• Products

    World Bond Fund Monthly Positioning & Outlook

    View Now >

  • Insights

    Human-Centric Investing Podcast

    Listen to Latest Episode >

  • Practice Management

    Applied Insights Team

    Learn More >

  • Resources

    Tax Center

    View Now >

  • About Us

    Human-Centric Investing

    Learn More >

A student heading off to college is usually a celebratory time for both parents and students. Unfortunately, many families also experience the flip side—the anxieties that come with the looming task of paying for college and the potential weight of student-loan debt.

The good news is there are many ways to help make college more affordable. One of the best ways is by finding free money through scholarships. In 2019-20, 58% of families used scholarships (making it the second biggest source of funding) and 48% used grants.1 And though they do take some extra work, the payoff is just that—free money.

As an even bigger bonus, those scholarships and grants are awarded for all sorts of reasons. Are you crafty with duct tape? There’s a scholarship for that. Are you tall? Do you have a mean duck call? Are you a Trekker? There are scholarships for that, too!

In addition to some of these more unique scholarships, there are plenty of traditional scholarships available. The trick is understanding what they are, and where you can find them.

What Are Grants and How Do I Find Them?

A subset of financial aid, grants are need-based and don’t need to be repaid. If you’re looking for grants (and financial aid in general), the Free Application for Federal Student Aid (FAFSA) is your first step. The FAFSA is completed annually to determine eligibility for financial aid, which could include both federal grants and federal student loans.

Students are automatically considered for most grants when they submit their FAFSA form, so it’s an imperative. Not submitting means that you could be missing out on thousands of dollars in aid. In fact, in the 2019-20 academic year, 43% of families chose not to fill out the FAFSA because they assumed that they wouldn’t qualify for any aid.1

Each year, the FAFSA opens on October 1; it asks for information such as, bank statements, records of investments, tax returns, and which schools you’re considering applying to. In general, it’s recommended that families submit their FAFSA as soon as it becomes available. While grants are need-based, 13 states use the FAFSA on a first-come, first-serve basis. Further, some schools (regardless of the state they’re located in) also award financial aid (i.e., grants) on a first-come, first-serve basis as well. Delaying your application could make a big difference in the financial aid package you’re offered.

 

Are There Other Resources for Grants?

Federal grants through the FAFSA are the first stop, but you can also search online for a variety of other grants: from your school(s) of choice, through your state, and from private sources. That being said, finding non-federal grants will likely take some digging.

Your high school may have additional grant programs in place to help students in need pay for the growing cost of college. To find out if they do and to learn about eligibility requirements, visit your school’s website and give your prospective university’s financial aid office a call.

A good place to start when looking for state-funded grants is through the state agency contact list via the US Department of Education. This site will direct you to contact information and the website for your state’s higher education agency, which may help you find more grants and scholarships specific to your state.

Private grants can be a little trickier to find and will take some searching. Companies, both locally and nationally, and non-profits may offer grants for students. These will usually have further eligibility requirements and might be more specific. Private grants are available for a slew of reasons: minority students, women, women in STEM, high achievers, service members or students with parents in the military, first-generation students, adults, grad students, students with disabilities, certain professions/majors, combinations of need- and merit-based grants, and more. Start by narrowing down what you might qualify for, search online, and assess your eligibility before you spend time applying.

 

What Are Scholarships and How Do I Find Them?

Scholarships are another type of financial-aid award that do not need to be repaid. These, however, are merit-based, and students will need to apply for scholarships on an individual basis. There are thousands of scholarships available for every reason under the sun, but they do require students to put in a good bit of work.

Not only will students have to do the legwork of finding scholarships that they are eligible for, scholarships often have strict application requirements. Since scholarships are merit-based, applications will likely ask for high-school transcripts, standardized test scores (SAT, ACT, etc.), letters of recommendation, essays, and resumes.

