Don't Get Caught With the Big Lie About Scholarships... Buyer BewareThere are many myths and misunderstandings about student financial aid. The biggest one is that "There are millions of unused scholarships each year."
This is a horrible myth that has continued for twenty years because of many unscrupulous scholarship search companies out to take advantage of families. It's just not true. Private scholarships are not where the action is in terms of student aid. We know that is not what you want to hear, but scholarships represent less than four percent of the total aid available each year. That means very few students win an outside scholarship. And for those students who do receive a private scholarship, the average award amount is usually less than what is needed to pay for books and supplies for a year.
Sure, apply for local scholarships from philanthropic organizations in your community and check with you local high school counselor and college financial aid administrator for lists of scholarship possibilities and scholarships. But do not be disappointed if you do not receive one because scholarships are not the way the great majority of students finance their college education. And be wary of scholarship search scams, companies who are out to take advantage of unknowing students and parents. These questionable businesses try to continue the myth about scholarships and charge hundreds of dollars and "guarantee" results.
It just isn't true. Their "guarantee" fine print usually indicates you have to send them several denial letters from outside scholarship agencies before they will refund your money. And most of the scholarship agencies on the lists they send you (you have to write the letters requesting scholarship applications) will never even respond to you nor even mail you a scholarship application. In our 34 years in the student aid industry, we've learned that paid scholarship searches are often not worth the money.
There are a number of companies that provide "free" scholarship searches on the Internet, including fastWEB. However, it is still highly unlikely you'll receive an application or response from most companies or agencies. And to make matters worse, FastWEB (owned by www.monster.com) sells the names of students to other companies so you'll be hounded by others through their junk mail and evening phone calls trying to sell you something. So as usual, the only one who usually gets any money is the scholarship search company, not the deserving student.
If you are a Native American, there may also be scholarships available through your tribe, the Bureau of Indian Affairs or schools themselves. See a list of 562 federally recognized Native American tribes in the U.S. and Canada and more information about Bureau of Indian higher education grants.
For blind or visually impaired students, scholarship opportunities ranging from $3,000 to $12,000 are available through the National Federal of the Blind.
The way most students will finance their education is through traditional forms of financial aid sponsored by the Federal and state governments (see Types of Financial Aid) and the colleges themselves. Our suggestion is to spend your time on these traditional financial aid programs and be sure to complete the FAFSA, or have FAFSA.com's experts do it for you.
If you must spend time with private scholarships, your chances will be much better with those that are from companies, religious, and philanthropic organizations within your own local community. Those students with outstanding academic records in high school (i.e., high grade point average and SAT scores) and those who have been very involved in athletics, clubs, and activities in their high school and community have the best chance at the limited and competitive scholarship programs.

Who is Eligible and the "EFC"
More families are eligible for need-based types of financial aid than ever before. This is a result of more sensitive Federal need analysis standards whereby the equity in a family's home is no longer considered for Federal or state aid programs. In addition, there is no longer a minimum expected student contribution used in the awarding of federal or state aid programs. The basic equation used to determine a student's financial aid eligibility or "need" is the following:
Cost of Attendance or BudgetLess (-) Expected Family Contribution (EFC)= Financial Aid Eligibility or Need
The EFC is calculated using a need analysis formula updated and approved each year by Congress called Federal Methodology or FM (PDF document which requires Adobe's free Acrobat Reader). An EFC is first calculated by the federal processor after you submit your FAFSA. However, your college financial aid administrators may revise your original EFC if you are selected for a process called verification. If selected for verification (approximately one-third of all applicants are selected), you will be asked to submit copies of your most recent federal income tax returns for both the custodial parent and the student.
If the estimated income information you submitted on your FAFSA is different than the actual income and tax figures on your tax return, your school's financial aid administrators will re-calculate your EFC using the standard FM formula. There is no penalty if your estimated income is different than your actual information. You may update your income information on a four-page Student Aid Report (SAR), available after your FAFSA is fully processed by calling the Federal Student Aid Information Center at 1.800;.433.3243. Once you make the corrections on your four-page SAR, sign the last page (Certification section) and mail it back to the federal processor. As with any changes you make on your SAR, the student will receive a new, revised SAR showing the changes made within four weeks. Some colleges may require all applicants to provide copies of federal income tax returns for both the student and parents, even if you were not selected for verification by the federal processor.
Treatment of a parent's assets are generally not treated as harshly as many families expect. The Education Savings and Asset Protection Allowance (ESAPA) is the table used to determine the amount of assets of the parents that will be "protected" (not used to generate the EFC). However, a student's assets are assessed at a 35% rate. That is, 35 percent of whatever assets are reported on the FAFSA for the student (under 26 years of age) will be expected to be used for their educational expenses in the next school year. But for parents, up to $60,000 of their assets, excluding their home and retirement programs (except for the amount contributed to a tax-deferred retirement program in the prior year) are protected for retirement and emergency expenses, depending on their age. The older the parent, the more their assets are protected.
Another aspect of the Federal Methodology (FM). The FM formula includes a basic living allowance for families. The government uses figures derived by the Bureau of Labor Standards, low standard of living. This is the amount the government assumes a family can live on for a year, based on their number of family members. This is one of the key elements or tables within the formula and is probably the most to blame for those extremely unreasonable and high EFCs that families frequently complain about. They expect me to pay what? The living allowance (called the Income Protection Allowance) is the same for all families, whether they live in California or Mississippi. Many families believe the Federal Methodology (FM) need analysis formula has become a way for the government to ration limited funds then a true measure of a family's ability to contribute to their child's educational expenses.
Curious about those government tables? Click here for more details about the FM need analysis tables (requires Adobe's free Acrobat Reader).
If your college also requires the CSS PROFILE Financial Aid Application, an Institutional Methodology or IM is used to calculate an expected family contribution (EFC). This IM EFC is, on average, approximately $2,000 higher than the EFC calculated using the Federal Methodology (FM) need analysis system.
This is a result of the following factors:
1) IM takes into account a parent's equity in their primary residence (market value less mortgage amount) while FM does not use a family's home equity.
2) IM assumes a minimum "student contribution," regardless if the student has worked during the previous year or expects to work in the current year.
After your PROFILE is processed, the results are transmitted electronically and/or a paper report (PROFILE Need Analysis Report) is mailed to your college financial aid administrators. The Institutional Methodology (IM) is different than the Federal Methodology, which is used to calculate your "Expected Family Contribution" or EFC, for consideration of Federal and state aid programs such as the Pell Grant, Supplemental Educational Opportunity Grant, Perkins Loan, Work-Study, and state grants (i.e., Cal Grants, TAP, etc.). The IM is used by some colleges as a method of rationing their limited institutional funds (usually grants) to the neediest students. Federal regulations require that schools use the FM need analysis system in determining eligibility for Federal funds, including the Federal Stafford Loan, but schools can use whatever need analysis system they choose for awarding their own funds.

