X 3 Categories of Available Scholarships
Posted on November 22, 2018

3 Categories of Available Scholarships


Few elements of the college project plan are as misunderstood as scholarships. Substantial resources are available for students to access, but knowing where they are, who controls the purse strings, and how to get them is important.

First, parents need to understand the three categories of scholarships:

  1. Institutional (colleges and universities)
  2. Government (federal and state)
  3. Private (corporate and community)

Institutional Scholarships 

The most significant scholarship money (free money) comes from the schools – or institutions – themselves and is distributed at the discretion of the universities. Schools invest significant efforts to raise and manage their endowment funds and strategically administer scholarships to attract a student body that perpetuates their mission and raises their rankings. 

Most student bodies look like a demographic barbell: smart kids from low-income households weighted equally with smart kids from affluent households. What’s missing in this equation are average students and kids from middle-income families, who have to work harder to make the system work for them. If we allow ourselves to look at colleges and universities that are not at the top of every ranking report, we’ll find that our students will be warmly embraced and financially enticed to attend. 

Government Scholarships 

As for government scholarships, federal grants are need-based and geared toward families making less than $50,000 per year. The other category of free money offered by the federal government is the tax credit, which is not really a scholarship, but is money for college provided by Uncle Sam. 

Families should take advantage of the American Opportunity Tax Credit – the most generous version – which is more valuable than a deduction as it reduces your tax liability dollar for dollar. The credit is limited to qualifying expenses, which include tuition, fees and course materials. The generosity is capped at certain income levels and can only be used for four years but, with the college costs rising every year, qualifying is not difficult. 

Private Scholarships

Third party scholarship money, or private scholarships, make up 6 percent of the three-billion-dollar pie that is the total financial aid available in the US each year. Private money requires the most time and effort, organization and persistence from families. Finding it should almost be viewed as a part-time job. 

To be frank, it is the rare household that does the work necessary to yield meaningful results, but the ones that do the legwork can garner several thousand dollars to offset the costs of the first year of college.

For more in-depth information about the different types of scholarships that are available, and how to access them, I suggest checking out my book, Never Pay Retail for College. Chapter ten goes into great detail about this subject. 

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