How Scholarships Work (2023)

Most people already have a vague idea about what a scholarship is -- money that someone gives you to pay for school. That's actually pretty close. Basically, a scholarship (or a grant or a fellowship) is a sum of money awarded to a student in order to help him or her further his or her education. Instead of a loan, which accrues interest, or need-based financial aid, which is usually doled out by universities, scholarships are gifts that don't need to be paid back.

Scholarship money can come from any number of sources. There are scholarships provided by governments, corporations, universities or any organization with a little goodwill and some money to burn. Many famous scholarships come from stipulations in the wills of philanthropists. For instance, the Rhodes scholarship, which is one of the most prestigious scholarships in the world, is named for the diamond baron and fervent colonialist Cecil Rhodes, who founded Rhodesia (now Zimbabwe). Rhodes created a trust in his will that pays for a select group of exceptional students to study at the University of Oxford in England every year. Former Rhodes scholars include sportscaster Pat Haden, pundit Rachel Maddow and former president Bill Clinton.

However, though a scholarship isn't a loan, it's not just free money either. Most organizations that offer them consider them an investment rather than a gift. For that reason, scholarships usually have strings attached. Athletic scholarships come with the expectation of maintaining a certain grade point average as well as performing on the field. Scholarships may also be contingent on entering a certain career, such as medicine or library science. Others may expect certain acts of service, like Merrill Lynch's Partnership Scholars Program, which offers a $2,000 scholarship to worthy applicants in exchange for 50 hours of mentoring middle school students.

In this article, we'll take a look at some of the different types of scholarships, what it takes to get them and why just because you have a scholarship doesn't mean you'll be using it to pay tuition.

Contents

1. Individual Scholarships
2. Athletic Scholarships
3. Merit Scholarships
4. How Scholarship Money is Used
5. Searching for Scholarships

Not all scholarships are directed at the overachiever who's a star football player and earns a perfect SAT score. If a student can get into a college, he or she has a chance at receiving some kind of scholarship, period. One of the more common ways to get a scholarship is to apply for an individual-based program that offers scholarships that funnel applicants into specific career paths. For instance, anyone intending to be a doctor, dentist or nurse should have no trouble finding funding, provided they're willing to enter into a service obligation after they've completed their training. The National Health Service Corps gives out free ride scholarships for future health care workers in exchange for two years of clinical practice in a health care arena where there's a shortage of workers, like rural dentistry or vision care. The Army, Navy and Air Force also award this kind of funding through the ROTC program.

Even who you are can be a cause for scholarship. The Knights of Columbus offer 62 awards of $1,500 each for Catholic students who show academic potential, and the Jewish Community Center offers up to $10,000 a year to graduate students. Many scholarships are offered based on ancestry. Students of Chinese, Polish, Danish, Japanese and Italian descent (just to name a few) all have scholarships open to them. And, if you can prove you're a direct descendant of one of the signers of the Declaration of Independence, you're eligible for $1,500 from the Descendants of the Signers of the Declaration of Independence Scholarship committee.

How about even more specific scholarships? The Evans Scholars Foundation offers full tuition scholarships to former golf caddies of exceptional character. The requirements for individual scholarships get even stranger, like the Fred and Mary F. Beckley Scholarship, which awards a sum of money every year to needy southpaws. Here are a few more odd duck scholarships, only one of which is actually duck-related:

Next up, we'll take a look at athletic scholarships to find out whether all that practice you did on your high school bowling team can help you pay for school.

Unlike the individual scholarships we just discussed, which usually come from outside sources, most money for athletic scholarships comes directly from the schools' athletic departments. Universities budget a certain amount of money for attracting top athletes, and athletic grants exist for all kinds of sports, not just basketball and football. There are literally hundreds of athletic grants for golf, for instance, plus many more for uncommon sports, such as fencing and water polo. Coppin State University in Maryland even offers a grant for weight lifting.

Athletics at the university level in the United States are divided into three divisions. Division I, which mostly includes large schools with intense sports culture, offers the most money to their athletes, but also demands the most time and commitment in return. Division II sports are mostly smaller schools with less money for a large athletics program but still playing at a highly competitive level. Division II athletes are more likely to get supplementary scholarships rather than free rides, but there's also less pressure on the field. Between Divisions I and II, 126,000 athletes in the United States receive about $1 billion every year [source: Nitardy]. Finally, Division III sports have the least funding and don't award athletics scholarships. Financial aid packages can be more generous for athletes applying at Division III schools, but in general, Division III athletes are in it for the love of the game.

The application process for a sports scholarship is a little different from other scholarships, partly because coaches are actively interested in recruiting new and talented athletes. Rather than waiting for applicants, every year coaches send out mass recruitment mailings to players who appear in all-regional rankings national lists. Many athletes get recruited just by writing a letter to a coach at the school of their choice or sending in a performance DVD.

However, there are many factors that go into the selection process for an athletic scholarship. Colleges look not only for talent on the field, but for players who will excel academically. Many incoming athletes end up having to adjust their expectations when they find they're no longer big fish in small ponds. It's not uncommon for freshman to be benched for an entire year to train while they wait for a spot to open up on the starting lineup.

