Here Are the Bright Spots for Scholarships

Despite the recession, 3 types of college students might get more and bigger scholarships this fall.

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Some of the biggest and most important scholarship programs will be handing out more free money to more people this fall. Unfortunately, the recession, state budget crunches, and declines in the stock market are, in some cases, overwhelming the improvements and are making college less affordable. But many kinds of students do have some good news to look forward to this fall.

Low-income students:

The good news: The amount of money you can get from the single biggest college grant program in the country, the federal government's Pell grant, will jump dramatically this fall. The maximum grant, which generally goes to students with incomes below about $20,000 a year, will rise by $619, or 13 percent, to $5,350. Those from families earning enough so that they qualify for only the minimum Pell grant—typically those with annual incomes of about $45,000 to $50,000—will get $976 this fall, up from $890 last year.

Better yet, the government plans to give out almost 1 million more Pell grants this fall.

Low-income students can also look forward to more Pell increases in the future. The government plans to add about $200 to the maximum Pell grant in the fall of 2010. And after that, President Obama has proposed raising the Pell maximum automatically so it slightly outpaces inflation every year.

Not only will low-income students get more Pell money, but the government will broaden the standard to make more students eligible for the grants.

Last year, only those undergraduates whose Free Application for Federal Student Aid (FAFSA) revealed that they could afford an estimated family contribution (EFC) of $4,041 or less received a Pell grant—a total of 6.1 million students.

For this fall, the government will award at least some Pell grant money to any student with an EFC of $4,617 or less. That's about 7 million undergraduates.

And if Obama's plan goes through, in 2010, the government expects to award a Pell to any student with an EFC of $5,273—which is expected to total about 7.6 million undergraduates.

A few other scholarship programs have also expanded during the recession. The Denver-based Daniels Fund awarded 263 scholarships in 2009, up from 256 last year, for example.

The bad news: Unfortunately, many schools are raising their prices more than the increase in the Pell. The University of Mary Washington, a public university in Fredericksburg, Va., recently announced that its costs would jump by $760 in the fall. The costs of many private colleges have grown even more. Students who get no aid and thus pay the full cost of Stanford University, for example, will have to come up with $48,843 this fall, at least $1,600 more than last year.

In addition, many smaller grant programs for needy students, such as those offered by some nonprofits, states, and colleges, have had to reduce their payouts this year. The Ron Brown Scholar Program, for example, offered just 12 $10,000-a-year scholarships for freshmen entering this fall, down from 20 in previous years. And the Central Scholarship Bureau of Maryland lost about $500,000 in scholarship money in the recession and will be able to hand out only $1 million this summer.

Meanwhile, the recession has created so many newly needy students that almost all scholarship programs have been deluged with applications. While many government scholarships, such as the Pell grant, are guaranteed to all who qualify, the odds of getting other kinds of scholarships have worsened dramatically in many cases. The Daniels fund awarded seven extra scholarships this year, but it saw the number of applicants jump by about 1,000, to 2,009. The Central Scholarship Bureau of Maryland says that budget cuts, combined with a 70 percent increase in applications, mean that instead of helping about one fourth of its applicants, it may be able to help only 1 in 10.

Finally, President Obama's ambitious long-term plan to raise Pell grants automatically hasn't been enacted yet. It currently depends upon funding projected to be reaped from a controversial plan to reform student lending.