Are There Millions Of Dollars In Scholarships Going Unclaimed Each Year

Understanding How To Pay For College (Fourth Edition) Copyright 2010, 2011, 2012, 2013 By: Educational Literacy Center All Rights Reserved No part of this publication may be used or reproduced in any manner whatsoever without written permission except in the case of brief quotations embodied in critical articles and reviews. For More Information Contact: Chuck Moore, CCFC, CAMC, CAFC Louisville, Ky 40207 Ph. 502-721-8646 Cell 502-931-3137 [email protected] www.collegeliteracyacademy.com

This publication is general in nature and is not intended to give legal, accounting or investment advice. Before incorporating any ideas in this publication the reader should consult with their financial advisor, guidance counselor, or tax professional. Some of the information provide in this publication is from varies outside resources

Are There Millions Of Unclaimed Scholarships Available Each Year? This myth has been circulating in our school systems for years. There are several books written each year touting there are millions of dollars of unclaimed scholarships each year… This is totally false. I want to put this myth to rest for good. Non-profit and for-profit organizations do distribute millions of dollars in scholarship funds each year, based on certain criteria. These funds are distributed to needy and/ or talented students. However, the funds are only given out as long as the donor’s investment portfolio is adequate to distribute the funds. There are scholarships given out by Rotary Clubs, Churches, Men/Women Groups, etc. as well. During the years between 2001 to 2010 many of these organizations stopped or cut back on these scholarships because of the down-turn in the market. Also, these funds are given out on a very competitive standpoint and the average high school student who shows no need or talent (academically, etc.) will not qualify for most of these scholarships. So, if most of these non-profit and for-profit organizations are giving out all the money they can, where are all the millions of dollars in college scholarships going unclaimed? Most of the unclaimed scholarships come from employee benefit programs under IRS regulation Section 127 Educational Assistance programs. This assistance is mostly available to employees of corporations or small business owners. Let’s look at what the IRS says about this program: Section 127(c)(1) of the Code provides that “educational assistance” means (A) the payment, by an employer, or expenses incurred by or on behalf of an employee for education of the employee (including, but not limited to, tuition, fees, and similar payments, books, supplies, and equipment), and (B) the

provision, by an employer, of courses of instruction for such employee (including books, supplies, and equipment), but does not include payment for, or the provision of, tools or supplies which may be retained by the employee after completion of a course of instruction, meals, lodging, or transportation. Accordingly, based on the information provided and representations made, the first $5,250 in educational assistance provided to an employee during a calendar year under the Plan will not be included in the employee’s gross income pursuant to section 127(a) of the Code. If the employees do not take advantage of this free money, they go UNCLAIMED. Plus, if the student is not an employee of the company, they cannot receive these college funds.

How About Scholarships Given Out By Colleges And Universities ▬ Are They Also Going Unclaimed Most state supported colleges do not have a substantial amount of scholarship funds to help the average college student. Most of the money that is given out by the college’s foundation is normally given for campus improvements or special needs of the college or university. The scholarship funds available are normally given to the neediest or the high academic or talented (athletic, musical, etc) students.

Federal And State Governments Most of the scholarship/grants given out through state governments are normally based on need only. Some states like Kentucky, Georgia, South Carolina, and Florida have merit scholarships available to students that maintain acceptable grades in high school. The two most popular need-based grants that are available through the Federal Government are the Pell Grant and SEOG (Supplemental Educational Opportunity Grant) programs. The Pell Grant of the past would cover a substantial amount of college expenses. However, this grant program has not kept pace with the rising cost of a college education.

Another thing most families do not understand is that a student cannot qualify for the SEOG grant unless they qualify for the Pell Grant first. If a student were to attend a private college or university, there is a high likelihood they will receive some scholarship/grant money. Private colleges receive little or no support from state taxing authorities. Therefore, they charge more for their education compared to state supported colleges and universities. Most private colleges need to compete for students with state supported colleges. In order to compete (based on cost), many will normally offer a qualified student scholarship money to help pay for the higher cost of the education. The amount of the scholarship will vary depending on the student’s financial need and/ or the academic or athletic ability of the student. If a student has a high financial need and the student is not an above average student academically, some colleges may not offer admission or offer a smaller scholarship to discourage the student from attending due to the high need for financial assistance. Many private colleges like to advertise they are NEED BLIND and boast they always provide 100% of financial need to all ADMITTED students. However, if the family has a very high need, the student my not be admitted due to this high need.

Understanding how to pay for college could save your family thousands of dollars. If you are interested in learning more, go to our websites www.collegeliteracyacademy.com or www.gearuped.com and become an annual subscriber or send us an e-mail ([email protected]) for more information.