Scholarships can be highly competitive, so a good rule of thumb is to apply early and for as many as you are eligible. Just as with grants, ensure that you read all eligibility and applications requirements because incomplete applications could immediately disqualify you for that scholarship.

The easiest place to start when looking for scholarships is your high school and your college of choice. Your high school may have already compiled a list of local scholarships, and your prospective college may have some resources available on their website.

From there you can start searching online for nationally available scholarships. Many scholarships are offered by employers, individuals, private companies, nonprofits, communities, religious groups, and professional and social organizations. Scholarship search engines are also an excellent resource. A few well-known ones include: Scholarships.com, Fastweb, Cappex, and The College Board. You should also make use of the US Department of Labor’s free scholarship search tool.

 

What You Should Know Before Accepting Grants and Scholarships

Being awarded any grant or scholarship is great and a little can go a long way when paying for tuition, books, and all your other expenses—but there is something you’re going to want to consider before accepting either.

Be sure that you read and understand all the conditions that may be attached to specific grants and scholarships. Conditions could include: maintaining a GPA requirement, continuing to play a certain sport, remaining in your major or area of focus, or continuing on to a specific and qualifying career. Failure to comply with the conditions attached to your grant or scholarship may result in the loss of the award, and you may even be required to pay back any awarded funds.

 

Avoiding Financial Aid Scams

As with most things, there are, unfortunately, scams related to grants and scholarships. Once you start branching out from local and federal resources, you’ll need to be more vigilant about not falling for financial aid scams. Desperation over the high cost of college and inexperience may make some students vulnerable to scams.

Be skeptical of any emails offering you a scholarship or grant that you never applied for. Stay away from any applications asking for a fee, bank information, Social Security numbers, or other sensitive information. Any messaging that pressures you to act now or guarantees you money are both major red flags. In general, you should stick to well-known organizations and websites, and keep an eye out for anything that looks or sounds suspicious. If it sounds too good to be true, it likely is.

 

Taking Advantage of a 529 Account

Scholarships and grants are a fantastic resource that can help you pay for higher education. If your child is young, or even in their teens, and you’re already thinking about how you’re going to afford college without sinking yourself (and your child) into debt, 529 saving accounts can be an incredibly helpful tool.

These tax-advantaged savings accounts are specifically geared toward education and allow you to take advantage of any potential growth. These accounts are funded with after-tax dollars, interest compounds tax-free, and funds can be withdrawn without being taxed for qualified expenses.2 Qualified expenses include: college tuition, supplies, room and board, equipment, vocational or technical training, K-12 private school tuition,3 apprentice programs and fees,4 and student-loan repayment.5

These funds never expire, and if you open a 529 savings account and your child elects not to pursue further education or if you have funds left over after one child graduates, the beneficiary can be changed.

 

How Do 529s and Financial Aid Coexist?

It’s important to note that 529 accounts are considered an asset under the financial aid formula that FAFSA uses to determine need, but it only has a small impact on eligibility. 529 accounts owned by parents or students could potentially impact aid up to 5.64%—a small price to pay when you consider all the other benefits of a 529.6

Plans owned by grandparents or other relatives could impact need-based financial aid by up to 50%. To help mitigate this potential impact, grandparents can transfer the ownership of the 529 plan to the parent; wait to use the funds until the second half of the student’s sophomore year (because FAFSA is based on income and tax information for the prior two years and won’t impact future years); or use the funds after a student graduates to pay down student loan debt.

If your child does end up receiving a scholarship of some sort, there is a clause that allows you to withdraw up to the amount of that scholarship and use the money for any purpose penalty-free, but you’ll still have to pay income tax on the earnings.

 

What if I Still Need More Money?

Despite all the financial aid, grants, scholarships, and saving you might do, some students will inevitably end up still needing to consider loans.