Types of Aid Programs
Student financial aid programs consist of need-based grants, scholarships, attractive student and parent educational loans, and work opportunities. Grants and scholarships are considered gift aid and do not have to be repaid. Obviously, this is the most popular type of financial aid, but also the most difficult to obtain.
Grants are based on financial need, using a national need analysis formula called Federal Methodology (FM) as mentioned above. Scholarships are normally based on merit, including academic performance, special talents, or other criteria. There are many private scholarships sponsored by companies, philanthropic organizations, religious organizations, etc. Unfortunately, scholarships represent less than four percent of the total aid available. Colleges and universities also offer scholarships not based on need, though these are generally very competitive.
Most students must credit-finance part of their educational costs through student loans. The largest aid program by far is the Federal Stafford Loan, which makes up approximately $50 billion of the $90 billion available from all sources each year. The subsidized Federal Stafford Loan is based on need and means that the government will pay the interest as long as the student is enrolled at least half-time in a school that participates in the Stafford Loan program. More information about the Federal Stafford/Direct Loan is available online.
The unsubsidized Federal Stafford Loan is not based on need though you still must complete the FAFSA to receive this loan. Parents may also borrow through the Federal Parent Loans for Undergraduate Student (PLUS) program.
Another attractive Federal loan programs is the Federal Perkins Loan program. The Federal Perkins Loan is based on financial need and is administered by the colleges. Perkins funds are normally limited at most schools as the majority of their Perkins Loan funds come from collections from past borrowers and very limited new Federal Perkins Loan funds are made available to schools. Usually only the neediest students who apply early are awarded a Perkins Loan and normally the annual award amount at most schools is less than $2,000.
Students may also work part-time while earning their degree. Research indicates that most students who work a reasonable number of hours while in college (10-15 hours per week) earn as good or better grade point average than those who do not work. Of course, all students are different so it may not be right for you.
The Federal College Work-Study Program has been around since 1965 and is based on financial need. If you are awarded Work-Study, it means you can work part-time during the school year either on or off campus, depending on the jobs your student employment or financial aid office have approved. Work-Study is simply a part-time job where you get paid like any other college employee. You can use your Work-Study earnings to pay for any educational-related expense, including room and board, personal expenses, books, etc. Usually it is an advantage to have Work-Study as part of your award offer since the employer normally only pays about one-half of your salary while the government pays the remaining amount through a grant to your school. That means a Work-Study student is less expensive to hire for an employer as it will save their department money.

How SFAS Will Help You
FAFSA.com has been in the student aid business since 1971 (over 34 years), helping students and parents obtain the funds necessary to finance their college education. Let us help you with such important matters. We complete the FAFSA, the main application which must be completed in order to receive any Federal or state financial aid programs, including educational loans.
For more information about us, go to the Top Ten Reasons to Use FAFSA.com. Or go to How to Subscribe to FAFSA.com and be one step closer to obtaining the funds you need for your college education. Still not sure? Find out what expert college financial aid administrators, FAFSA.com's customers, and high school counselors say about our experts.
Need more assistance getting financial aid? Be sure to contact an experienced financial aid administrator at your college(s) to learn more about the programs they offer, scholarship programs, application procedures, deadline dates, etc. Remember, even if you and your parents don't have enough money to finance your college education, financial aid programs are available to make it possible. Good luck!