The Free Money

Free money consists of much more than just grants and scholarships, and knowing all the options may give you an edge in your ultimate goal: getting someone else to pay for your education.

10 Kinds of Free Money
  1. 1. Federal grants
  2. 2. State grants
  3. 3. Private scholarships
  4. 4. Institutional scholarships
  5. 5. Federal scholarships
  6. 6. Service rewards
  7. 7. Fellowships
  8. 8. Tuition waivers
  9. 9. Housing allowances
  10. 10. Forgivable loans
The Meaning of “Free”

The financial aid counselors you meet probably won’t use the term free money—it’s hard to convince a financial aid counselor that anything is truly free. If you eavesdrop on a financial aid meeting, you’ll probably hear them talk about gift aid and self-help aid. Gift aid is money given to you that you don’t have to repay, such as a grant or scholarship. Self-help aid is money you either have to repay or earn beforehand, such as loans or college work-study.

The Ratio

Each financial aid office has the right to set a ratio of gift aid to self-help aid that meets its overall funding and enrollment goals. After the financial aid officers determine your need, they will use this ratio to decide how much of your need will be met by scholarships and how much will be met by less favorable aid, such as loans.

You should request this ratio from the colleges you’re applying to. Different schools handle the ratio different ways, and their methods can make a difference in your aid package. For example, some schools actually reward students for bringing in private scholarships by including these as self-help aid. You did earn that scholarship through hard work, right? Other schools will simply award you more loans, rather than institutional scholarships, to meet your remaining need.

The Pell Grant

The Pell Grant, by the Department of Education’s account, is the foundation upon which the neediest students can build their dreams of a higher education. In terms of a dollar amount, the main source of free money available for college is the U.S. government, and the largest of the free federal programs is the Pell Grant.


In order to receive a Pell Grant, you must be a U.S. citizen or eligible noncitizen who has not yet earned a bachelor’s or graduate degree. You are eligible to receive only one Pell Grant per year and cannot receive Pell Grant funds from more than one school at a time.

How to Apply

The FAFSA serves as the application for the Pell Grant. You will also need to complete any financial aid applications for your specific school, though they will not affect the amount of your grant. The Department of Education creates a list of tables each year that specifies the Pell Grant amount a student can receive based on numerous factors, including the student’s EFC, COA, and enrollment status (full-time, half-time, or less than half-time).

Note: In 2004, the Pell Grant program had a budget of $12.7 billion. In 2003, over 4 million students applied for and received Pell Grant assistance, with individual awards averaging $2,355.


Besides the Pell Grant, the other major federal grant program is the Supplemental Educational Opportunity Grant (SEOG). The maximum amount of this grant is similar to the Pell Grant, weighing in at $4,000.


Unlike the Pell Grant, the SEOG is not an entitlement. The SEOG is known as a campus-based program, which means that just because you qualify for a SEOG doesn’t mean you’ll get one. Campus-based programs are limited, and the criteria for receiving them depend on each campus’ own guidelines. Some students who are not eligible to receive a Pell Grant might still receive a full SEOG. However, when awarding SEOGs, most college financial aid offices give the greatest priority to students who have the lowest EFCs.

Apply as soon as you possibly can. Most colleges run out of SEOG money when they process their first batch of applications, so if you wait until March or April to complete the FAFSA, you’ve likely already missed the boat.

Keep in mind: Turning in your FAFSA early maximizes your chances of getting a SEOG, but it doesn’t guarantee you’ll get one. Since each financial aid office sets its own guidelines for awarding SEOGs, you should contact the schools where you are applying to find out how these grants are awarded and what the qualifications are.

State Grants

Uncle Sam isn’t the only one concerned about your education. Each state plus the District of Columbia has a higher education agency that oversees financial aid programs specific to state residents. Most of these states offer some pretty enticing reasons for staying close to home and attending either a public or private college in your state of residency. In fact, some states offer grants that can exceed $10,000 per year!

States don’t always do a good job of promoting how much financial aid they can offer to local students. Texas alone offers up to $3 billion per year in total financial aid. California and New Jersey each budget nearly $1 billion for grants, loans, and work-study.

While the federal grant programs are based on need, many state awards are based on a combination of need and merit. Students who are ineligible for Pell Grants are sometimes very surprised to discover they’ve won a big pot of cash closer to home. You should actually be thankful the states don’t know how to advertise their financial aid—the fewer people who know about this money, the better your chances of getting it!

Furthermore, each state’s higher education agency may be found online at www.ed.gov/erod by clicking the “state/territory” link. These agencies are supported by your tax dollars, so don’t be afraid to drop them a line and let them know what you need.

