How Do Scholarships Work? The Complete Guide

Given the high cost of college, it’s no wonder that few students can afford higher education without some kind of financial aid. In fact, according to statistics agency Think Impact, about one-third of students borrow money to pay for college — and around 58% rely on scholarships.

While scholarships are most popular among incoming freshmen, they’re an important source of funding for all collegians, up to and including seniors and graduate students. Still, many students find themselves uncertain about where to begin. How do scholarships work? Where exactly does that money come from? How do you know which scholarships are worth applying to? To help you understand the details, we put together this guide. Give it a read to start off your scholarship search on the right foot.

How do scholarships work?

Scholarships are an excellent way to pay for college because they’re basically free money. Unlike student loans, scholarships do not need to be repaid. Unlike grants, which are usually government-sponsored and administered according to financial need (like the Pell Grant), scholarships can come from any number of providers. Some scholarship programs are specific to a particular university, while others are sponsored by non-profits or local companies.

While some scholarship awards are need-based, many are given based on academic, artistic, or athletic merit. Scholarships can be a one-time award or a gift that renews annually throughout your college career.

Once you win a scholarship, what happens next will depend on the rules of that particular award. Some scholarship providers pay the funds directly to a student’s university to cover the cost of tuition and fees; others send the award directly to the student via a check or money transfer. The student can then use the funds to pay the school, or to cover other education-related costs.

Some scholarships offer “in-kind” awards, which come in the form of school supplies, travel opportunities, mentorship, or summer programs. The particular mechanics of the award disbursement will vary depending on the scholarship provider.

Scholarships vs financial aid

Technically, “financial aid” refers to any money that doesn’t come out of a student’s pocket.

However, “financial aid” is usually used as shorthand to refer to a student’s “financial aid package,” or “award letter.” A financial aid package is an offer that the federal government makes to a student to help them attend their chosen college or university. It only includes federal student loans, grants, and work-study programs — not private loans or scholarships.

That’s because, unlike scholarships, your federal award is always need-based. In fact, the only way to receive a financial aid package is to fill out the FAFSA® (Free Application for Federal Student Aid), which is all about your family income and financial details.

Scholarships, on the other hand, are often called “gift aid.” Along with private student loans, they can be a valuable supplement to what’s offered to you in your federal financial aid package. Unlike federal aid, there’s no cap on the amount of scholarship money you can win. Another perk of scholarships is that they tend to be more flexible than federal- or state-sponsored sources of funding.

Types of financial aid

Federal loans, private loans, and work-study are the most common types of financial aid. Each has its own pros and cons.

With both federal and private loans, the borrower must repay the loan funds along with interest. Oftentimes, federal loans come with lower interest rates and more borrower protections than private loans do. Private loans, however, can be a great option, especially for students who don’t qualify for federal loans but still have education expenses they can’t afford on their own.

A third type of financial aid is work-study, which is a federal or state-sponsored program where students can work at their college or university to earn money to pay for their education. Work-study jobs come in all shapes and sizes — from making lattes in the on-campus coffee shop to shelving books in the library.

Work-study jobs often require a significant time commitment, which can be a lot to squeeze in as a full-time student. However, they’re a great way to keep from accumulating student debt. Another bonus: not all work-study programs require that your wages be sent directly to your school. Many pay via direct deposit or check, which you can then use to cover textbooks, living expenses, or anything else you choose.

Scholarships vs federal loans

Unlike scholarships, federal loans will need to be repaid at some point in the future (with interest). There are also limits to how much you can borrow from the federal government, and the only way to qualify for federal financial aid is to complete the FAFSA®.

While many scholarships have a more intense application process, including essays, letters of recommendation, and other documents, you’ll never have to pay the money back. Many don’t require a completed FAFSA® and aren’t need-based.

What can you use scholarship money for?

Most scholarship money is intended to be used for education-related expenses, but each award has different rules. There are some scholarships that are just for tuition, while others are meant to cover the cost of books and supplies. For students with hopes to study abroad, there are scholarships for that, too. Be sure to read the rules of your award to ensure you’re using it for the right thing, be that travel, living expenses, a new laptop, or school tuition.

What organizations offer scholarships?

Colleges and universities are some of the largest scholarship providers in the US. When you’re putting together your list of colleges, do some research into your prospective school’s scholarship offerings. For some universities, students are automatically eligible for awards upon their application for enrollment, while other scholarships might require separate applications.