Once students fill out the FAFSA, they will likely be offered federal student loans in the financial-aid package from their school(s). You can accept all, partial, or none of the loans offered. Interest rates on federal student loans are fixed and usually lower than on private loans. Repayments don’t begin until after you leave school or drop below a part-time student status. These loans often offer flexible repayment plans and may even be forgiven in some cases or if you work in specific careers (education, medical fields, nonprofits, etc.).

College is expensive, but knowing where to find financial aid, grants, and scholarships can help parents and students make more informed financial decisions.

Talk to your financial professional about how your family can make college more affordable.

1 Sallie Mae, “How America Pays for College 2020,” July 2020

2 Non-qualified withdrawals are taxable as ordinary income to the extent of earnings and may also be subject to a 10% federal income tax penalty. Such withdrawals may have state income tax implications.

3 If using a 529 plan for K–12, it can only be used for tuition up to $10,000 per year.

4 529 plans can be used for apprenticeship programs registered and certified with the Secretary of Labor under the National Apprenticeship Act. West Virginia state code does not provide for the inclusion of Apprenticeship Programs as a Qualified Higher Education Expense. This means under current law, earnings associated with distributions for these programs would be subject to West Virginia tax but exempt from Federal tax. Consult a tax professional for further information.

5 Can be used for student loan repayment for a maximum lifetime limit of up to $10,000.

6 Saving For College, “Does a 529 Plan Affect Financial Aid?,” 9/9/20.

Investment returns are not guaranteed, and you could lose money by investing in a 529 plan.

All information provided is for informational and educational purposes only and is not intended to provide investment, tax, accounting or legal advice. As with all matters of an investment, tax, or legal nature, you and your clients should consult with a qualified tax or legal professional regarding your or your client’s specific legal or tax situation, as applicable. The preceding is not intended to be a recommendation or advice.

This information has been prepared from sources believed reliable but the accuracy and completeness of the information cannot be guaranteed. This material and/or its contents are current at the time of writing and are subject to change without notice.

Links from this article to a non-Hartford Funds site are provided for users’ convenience only. Hartford Funds does not control or review these sites nor does the provision of any link imply an endorsement or association of such non-Hartford Fund sites. Hartford Funds is not responsible for and makes no representation or warranty regarding the contents, completeness or accuracy or security of any materials on such sites. If you decide to access such non-Hartford Funds sites, you do so at your own risk.

CCWP107   224744

The material on this site is for informational and educational purposes only. The material should not be considered tax or legal advice and is not to be relied on as a forecast. The material is also not a recommendation or advice regarding any particular security, strategy or product. Hartford Funds does not represent that any products or strategies discussed are appropriate for any particular investor so investors should seek their own professional advice before investing. Hartford Funds does not serve as a fiduciary. Content is current as of the publication date or date indicated, and may be superseded by subsequent market and economic conditions.

Investing involves risk, including the possible loss of principal. Investors should carefully consider a fund's investment objectives, risks, charges and expenses. This and other important information is contained in the mutual fund, ETF or closed-end interval fund prospectus or summary prospectus, which can be obtained from a financial professional and should be read carefully before investing.

Mutual funds and the closed-end interval fund are distributed by Hartford Funds Distributors, LLC (HFD), Member FINRA/SIPC. Exchange-traded products are distributed by ALPS Distributors, Inc. (ALPS). Advisory services may be provided by Hartford Funds Management Company, LLC (HFMC) or its wholly owned subsidiary, Lattice Strategies LLC (Lattice). Certain funds are sub-advised by Wellington Management Company LLP and/or Schroder Investment Management North America Inc. Schroder Investment Management North America Ltd. serves as a secondary sub-adviser to certain funds. Hartford Funds refers to Hartford Funds Management Group, Inc. and its subsidiaries, including HFD, HFMC, and Lattice, which are not affiliated with any sub-adviser or ALPS. The funds and other products referred to on this Site may be offered and sold only to persons in the United States and its territories.

© Copyright 2021 Hartford Funds Management Group, Inc. All Rights Reserved. Not FDIC Insured | No Bank Guarantee | May Lose Value