In addition, these higher education agencies often sponsor free financial aid workshops that can give you the inside scoop on state financial aid programs. Check their Web sites for details on when and where.

Don’t make the mistake of relying on your high school guid-ance counselor to know about all the state financial programs. Even the sharpest guidance counselors sometimes miss the best of what’s out there simply because state programs can change from year to year.

Just like federal aid, state financial aid requires that you complete the FAFSA. The priority deadline for completing the FAFSA varies considerably from state to state, so be forewarned. For example, Michigan and Rhode Island require that completed FAFSAs arrive at the financial aid office by March 1. Since processing a paper FAFSA for the first time can take up to six weeks, this means that in order to be absolutely sure you’ll meet your state’s financial aid deadlines, you should complete your paperwork in January.


You can win scholarships for any number of accomplishments, including athletics, academics, and music. Scholarships are available for students of certain ethnic backgrounds and for outstanding essays. In other words, there’s probably a scholarship that will be a perfect fit for you. In case you forgot . . . scholarships are free money. You need to know how to find (and get) a scholarship to help pay for college. You also need to know how scholarships affect your overall aid package.

Private Scholarships

Private scholarships, or outside scholarships, can come from anyone and anywhere for any number of reasons. These are generally scholarships you pursue on your own, independently of the colleges you apply to.

Scholarships are always good, right? Not so fast. Most colleges count private scholarships as gift aid when calculating your financial aid award. This means that if you receive a scholarship, you may end up with more loans to cover your remaining need and fewer institutional scholarships, grants, or work-study. If your COA is $20,000 and you win a scholarship for $15,000, that means you can now receive only an additional $5,000 worth of financial aid.

How the financial aid office treats that remaining $5,000 of need may make all the difference in the world, and this is a very good example of why you should apply to more than one college. By comparing different award letters, you’ll be able to see which colleges will use that private scholarship in a way that leaves you with the least amount of graduation debt.

Institutional Scholarships

Institutional scholarships typically come from the college’s endowment or foundation, and financial aid offices will almost certainly consider them as gift aid. Though you should still apply for all the institutional scholarships you can, you might want to ask the financial aid office how these scholarships will affect your other financial aid. Each year, countless students are dismayed to find out that their financial aid award letters are adjusted with higher loan amounts after they win institutional scholarships. The financial aid officer will probably give you that look that says, “Stop complaining—you got a scholarship, after all.” But if you’ve received a similar award offer from another college with a higher gift aid to self-help ratio, you can return that look with a choice one of your own.

Federal Scholarships

In addition to private and institutional scholarships, there are also several federally funded scholarship programs out there. The Byrd Scholarship (www.ed.gov/programs/iduesbyrd), with average awards of $1,500, is offered in all 50 states, usually based on academic or extracurricular merit. Application information is available through each state’s higher education board or through your high school guidance counselor. Truman Scholarships (www.truman.gov) provide $26,000 to 70–80 undergraduate students each year based on leadership and public-service skills. Truman Scholars are nominated by the college, so it’s a good excuse to practice those networking skills as soon as you’ve gotten your bearings on campus.

Note: For some reason, these and other federal scholarships seem to be the least publicized and least well known financial aid awards in existence—even some financial aid officers are unaware of them. An easy place to start your search for federal scholarships is the Department of Education Web site at www.ed.gov. Simply type “scholarship” into the search box. They are usually treated as gift aid, like Pell Grants, but they are much better options than student loans.

    Free Scholarship Search Engines
  • www.fastweb.com
  • www.studentaid.ed.gov
  • www.srnexpress.com
  • www.collegenet.com
  • www.wiredscholar.com
  • www.gocollege.com
  • www.fastaid.com
  • www.collegeview.com
  • www.collegeboard.com
  • www.scholarships.com
Scholarship Contests

Is there anything more American than a contest? Even if you’ve been lax in your studies or lazy on your SATs, a contest offers you the chance to roll the dice and make the world right again in one fell swoop. Unfortunately, as your instincts are almost assuredly telling you, many contests are likely to be set-ups, with the only real winners being those smart enough not to play. You should be skeptical of any scholarship contest application you receive, particularly if there are any fees involved.

