scholarships represent the most significant source of school money, but as you learned, they are among the smallest sources.

Unlike other sources, these scholarships typically last for just one year; most of these awards are under $4,000. As a result, the odds of winning a scholarship are about one in eight. Prestigious scholarships can have odds of one in 250 or one in 500.

Scholarship FAQs for High School Students and Parents

If you've made it this far and still have questions about scholarships, we have the answers here.

How can scholarship money be spent?

Scholarship checks awarded in your name can be spent on anything, but you would be wise to look at this as an investment and not a free pass to splurge on video games or concert tickets. This money is for school expenses. This could mean tuition, but it could also be books, pencils, housing, food (you can't study on an empty stomach), or even computers and software.

When you receive the scholarship money depends on the scholarship you won. Sometimes you get the money in one chunk before school begins; in other cases, the money is distributed in installments. Sometimes a scholarship may be paid out in the middle of a semester.

How are scholarships awarded? Who can qualify for them?

Scholarships aren't awarded just to students with a 4.0 GPA. Each scholarship has its own criteria, as we mentioned above. For example, some scholarships are awarded based on need. For others, you must be a member of an organization, studying a specific field, an exceptional athlete, or fit whatever guidelines the group awarding the money decides upon.

Regardless of whether you excel in academics or sports, you should be able to find several scholarships that work for you. There are even scholarships intended for students living in a particular state or town. In addition, you can continue to apply for scholarships during your collegiate years up to your Ph.D. studies.

We encourage you to apply for as many scholarships as possible so you don't miss out on any free money.

Who can apply for scholarships?

Scholarships are available to high school students, current college students, and even adults returning to school. Each scholarship has its own set of eligibility requirements, so it's essential to research and read the guidelines carefully before applying.

When should I start applying for scholarships?

It's never too early to start researching and applying for scholarships. Many scholarships are available to high school students in their junior and senior years, but some are also open to younger students. It's a good idea to begin your search early and create a calendar to track application deadlines.

Where can I find scholarships?

Scholarships can be found through a variety of sources, including:

  • Your high school guidance office
  • College and university financial aid offices
  • Online scholarship search engines, such as Fastweb, Scholarships.com, and Cappex
  • Community organizations, such as local clubs, foundations, and businesses
  • Professional associations related to your field of study

How do I apply for scholarships?

Each scholarship has its own application process, including submitting an online or paper application, writing essays, providing letters of recommendation, or submitting transcripts and test scores. Be sure to carefully follow the application instructions and submit all required materials by the deadline.

What is the difference between need-based and merit-based scholarships?

Need-based scholarships are awarded based on a student's financial need, as determined by their family's income, assets, and other factors. Merit-based scholarships are awarded based on a student's academic, athletic, artistic, or other achievements, regardless of their financial situation.

Can I win multiple scholarships?

Yes, students can apply for and win multiple scholarships. However, it's important to note that some colleges and universities may reduce your financial aid package if you win a large enough scholarship. That's because a considerable scholarship can decrease your financial need, so the school may think you don't require as much aid.

Do I have to pay taxes on my scholarship?

Scholarships for tuition, fees, and required books or supplies are generally tax-free. However, if you use your scholarship funds for other expenses, such as room and board, travel, or optional equipment, those scholarship funds are usually taxable. Again, it'sgood to consult a tax professional or the IRS website for more information.

Can international students apply for scholarships?

Yes, many scholarships are available to international students studying in the United States.However, research scholarships are specifically for international students, as eligibility requirements may differ from those for U.S. citizens.

What should I do if I don't win a scholarship?

Don't get discouraged if you don't win a scholarship right away. Keep searching and applying for scholarships throughout your high school and college years. Additionally, you canexplore other financial aid options, like grants, work-study programs, and even student loans, to help fund your education.

Are You Looking for Scholarships?

Supplement the college and university scholarships you receive by checking out Cappex's scholarship database. We have millions of dollars worth of scholarships you can apply for to help bring down the cost of college, and they've all been vetted, so they're legit and scam-free.

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What are Scholarships and How Do They Work? (Guide) | Cappex (2024)

FAQs

What are Scholarships and How Do They Work? (Guide) | Cappex? ›

Scholarships are financial aid awards designed to help students pay for an undergraduate or graduate degree. Sometimes a scholarship comes in a one-time check. Other scholarships are renewable and provide student with money each semester or school year.

