These Days, Even Scholarships Come With Price Tags

By Staff

A scholarship is a good thing, right? You are able to spend more time concentrating on your college studies and less time worrying about how to pay for them, whether out-of-pocket now or in the form of compounding interest on student loans, further down the road. But in an increasing number of instances, students who earn scholarships are getting dinged for them by their schools.

A report released last month by the National Scholarship Providers Association, a nonprofit that represents scholarship providers, revealed that when a student gets a private scholarship -— from a corporation or community group, e.g. — some schools will actually scale back their own aid offering. In other cases, even when aid is enough to cover every penny of financial need, some schools require students to still pay a portion of the college bill out of their own pockets. These policies are in place at roughly 10 out of the 61 colleges surveyed in the report.

According to MarketWatch, that figure is likely much higher on a national level: more than 36 colleges nationwide — including elite private and large public institutions -— require students to make some payment toward their education costs (tuition, room and board, or fees). This is true even when outside groups award full need-based private scholarships, according to the United Negro College Fund, which administers the Gates Millennium Scholars program that provides scholarships to low-income college students. (The GMS program contributed to the NSPA study.)

While the practice has been around for years, sources say these figures are the first to quantify how widespread it is. The consequences for students—particularly those from lower-income families—can be severe, including leaving them on the hook to pay more for college than they expected.

The practice also contradicts the advice that students have received for years. Guidance counselors and financial aid advisers have long encouraged families to seek out private scholarships to pay for college. And when the recession kicked in and many colleges and state governments scaled back the size of their grants, families had little choice but to rely more on private scholarships.

But in actuality, many colleges’ policies won’t allow scholarships to lower students’ out-of-pocket expenses, and they effectively penalize students who aren’t wealthy.

Many colleges require students to pay a portion of their annual college costs, and they will not accept any type of need-based financial aid for this amount, no matter how poor or wealthy the student is. The reasons: Some believe that students should have skin in the game. If they’re required to pay even a small amount, they’ll theoretically be more engaged in their studies. Other colleges say it’s because of the way they determine financial need.

Several schools, including Amherst College, Columbia University, Duke University, Middlebury College, Mount Holyoke College, Vanderbilt University, Wesleyan University, and Williams College, say they require all students to contribute at least a certain amount toward their college costs. This payment is often referred to as a “minimum student contribution,” which is a flat payment typically between $1,500 and $4,000 a year. The dollar amount is usually the cheapest for freshmen and the most expensive for seniors. Some schools refer to it as a “summer earnings expectation,” saying that they expect their students to work during the summer and to contribute a certain dollar amount from that income to their education costs. And some schools, such as Boston College and Rice University, say students must make this required payment plus turn over 25% of their assets, such as savings or brokerage accounts.

What’s more, schools are encouraged to charge students. For years, the College Board has suggested a minimum student contribution, and specified a recommended dollar amount — currently $1,800 for first-year students and $2,450 for dependent upperclassmen—for many colleges to charge. A College Board spokeswoman says it’s up to schools to decide whether to implement it, whether they’ll permit private scholarships to cover it, and if they want to reduce these amounts for lower-income students.

At other schools, the fees can be even higher. MarketWatch reports that Davidson College charges $2,000 for incoming students and $2,250 for returning students, up 11% and 5% respectively from 2008-09. At Boston College, it’s currently $2,400 and $2,500, up 9% and 4%, respectively since 2007-08. At Rice University, it’s $2,500 for all students, up 39% from 2010-11.

Critics say the policy also underscores how the system is stacked against poorer students: Most colleges will accept a check from any other external source, like a student’s wealthy uncle, for this required payment, but they will not allow a private scholarship to pay this bill, even though the end result for the schools is that they still get paid the same amount. For some students who receive scholarships through the UNCF’s Gates Millennium Scholars program, these contribution requirements equal 5% to 22% of their families’ annual income, says Larry Griffith, senior vice president at the UNCF.

To be sure, some schools will permit merit-based scholarships, which students earn based on their grades rather than their finances, to cover this student contribution. For instance, a spokesman for Yale University says the school will allow merit-based scholarships to reduce the student contribution but it will not permit need-based scholarships to do that.

And some schools, such as Davidson and Vanderbilt, say they will consider replacing or reducing required payments for students who are dealing with special circumstances. Jack Dunn, a spokesman for Boston College, says applicable scenarios might include enrollment in an unpaid internship or a medical condition that keeps the student from working. Cornell University says students who cannot meet the summer work requirement can submit a written explanation of their circumstances and the university will consider working with them to find a solution.