    Legitimate and Free, Scholarship Contests
  • Think you have a great idea for making the world a kinder place? Try entering the National Peace Essay Contest (www.usip.org).
  • Or maybe you don’t see what’s so great about peace, love, and understanding. In that case, maybe the Principles of War Essay Contest (www.usni.org) is the way to go.
  • Maybe you just want to make the world a greener place. Voila! The Better Earth Environmental Essay Contest awaits (www.abetterearth.org).
  • Did you save all those A+ Civics papers? The National Endowment for the Humanities is dying to hear your “Idea of America” (www.wethepeople.gov).
  • Even better, the Society for Professional Journalists (www.spj.org ) wants to know, “What does a free media mean to America?” So send in your essay.
  • You can enter the Free Will and Personal Responsibility Essay Contest (www.intothebest.com), especially since you’ve surely stayed up countless nights asking yourself, “Would I rather be liked or respected?”
  • Speaking of tough questions: Is your favorite president Abraham Lincoln? (www.thelincolnforum.org)
  • …or John F. Kennedy? (www.jfkcontest.org)
  • Are you the one kid in class who really gets Ayn Rand? There’s a scholarship contest out there for you, too. (www.aynrand.org)
  • Maybe, just maybe, the only thing you really understand is good old-fashioned “duck” tape. It’s good to know that www.ducktapeclub.com exists.
Memorial Assistance

Several states have established memorial scholarships to assist those affected by national tragedies. Oklahoma has created a fund to assist those affected by the Oklahoma City bombing. Both New York and New Jersey offer financial aid specifically for the victims of the September 11 attacks. New Jersey also offers a scholarship dedicated to the memory of Dana Christmas, a student who lost her life helping others in the tragic Seton Hall dorm fire of 2001. If you are a relative of a police officer, firefighter, or soldier who died in the line of duty, you may be eligible for similar scholarships set up by many state higher education boards nationwide.

Scholarship Scams

Many students seeking scholarships fall victim each year to scholarship fraud. Don’t be one of them! You should be wary of any solicitations that promise you scholarships or low-interest loans, even though they might sound like incredible deals. Most scholarship scams involve asking you to pay up-front fees, “guaranteeing” that you’ll receive money for college. Legitimate scholarship search Web sites will never require you to pay a fee for their services, and, unfortunately, there is never any guarantee that you will win the scholarship you want.

    Five Signs of Potential Fraud
  • “Scholarship success guaranteed, or your money back.”
  • “You can’t get this information anywhere else.”
  • “I just need your credit card number to hold this account.”
  • “The scholarship will cost some money.”
  • “You’re a finalist (in a contest you never entered) for the following scholarship. All you need to do is pay the entrant fee.”
Service Awards

You can earn free money for school simply by giving a little of yourself and your time. Service work looks great on a résumé, too.


AmeriCorps offers up to nearly $10,000 in scholarships for those who perform community service. If you use the AmeriCorps education award to repay student loans, you don’t have to report it to the financial aid office, which means it won’t reduce your other financial aid. Visit www.americorps.org for details.

The Armed Forces

Service in one of the armed forces is a popular choice for students looking for a lot of free money for college. The amounts can seem quite high, and advertisements often claim that you’ll receive up to $50,000 for college. If you explore this option, be sure to find out exactly how much you’ll actually receive. The amount will vary considerably based on which type of military service you choose, how long you sign up for, how long you attend college, and what kind of degree you decide to pursue.

If you decide that military service is the right choice for you, find out as soon as possible if the college you want to attend has a financial aid officer who specializes in Veteran’s Administration (VA) benefits. This person will be a vital resource, especially since the impact of VA benefits on your other financial aid can be extremely complicated.

Students interested in attending a regular college might also be interested in the Reserve Officers Training Corps (ROTC), which provides tuition expenses and a $100 monthly stipend. ROTC requires that participants serve in the armed forces after graduation.

Service academies provide tuition free of charge to students. These colleges are highly selective and also require five years of service in the military, but if you’re interested in military service and gaining a college degree for free, there’s really no better option.

There are four service academies:

  1. 1. The U.S. Military Academy (West Point, New York)
  2. 2. The U.S. Naval Academy (Annapolis, Maryland)
  3. 3. The U.S. Air Force Academy (Colorado Springs, Colorado)
  4. 4. The U.S. Coast Guard Academy (New London, Connecticut)

A fellowship is free money generally in the form of a stipend that is awarded for a specific project, purpose, or skill, but it can also be awarded based on need. Though most fellowships are indeed awarded to graduate students, many fellowships are available for undergrads as well. In recent years, many community foundations have changed their former scholarship programs into fellowships.

You are unlikely to find fellowships by searching through the typical scholarship books or Web sites. More often fellowships are offered by community-based, nonprofit groups who see the value of combining their philanthropic giving with educational opportunities.

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