Blog Spot

Evaluating Your Scholarship Offers (Part 2)
06/01/2008

When you receive your scholarship offers, they may come if different forms. One might offer a lump sum against tuition. Another may offer a percentage off tuition. Of course, the big one everyone looks for is full tuition, with room and board included!

For the rest of us, however, there is no such thing as a free lunch, and we'll have to keep in mind the cost of room and board, too. (See Evaluating Your Offers, Part 1.)

Today's discussion examines the difference between two types of offers: The Lump Sum and the Percent Off.

Most colleges offer a lump sum scholarship:

Congratulations! You have been awarded the Prestigious Scholarship of $12,000 per year (for four years).

Sometimes, your offer might read a little different:

Congratulations! You have been awarded the Excellence Scholarship, which will cover 75% of your tuition costs each year (for four years).

Not a lump sum this time, but a percentage. And this is where you'll want to be sure to compare like figures when weighing which offer is the best one.

For example, if tuition is $16,000 and you receive $12,000 off, then your cost is $4,000.

If tuition is $16,000 and you receive 75% off, then your cost is still $4,000.

BUT WAIT!

Consider what happens next year, when tuition rates go up!

A recent article published by the New York Times indicates that tuition at four-year colleges rose more than 6% from 2006 to 2007.

A word to the wise: Count on tuition going up each year!
Suddenly, that 75% off looks better than the lump sum, doesn't it?

Let's look again at the $12,000 lump sum offer:

Assuming tuition continues to rise at 6% each year, you'll be forced to incur all that increase yourself. Although the first year costs you just $4,000, by the fourth year you'll be paying $7,056. Quite a difference!

Lump Sum Scholarship

	Tuition	Your Scholarship	Your Cost
Year 1	16,000	12,000	4,000
Year 2	16,960	12,000	4,960
Year 3	17,998	12,000	5,978
Year 4	19,056	12,000	7,056

But the Percent offer looks a lot better:

Your costs also go up, but only by 6% per year. By the fourth year, your cost is still fairly low - just $4,764. A much better offer indeed!

Percent Scholarship

	Tuition	Your Scholarship	Your Cost
Year 1	16,000	12,000	4,000
Year 2	16,960	12,720	4,240
Year 3	17,998	13,483	4,495
Year 4	19,056	14,292	4,764

Conclusion

If your scholarship offer comes in the form of a percentage, you're probably better off.
On the other hand, it's impossible to compare colleges solely on one thing. Comparing apples to apples, College A may well look better than College B. But if B's oranges, bananas, and pineapples are better than College A's, perhaps you'll want to go there anyway, despite the extra cost.

Of course, all of this discussion is moot if you don't receive any offers at all. Do you have a plan to make your student scholarship material? ScholarshipPrep will assist you in getting your student ready to compete for the big bucks. To see what the program includes, click here.

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