In order for someone to give you money for school, you must be doing at least something well. Merit scholarships are the ones that come to mind when you think of the general idea of a scholarship -- the money awarded to the girl who got a perfect SAT score, the class president who's also a virtuoso violinist or the boy who spends 30 hours per week working in a soup kitchen. These scholarships are for the leaders of tomorrow: the brilliant, the talented, the dedicated and, occasionally, the cutthroat.

There are two reasons merit-based scholarships are awarded. The first is to recognize that the most talented people aren't necessarily going to come from socioeconomic backgrounds that can afford the best education. Merit-based scholarships offer an opportunity for truly talented minds to blossom rather than to just slip through the cracks. As former Vice President Dan Quayle once famously said on the subject, "What a terrible thing it is to lose one's mind." That may not sound quite the way he meant it, but his heart was in the right place.

Merit-based scholarships also benefit the community. We all win out when the math genius is working on theorems at the Massachusetts Institute of Technology instead of mopping the floors. Wasted talent isn't just something that hurts individuals -- it hurts the community when people aren't living up to their potential. States, for instance, all offer merit-based scholarships for in-state students as a way to make sure that the talent stays at home, and businesses offer merit-based scholarships partly to foster a strong relationship with incoming talent.

There are literally tens of thousands of merit-based scholarships out there. Some measure merit more conventionally, like the National Merit Scholarship Program, which selects their recipients based on their PSAT scores. Others, like the Arts Recognition and Talent Search and Project Imagine, award money based on potential and exceptional talent in the fine arts.

Finally, there are thousands of contests that award scholarships. These, however, can be the most competitive. For example, the National Geographic Society offers a $25,000 scholarship for first place in their Geography Bee, but winners have to beat out literally millions of other applicants. Likewise, the Intel Science and Engineering Fair gives out $3 million every year for exceptional science, math and engineering projects.

But wait. How does that scholarship money actually get used? Next up is the truth behind where your scholarship money goes.

So, it's time to go to college. Your grades are tight, you've applied to your top schools, and you've just been awarded a $1,000 scholarship as a prize in the local poetry contest (it was for your brilliant "Tears of a Clownfish," a solemn aquarium meditation). Things look pretty good. Sure, you weren't lucky enough to get a free ride scholarship that pays for tuition, books and living expenses, but every little bit helps. Even a meager $500 scholarship can mean the difference between eating hot mac and cheese in the cafeteria or rummaging in dumpsters for old bagels, right?

Not quite. When they're calculating how much financial aid to award a student, most colleges count scholarships as part of a student's financial assets and offer aid accordingly, rather than allocating those funds for tuition. Say, for instance, that a semester of college costs $10,000. Five thousand dollars might come from need-based loans, while the other $5,000 is expected to be paid in full. The poetry scholarship got you a cool grand, so your out-of-pocket tuition should come to only $4,000, except that it doesn't. Financial aid is always in short supply, which means that most schools, instead of counting your scholarship toward taking a chunk out of your tuition, consider it part of your previous assets. Instead of subtracting the $1,000 from your own contribution, it gets subtracted from whatever loans or grants you may have been getting from the school according to your individual needs. And while it may mean that you'll have less to pay off in the future, you'll still need to scrape together $5,000 to pay for your tuition. You still might need those bagels after all.

But scholarships do carry some advantages. One perk is that they make students much more attractive to universities. Money that you bring in as a student means less money that your school actually has to allocate to pay for you to study and live there. These days, it's impossible for most financial aid programs to offer support for all students. Schools everywhere in this economy are strapped for cash, slashing budgets and reducing services left and right, so any extra money that comes in from scholarships takes some of the pressure off. For every student who brings in money on a scholarship, the money that would have gone to them (whether through loans or need-based financial aid) can be spent on funding other students' educations.

Next up, we'll hunt down those elusive scholarships.

One of the most difficult aspects of obtaining scholarships is that it's hard to find a way to track them down. It's all well and good if a benevolent billionaire is offering up a fully paid scholarship to a talented young bagpipe player and you just happen to be the fastest bagpiper west of the Mississippi, but how are you supposed to know about it?

You learn about most scholarships the same way that humans have been finding out information since the Stone Age -- by asking around. It's crude, it's blunt and it takes a little bit of effort, but walking up to a guidance counselor or coach and saying, "Hey, do you know anybody who'll give me some money for college?" works much better than waiting by the window with fingers crossed, hoping that billionaire bagpipe lover comes knocking on the door. Guidance counselors and coaches will also know more about local scholarships, the kind that are either too small or too specific to show up in financial aid handbooks or online.

Finally, scholarship-seekers can never go wrong with the Internet, and there are a few highly reliable free search sites for tracking down scholarship material:

One thing that all scholarship searchers have to be on the lookout for is fake scholarships. With so much on the line, it's fairly easy to come up with a scam to lure trusting or desperate parents and students. Be wary of any organization or scholarship search service that guarantees acceptance, lacks sufficient contact information or requires suspicious fees. Awards organizations are trying to give away money, not the other way around, and it's all too easy to offer a paltry $500 scholarship in exchange for hundreds of $50 application fees.

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