How exactly do scholarships work? ›

Scholarships are a type of gift aid, so they don't need to be repaid. However, scholarships can have some requirements to meet, such as staying enrolled at least half-time and meeting certain GPA requirements. And with some awards, if you leave school, you may have to repay a portion of the scholarship.

What happens if you get a scholarship and don t go to college? ›

Many times if the student has not enrolled in classes during those 12 months, it expires. In almost all cases, scholarships are put directly towards your college's tuition and expenses, rather than a check sent to you. If you choose not to go to school, it will not be put in a savings account for later use.

How do they give you scholarship money? ›

Although some scholarship organizations send checks right to your school, others give the award to you. If you get the funds directly, or indirectly as a tuition refund, you can typically spend the money on education-related expenses like room, board or books.

What are disadvantages of scholarships? ›

Academically demanding: Scholarships are academically competitive, making it difficult for more students to qualify and receive the funding. This can also put a lot of pressure on students to produce outstanding academic results.

How rare is it to win a scholarship? ›

Full-ride scholarships are awarded to only about 0.1% of students (Wignall, 2021). Nearly just as rare are full-tuition scholarships, which are awarded to only 1.5% of students (ThinkImpact, 2021). A regular high school student may have the qualifications for as many as 50 to 100 scholarships (Dickler, 2021).

Do you get to keep the money from scholarships? ›

What happens to leftover scholarship money. If you earned scholarships and grants that add up to more than your total cost of attendance, your school may send you a refund of the leftover scholarship money. Keep in mind, you may have to pay taxes on that amount.

How long do most scholarships last? ›

Most scholarship prizes can only fund college tuition for one year, and expire after that use. For example, if you receive a scholarship that covers all your finances for your freshman year of college there is no guarantee that it will be rewarded for your consecutive years as well.

What can stop you from getting a scholarship? ›

Six Things to Avoid When Applying for Scholarships
  • Paying for scholarship assistance. ...
  • Failure to meet the application deadline. ...
  • Failure to follow directions. ...
  • Failure to send in a complete application. ...
  • Failure to write legibly. ...
  • Failure to proofread their application.
Mar 9, 2021

What GPA do I have to keep to not lose my scholarship? ›

Most schools set grade point average (GPA) minimums to keep the financial aid flowing—even for "need-based" grants awarded based on family income. Colleges typically require students to maintain at least a 2.0 GPA, the equivalent of a C average, to qualify for almost any kind of financial aid.

How much money is usually in a scholarship? ›

The average scholarship for 2-year institutions is worth $6,010. On average, first-time undergraduates who receive government grants and scholarships at a 4-year college receive about $14,890 annually.

How does a student receive a scholarship? ›

Most university scholarships will be awarded based on your application to the college and your FAFSA, both of which you'll need to submit to attend that school in the first place. This is great news because it won't require extra work on your end to be considered for this free money.

Do colleges automatically consider you for scholarships? ›

Colleges may give some scholarships automatically when a student meets their academic and test score requirements. Others may require the student to submit essays and letters of recommendation, attend a formal interview, or demonstrate their talent in a particular niche through an audition or portfolio review.

What are two things you should never do when applying for a scholarship? ›

Here are seven mistakes to avoid when searching for and filling out scholarship applications.
  1. Starting Research Too Late. ...
  2. Missing Deadlines. ...
  3. Filling Out a Scam Application. ...
  4. Ignoring Scholarship Requirements. ...
  5. Bypassing Smaller Scholarships. ...
  6. Leaving an Application Incomplete. ...
  7. Making Errors on an Application.
Feb 21, 2023

What info should you never provide for a scholarship? ›

If an application asks for money, walk away. Don't give out bank or credit card information. Any financial data you provide should come from IRS or FAFSA data. Legitimate providers do not ask for bank information.

What is the hardest type of scholarship to get? ›

Athletic Scholarships

An athletic scholarship may cover some or all of your tuition costs, depending on the school. Athletic scholarships are some of the hardest to receive.

