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Facts about Private Sector Financial Aid

Debunking the Unclaimed Aid Myth

Search services sometimes claim that billions of dollars in private-sector scholarships and grants go unused every year. These claims are based on a 20-year-old estimate of education benefits provided by employers for their employees, not money from private foundations and philanthropic organizations. If the money is going unused, it's because it can't be used; employees can only take advantage of tuition assistance programs and company scholarships when they or their children are enrolled in college. Moreover, these funds are available only to employees and their dependents, and not the general public. There is no documented evidence that any private scholarships ever go unused.

The "$6.6 billion in unclaimed aid" myth is based on a hearing of the National Commission on Student Financial Assistance held on November 10, 1983 before the Subcommittee on Postsecondary Education of the Committee on Education and Labor of the US House of Representatives. Page 6 of the Commission's report (ERIC Document ED 234-734) summarizes testimony by the National Institute of Work and Learning about the results of a 1976-77 study of employer tuition aid programs:

"About $7 billion is available annually from the private sector for tuition assistance, but less than $400 million is actually used each year. For the last decade between 3 percent and 5 percent of eligible employees used their tuition aid plans. For blue collar employees the rate is between 1 percent and 2 percent. In other words, about 1.5 million employees use their tuition aid plans annually."

The Reality of Private Sector Financial Aid

The 1992-93 National Postsecondary Student Aid Study (NPSAS) is the most comprehensive recent study of how students and their families pay for a postsecondary education. The NPSAS was conducted by the U.S. Department of Education's National Center for Education Statistics, and surveyed a nationally representative sample of 66,000 undergraduate, graduate, and professional students enrolled at 1,100 public, private, and proprietary institutions of higher education. The study found that only 4.0% of all students received non-employee, non-college-controlled private sector student financial aid during the 1992-93 academic year. An estimated total of $1.217 billion was awarded to 735,487 students, with an average award of $1,655.72. Of this total, $920 million was awarded to 638,974 undergraduate students, with an average award of $1,440.52, and $297 million was awarded to 96,513 graduate and professional students, with an average award of $3,080.46. These figures represent private sector grants from religious, community, civic, fraternal, professional, and philanthropic organizations, and exclude employee tuition benefits and private aid that is awarded by the schools.

According to data provided by three respected scholarship databases, the number of sources of private sector aid is approximately 3,200. This figure represents the number of sponsors, not the number of individual awards.

The following chart is based on NPSAS data.

      Private Aid  |**              Percentage of Undergraduate Aid
      Employers    |***                 Academic Year 1992-93
      Schools      |**************
      State        |******
      Federal      |*******************************************
                   0     10     20    30     40     50     60    70

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