That may very well be true…I agree 100%. But I would not underestimate superior students taking full rides to lower ranked schools. They get plenty of attention. We really need to look at the role that these students play in all of this. My friend’s son had a fully paid trip to Australia over the summer to do research.
I will state …again…that I know kids at Ivy League schools who do not have any kind of resume. No internships etc.
My cousin’s daughter graduated from a top LAC in May and is unemployed.
You also need to check what outside scholarships will allow in terms of use. Some are very specific and say “tuition only”. So…if your kid got a full tuition scholarship to a college…and an outside scholarship that was for tuition only…she wouldn’t be able to use it.
You need to be cognizant of deadlines for outside scholarships, too. Many close by end-of-year, early January. I’d certainly research any earmarked for Hispanic. Also those for Chemical Engineering. My S got two very nice national scholarships based on his intended area of study. I’d also look at local (California, plus prep school state) Credit Unions. Many credit unions have scholarship competitions. (Good marketing on their part!) In their pursuit, my S&D racked up roughly $25K between the two of them–a couple national, mostly regional or local. All were one-offs for one-year-only but they certainly helped pay for books, etc. Trouble is, it takes a lot of time & effort to first identify and then apply.
Yes, these outside scholarships can reduce the work study award, and loans. But the outside scholarship actually replaces those.
But it might mean less loans, or less work study for the student.
One thing about most of the very huge national outside scholarships…they have a need component. This family has a $30,000 or so EFC…right? They likely would not qualify for the big national awards.
I do agree that the smaller one year awards take the edge off a bit. But remember, they are for one year. Most of the smaller scholarships like credit union are not renewable.
Regarding outside scholarships: for the child of an employee of a large corporation, potential sources of small scholarships include the foundations backed by the employer. This might not be widely known or advertised but is worth investigating by talking to HR and/or colleagues that have college-age children. For example, a flight attendant working for Delta should look at https://news.delta.com/tags/scholarship-fund
My D had a 4 year renewable scholarship and a couple of others for the first and second years. They did indeed reduce her work study. Her school didn’t package loans in FA but if it had, it would have been a huge help not to have to take those loans.
But she worked for money on campus anyway - not work study funded but work nonetheless.
There are pure merit big awards out there but they are truly lottery tickets , and can take a lot of time to enter that ticket. My kids did not so well in that endeavor. Other than one kid, all they got was through the colleges. And the one lucked out on a closing out scholarship award but it was just for one year. Most are. But if she is willing and able to go for a number of them, great.
My kids got work study jobs from colleges. Though under the heading “Work Study”, they were not federally funded or under financial aid umbrella. They were university provided jobs. Paid pretty well, some of them did.
Both kids got work study and one used it but now both just got college jobs that actually pay more. All their employers are very student accommodating with tests and school schedule also just like work study.
I agree that this is the case, but it seems nonsensical. For example, if COA=$70K, and a school gives $40K of need based aid, that leaves a $30K bill for the family. Let’s say none of the $40K in aid is loan based (one of the elite no loan schools).
If the student wins a big $10K outside scholarship because of demonstrating need, then the school will reduce their $40K need based aid down to $30K to account for this. Thus, the parents still write exactly the same amount on the check as before. Why would the student even apply for the outside scholarship in this case?
I guess these awards are better for schools that don’t meet need.
Are you fairly confident that your efc will be about the same for all 4 years? I hate to add another school…but has she checked out Lehigh? If she shows huge interest I think she has a good chance of getting in…and it meets need.
“I guess these awards are better for schools that don’t meet need.” That is also what I have heard from colleagues. Apparently, in such scenario, there is not much point at applying to the outside scholarship unless you have a chance to get more than the need-based aid given. It is nonsensical. But even no loan schools are likely to expect work study, and are likely to apply small scholarships against the work study requirements, freeing some time to do something else.
One more thing to add. Remember that scholarships and grants used for things other than qualified educational expenses (tuition, fees, books) will be taxable income for the student. Make sure you save money to pay taxes if the student has high enough earned income plus scholarships that there is a tax payment due. Some folks don’t think of that.
Agree with @thumper1 the tax laws have recently changed and scholarships used for room and board and transportation are now taxed using the estate rate, better than not having the scholarship but something to be aware of.
“Remember that scholarships and grants used for things other than qualified educational expenses (tuition, fees, books) will be taxable income for the student.“
Also note that California has not conformed to the new federal tax deductions, so the state standard deduction is only $4401 for 2019. For a student with a large taxable scholarship (>$10K taxable) at an out of state school, it’s important to consider whether the student should proactively move their tax residency to the other state (if that is a state with a $12000 standard deduction), in order to avoid paying CA taxes on the scholarship (at the parents’ marginal rate). The offsetting issue is the potential loss of the $500 federal credit for dependents when the child is no longer resident in your home.
@Twoin18 the comment about the impact on CA state tax on a large taxable scholarship is very interesting, but how would a student proactively move their tax residency? In my mind this is not something that can be done. Do you have pointers?
Up date: I just ran the numbers for ds18 and his full ride should (including room, board + study abroad stipend) should cost us about $2,200 in taxes this year. Next year should be less because of no study abroad. So not as bad as I feared.
Thanks for the calculation. Good for @KevinFromOC to have a rough estimate. $2200 or so in taxes should still be considered.
@BelknapPoint if Kevin isn’t paying any costs himself (if his DD gets a full ride) am I correct that he will not be eligible to receive any of the tax credits? But his kid might still have federal and state taxes to pay?
@NJEngineerDad The first step is registering to vote and changing your drivers license. The first of those will be the date of moving residency for tax purposes. Change other things like the local bank and the address on savings accounts etc. if those have the parents address. Then fill in a part year tax return for the old and new states. Also don’t declare them as a dependent (after the first part year return when they are living with you more than half the year) because their income from the scholarship will be too high to qualify for the support test.
Note that tax residency is a completely different thing from tuition residency: it’s easy to become a tax resident (but potentially hard to leave), because states want your money, whereas it’s hard to become a resident for tuition purposes (but potentially easier to lose it).
Relinquishing other ties with CA is to some extent a qualitative issue, but if the student doesn’t come back in the summer (ie studies or works elsewhere) then they are unlikely to face problems in demonstrating they had an intent to leave. My D has spent less than a week in CA this year and will certainly be under 30 days even including thanksgiving and Christmas. The people who get into trouble (ie get audited) are high earners who own a home in CA that they haven’t rented out and continue to visit. The CA tax authorities aren’t going to spend time pursuing a student with minimal income and no assets here.
@Twoin18 Interesting, but aren’t scholarships excluded from the support test?
This (old) article (which might not be applicable under the new law) https://www.journalofaccountancy.com/issues/2011/may/20113902.html says:
“Section 152(f)(5) prescribes a special treatment for scholarships with regard to the support tests. If the recipient is a fulltime student at a qualifying educational organization as defined in section 170(b)(1)(A)(ii) and “a child of the taxpayer” (section 152(f)(5)(A)), any scholarship is excluded from the support tests.”
https://www.irs.gov/pub/irs-pdf/p970.pdf
“Support. Your support includes food, shelter, clothing, medical and dental care, education, and the like. Generally, the amount of the item of support will be the amount of expenses incurred by the one furnishing such item. If the item of support is in the form of property or lodging, measure the amount of such item of support by its fair market value. However, a scholarship received by you isn’t considered support if you are a full-time student. See Pub. 501 for details.”
https://www.irs.gov/pub/irs-pdf/p501.pdf
"Scholarships. A scholarship received by a child who is a student isn’t taken into account in determining whether the child provided more than half of his or her own support. "