Why is it so hard to get a scholarship? ›

Parents have a tendency to overestimate their child's eligibility for scholarships and underestimate their child's eligibility for need-based financial aid. Only about 1 in 8 college students wins a scholarship, and the average amount used to pay for college is about $4,200 a year.

What is the #1 way to increase your chances for a scholarship? ›

If you apply to more scholarships, you will increase your chances of winning a scholarship. Often students dislike smaller scholarships and essay competitions. But these scholarships are less competitive, so they are easier to win. Small scholarships do add up and may make it easier to win bigger awards.

Do you have to pay back scholarships if you fail? ›

Do you have to pay back a scholarship if you lose it? Usually, the answer is no. Scholarships are a form of nonrepayable gift aid, much like many federal grants. Student loans, unlike grants and scholarships, are borrowed money that must be paid back with interest.

Why should I be selected for a scholarship? ›

Talk about your Passion and Persistence. Letting your passion show through in your answer allows the committee to see your dedication. You deserve this scholarship based on your love of learning, your enjoyment of your field, or your passion for growth.

Do you apply for scholarships every year? ›

Winning scholarships while in college can help you pay for your expenses and even boost your post-grad connections. Apply for scholarships each year, even if you don't win money the first time you apply.

Is there a limit on how many scholarships you can get? ›

There is no limit to the number of scholarships you can apply for, and you actually should apply to many. Scholarship awards can vary greatly, so you might apply for a few scholarships with huge awards, and you might also apply for some that are only worth a few hundred dollars.

Do you lose your scholarship if you take a year off? ›

They Can Be “Use It or Lose It”

For example, if you win an award for your freshman year and you decide to take a year off instead, the scholarship may not be waiting for you when you do attend. Scholarships are usually not a physical check to you, but a check to the school towards your education.

How late is too late for scholarships? ›

Is it too late to apply to scholarships? No! There are SO many scholarships out there available to students of all ages, years in school, major, and more! It's never too late to find money for college, so consistently searching for scholarships is key.

What GPA do I need for scholarships? ›

Although a strong GPA helps increase your chances of getting a full-ride scholarship, you don't need a perfect 4.0 to be qualified. In fact, GPA requirements are most commonly set at a 3.0 average, with what's considered to be a "good GPA" typically being a score between 3.5 and 3.8.

What grade do you need for a scholarship? ›

Minimum requirements range from around 2.0 on the lower end to 3.75 or higher for competitive academic scholarships. Generally speaking, a 3.0 GPA or higher will give you a decent shot at qualifying for a variety of scholarships.

Can you live off scholarships? ›

Just as you can use scholarships to pay for tuition, you can use scholarship money for living expenses as well. What some students may not realize is that room and board can oftentimes be just as expensive as tuition – if not more.

Can you get denied a scholarship? ›

Scholarship applications are rejected for a wide variety of reasons. Sometimes it is because the essays submitted weren't as high in quality as those submitted by other candidates. It can also be related to poor GPA, low amounts of extracurricular activities, neglecting to submit all required materials, etc…

At what GPA do you lose fafsa? ›

The Satisfactory Academic Progress regulations require that you maintain a minimum cumulative grade point average (GPA) in order to remain eligible for financial aid. This cumulative grade point average is 2.0 on a 4.0 scale. If you drop below a cumulative GPA of 2.0, you will be placed on a financial aid Warning.

What GPA do you lose fafsa? ›

Federal Student Aid

If you receive federal college loans, failing a class may disqualify you from them based on your school's SAP requirements. Federal student aid typically requires you to maintain a 2.0 GPA to qualify — so failing a class may put you at risk of losing it.

Is $25,000 a good scholarship? ›

A scholarship that offers $25,000 to $49,999 is still worth the student's time and effort. Even a scholarship worth $500 deserves an application, since every dollar won is a dollar less borrowed. There are many more scholarships at these award levels, but here are a dozen of the most famous scholarships.

How many scholarships do people usually apply for? ›

For those that want solid numbers, on average, many of the students I work with are applying for anywhere between 3-7+ scholarships, each, per week. Some weeks those numbers are much higher, and other weeks students are preparing or taking the week off to recharge mentally.

How rare is a full scholarship? ›

How hard is it to get a full ride scholarship? Less than 1 percent of students get full ride scholarships, showing just how difficult it is to earn one. However, with the right background, proper planning and by knowing where to look, your chances of landing a full ride scholarship can increase.