Some of the highest-dollar scholarships come from private organizations. These awards are funded by everything from big corporations and wealthy individuals to nonprofits and even churches. Some of the biggest scholarships available for high school seniors, for example, are funded by private charitable foundations.

State and local governments tend to be a smaller source of scholarships, but that doesn’t mean there aren’t some great options out there. In the state of Georgia, for example, students who have maintained a 3.0 GPA during high school are eligible for the HOPE Scholarship. HOPE usually covers the entire cost of tuition to any Georgia school for the entirety of a student’s undergraduate degree. Be sure to check your state’s website to see what’s available to you.

What types of scholarships are there?

While there are many different types of scholarships, the three biggest categories are need-based, merit-based, and athletic.

Need-based scholarships are given to students based on their financial need and family income. To determine if you’ll qualify for this type of scholarship, fill out your FAFSA.®
Merit-based scholarships are awarded based on academic achievements like GPA or standardized test scores. Some are awarded automatically by states, schools, or standardized-testing organizations — no application necessary. Others require transcripts or a resume to demonstrate merit as part of the application process.
Athletic scholarships are fairly straightforward and are given to students based on their athletic prowess. For some athletic scholarships, you don’t have to apply; instead, you might be recruited by a university’s coach. But, unless you’re an elite athlete, you’ll likely need to apply for awards, either through your school’s athletic department or through organizations interested in advancing a specific sport.

Outside of these three categories, you’ll find awards focused on everything from extracurricular activities and the arts, to faith and community service. No matter how off-the-beaten-path your interests are, there’s probably a scholarship for you.

Who can apply for scholarships? How do I know if I’m eligible?

When applying to colleges, students should fill out the FAFSA®. Once you’ve received your federal financial aid package, you’ll be able to determine your actual cost of attendance. This will help you determine how much money you need, and therefore how many scholarships you should apply for. It will also help you determine whether or not you qualify for need-based scholarships.

Even if you don’t qualify for federal financial aid, scholarships are available to all types of students. You may want to consider merit-based instead. Don’t have the highest GPA in your graduating class? Not to fear — there are scholarships for athletes and artists, singers and dancers, and even Star-Trek fans and vegetarians.

Age also doesn’t matter. You’ll find scholarships for high school juniors, high school seniors, graduate students, and everyone in between.

When researching different scholarships, take a peek at the eligibility section for each award. Most scholarship programs have clear sections that outline who is and who isn’t eligible for each type of award.

When should I start applying for scholarships?

It’s never too early to get a jump on the scholarship application process. For most high school students, your junior year is a great time to begin the college application process. That includes applying for scholarships. Before you’ve decided where you’re going to go to college, you can start applying for awards based on your interests, intended major, or extracurriculars. Once you’ve committed to a school, check out their scholarship offerings to make sure there aren’t any sources of funding you’re missing.

You can also apply for scholarships while you’re already enrolled in college or graduate school. Before each school year begins, it’s worth taking a spin through a scholarship platform like Going Merry to see what’s available.

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How to apply for scholarships

With so many different scholarship programs — each with their own websites, requirements, and applications — it can be tough to know where exactly to begin. Here’s what the basic process looks like and how to get started.

1. Do your research

Once you’ve filled out your FAFSA® and determined your basic eligibility criteria, it’s time to start searching for awards. You can find scholarships on the federal government website, your college’s website, and on designated scholarship platforms like Going Merry. (Note: it’s important to watch out for scams during this stage of the process. Be wary of any scholarship program that has an application fee. Any scholarship worth your time should be free for you to apply.)

2. Understand the eligibility requirements

Before you start filling out applications, carefully read each scholarship’s requirements to make sure it’s right for you. If an award says it’s for high school seniors and you’re a junior, make a note to come back to it next year. Don’t waste your time applying to awards for which you’re not eligible.

3. Build a list of awards

As you continue researching different scholarships, build a list of awards that are a good fit for you. Continue adding to this list as your eligibility changes.

4. Create a calendar of deadlines

Chances are, you’ll be applying to a variety of different scholarships, each with a different deadline. Create a calendar (either digitally or on paper) and input each deadline for each award. This will help you stay on track as you continue the process. Then, add self-imposed deadlines for each award. If your application is due in six weeks, for example, maybe make a goal to have your essay done in two weeks, so you have time to refine and reflect.

5. Collect the necessary documents

College scholarships sometimes require a lot of paperwork. Many scholarship providers want copies of your official transcript, parents’ tax returns, student aid report, recommendation letters, and other items. Make a list of all of the documents you’ll need for the different applications. Then, start gathering them. If you need to submit recommendation letters from a teacher or employer, be sure to give them ample time to write your letter. If a scholarship program requires an official transcript, you’ll have to request that from your high school.

