Q: How will the recent financial and economic troubles affect my college scholarship?
A: Anyone who has already qualified for any kind of grant or scholarship this fall should be fine. But charities and governments are already planning to cut back the amount of money they'll be handing out next year.
The market meltdown is increasing demand for scholarships far above the dollars expected to be available next year. In fact, several scholarship programs are likely to cut awards next year, despite record-breaking applications.
"Demand for scholarships is up, and supply is down. ...We're being hit by a perfect storm," says Colette Hadley, executive director of the Scholarship Foundation of Santa Barbara, who is now trying to figure out whether it would be better to cut the number of scholarships her group can offer next year by about 400 or to reduce the average size of the scholarship by about 20 percent.
There's no immediate crisis, however. Governments, schools, and charities have been able to meet their commitments this fall. Congress, for example, recently appropriated an extra $2.5 billion to meet this year's increased demand for federal Pell grants, which are awarded to students with low incomes. California, which had delayed paying Cal grants to some college students this fall, has finally settled its budget and is now sending out that cash. And 29 percent of private schools surveyed in mid-October said they had increased grants to tide students over. Shenandoah University in Winchester, Va., for example, just started offering small grants to cover the extra incidental costs of studying abroad this year and is offering no-interest loans for textbooks and meal plans for the rest of the year, says President Tracy Fitzsimmons. "If they just need something small to get them over the hump," the school wants to make sure students eat and study, she says.
But prospects for next fall will most likely get tougher for anyone hoping for free money from any of the three main sources of scholarships.
Governments: Many states are bracing for potential budget cuts that could mean higher tuition, smaller state grants, or both. Public universities in Rhode Island, for example, have already announced tuition increases of at least $200 for this spring. At the same time, the size of the average state grant will be cut 25 percent, or about $125. Continuing budget cuts in other states may threaten other aid programs later next year.
Charities, foundations, and corporations: Scholarship America, which manages more than 600 other corporate and private scholarship programs, says the financial troubles have meant a reduction in scholarships sponsored by financial services, automobile companies, and real estate agencies. Drops in profits, investments, and donations are forcing many charities to cut back as well. "Unless a miracle in the market occurs by next April," the McConnell Foundation, which handed out about 37 big scholarships to students from rural northern California this year, will award only about 31 next spring, says David Tanner, the foundation's scholarship program officer. The market turmoil has wiped out all the profits and some of the principal of the original $5 million endowment of the Owen County Community Foundation of Spencer in Indiana, says administrative director Maggie Burton. "It is hard for us to imagine a year without scholarships, especially given the impact of the current financial crisis on our students," so the foundation will probably scrape together at least a little scholarship money for next year, but it probably won't match last year's 27 scholarships of about $1,000 apiece, Burton says.
Colleges: Schools are bracing for a rush of applications that will make competition very fierce. Many private colleges are planning to increase the amount of aid they will hand out next year. But it is not clear whether the increase in aid will match the likely increase in tuition. If not, the final price tag students and parents pay will grow.