How long do scholarships take to process? ›

How long does it take to get approved for a scholarship? After scholarship deadlines, it often takes one to three months before a scholarship winner is announced. This is due to the time it takes to go through scholarship applications.

How do you ask for a scholarship? ›

Contact your school's admissions office and complete the necessary paperwork. Ask the school if it can offer more scholarship money to make your attendance more feasible. Applicants should use family circumstances as compelling reasons for the school to reconsider.

What SAT score will get you a full scholarship? ›

So you're probably wondering, What's a good SAT score for scholarships, and how can I find them? The short answer is that you should aim for an SAT score between 1200 and 1600 if you want to secure some scholarships based on merit–and the higher within that range you score the more money you're looking at.

Can a high SAT score get you a scholarship? ›

Scholarships are often awarded based on academic merit— and they sometimes consider your ACT or SAT scores. Strong ACT or SAT scores can make you a competitive scholarship applicant.

Is scholarships based on GPA? ›

While some scholarships are based on a student's GPA, most scholarship aren't only about a student's GPA. Rather, providers use grade point averages as a piece of scholarship qualification criteria (For example, the details may note, “Students must have a 3.0 GPA or above to apply.”)

What happens if you accept a scholarship and don t go to college? ›

Many times if the student has not enrolled in classes during those 12 months, it expires. In almost all cases, scholarships are put directly towards your college's tuition and expenses, rather than a check sent to you. If you choose not to go to school, it will not be put in a savings account for later use.

What are the cons of scholarship? ›

Academically demanding: Scholarships are academically competitive, making it difficult for more students to qualify and receive the funding. This can also put a lot of pressure on students to produce outstanding academic results.

What is the 5 strong scholarship? ›

The mission of the 5 Strong Scholarship Foundation is to increase the retention and graduation rates at partnering Historically Black Colleges and Universities by assisting in the enrollment and success of academically promising student leaders until graduation.

What are the chances of actually getting a scholarship? ›

Odds of Winning a Scholarship

Only about 1 in 8 college students wins a scholarship, and the average amount used to pay for college is about $4,200 a year. Very few students win $25,000 or more in scholarships each year (only about 0.1%). Among the students who win scholarships, 97% win $2,500 or less.

How much do you usually get from scholarships? ›

The average scholarship for 2-year institutions is worth $6,010. On average, first-time undergraduates who receive government grants and scholarships at a 4-year college receive about $14,890 annually.

What are my chances of getting a full scholarship? ›

Unfortunately, the reality is that many students who more than meet all of the requirements for a full scholarship will not get it. In fact, only 0.1% of students get a full-ride per year.

How much money can I expect from scholarships? ›

The average scholarship amount is $5,000 to $10,000 annually. These scholarships are typically available through the college you are planning on attending. Community partners and professional organizations offer them as well.

What GPA will get you a scholarship? ›

Although a strong GPA helps increase your chances of getting a full-ride scholarship, you don't need a perfect 4.0 to be qualified. In fact, GPA requirements are most commonly set at a 3.0 average, with what's considered to be a "good GPA" typically being a score between 3.5 and 3.8.

What GPA is good enough for scholarship? ›

Minimum requirements range from around 2.0 on the lower end to 3.75 or higher for competitive academic scholarships. Generally speaking, a 3.0 GPA or higher will give you a decent shot at qualifying for a variety of scholarships.

Who is most likely to get a scholarship? ›

Over 33% of private scholarships are provided to STEM students. The chances of a white student getting a scholarship are 14.2%, while the odds for minority students are 11.2%. The odds of a Black student winning a scholarship is 11.4%, 9.1% for Hispanic students, and 10.5% for Asian students.

How many scholarships should I apply for to get money? ›

The short answer is that you should apply to as many as you can, as early as you can. This means that you need to be looking early, and finding out when deadlines are. But remember, you don't want to make a career out of scholarship searching and application.

Do scholarships give you money every year? ›

Scholarships are financial aid awards designed to help students pay for an undergraduate or graduate degree. Sometimes a scholarship comes in a one-time check. Other scholarships are renewable and provide student with money each semester or school year.

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