While this step might seem straightforward, it can be time-consuming. Get started early, you’ll thank yourself later.

6. Write your essays (if necessary)

There are a number of programs that don’t require essays (and you should apply to as many as you’re eligible for). But for those awards that do require writing, give yourself time to brainstorm, write, and edit. Essays are a place for you to express your personality and show a side of yourself that’s not represented in your grades or standardized test scores. Answer each prompt with a clear, thoughtful response that demonstrates why you deserve this award.

7. Double-check your work

Once you’ve collected all your documents and written your essays, check your work with a fine-tooth comb. Many scholarships can be competitive, and even a small typo could be the difference between winning free money and getting passed over for a more polished application.

8. Submit

Once you’ve prepared and proofread your application, it’s time to submit it. While you wait to hear back on your scholarship applications, try to be patient. Many scholarship providers put decision dates on their websites, so you could build a calendar of those if you want to give yourself some goalposts.

9. Write “Thank You” notes

If you collected letters of recommendation during your scholarship application process, don’t forget to properly thank your reviewers. It can be as simple as an email or as lavish as a handwritten note. Either way, be sure to express your gratitude to whoever took the time to write on your behalf.

Using Going Merry to apply for scholarships faster

Sure, you could create elaborate spreadsheets to keep track of all your scholarship deadlines, eligibility criteria, essay prompts, and document requirements. Or you could sign up for Going Merry and let a robust platform do it for you.

Going Merry was built to make the scholarship search and application process easier. All you have to do is fill out a simple profile. Then, Going Merry uses your eligibility information to curate awards for you. It also lets you collect your documents, save essays, and submit applications all in one place. You can even access bundled applications, which allow you to apply in bulk to multiple scholarships that ask for the same requirements.

Here’s how to use Going Merry to apply to more scholarships, faster.

Create a free account on Going Merry and populate it with your information. This includes your current education level, location, and ethnicity. Then, browse our list of interests. Are you into visual arts, or is soccer more your thing? The more information you add to your profile, the more accurate your scholarship search results will be.

2. Browse awards curated just for you

On Going Merry, you can either search for specific scholarships or sort available awards by category. You can also search by competitiveness level, time it will take to complete the application, and award amount. On the main search page, you’ll see cards for each award with quick facts about them, which allows you to scan through them faster. When you find a scholarship that looks interesting, simply click the card to learn more.

If you don’t have time to browse, we’ve got you covered. Right after you sign up, we’ll start putting together a list of awards that match the eligibility details on your profile. Check your inbox, take a peek at our emails, and focus on the awards that interest you.

3. Build a scholarship list

As you build a list of your favorite scholarships, be aware of how competitive each award is and how likely you are to win it. There are some scholarships that give out a single, high-dollar prize, while others award multiple winners. It can be smart to concentrate on the awards you have a greater shot at winning.

Often, the awards you’re more likely to win are the ones that more specifically fit your unique personal characteristics. Are you a Latina who loves to code? A student-athlete who identifies as LGBTQIA+? There might be a scholarship tailor-made for you.

If you’re short on time, consider searching for scholarships based on how long it will take you to complete the application. It’s advisable to apply to at least a handful of “easy” scholarship awards first, since they require less work.

On Going Merry, it’s easy to build a list of favorite scholarships. All you have to do is click the heart button at the top of each award, which will add the scholarship to your favorites list. You can then go to the menu and click “Scholarships” to view your favorites in one spot. Going Merry will automatically create a calendar of deadlines for your favorite scholarships to help you stay on track.

4. Collect your documents

In your profile section, you’ll find a tab called “Documents,” which is where you can store required documents. Need a copy of your FAFSA®? No problem. Need to request a recommendation letter from your math teacher? You can do that directly from this page.

5. Write some amazing essays

Going Merry can’t write your essays for you. But we’ve done the next best thing, which is put together a handful of articles with our best tips and example essays to help yours stand out. Some scholarship programs receive thousands of applications, so finding ways to make yours shine is a worthy use of time. Our best advice? Be genuine and persuasive. Selection committees are made up of humans. Don’t tell them what you think they want to hear; tell them about you. What makes you tick? What have you overcome? What do you hope to achieve with the help of a college education? This is your chance to play up all your accomplishments, so don’t be shy.

6. Fill out your application (or let Going Merry do it for you)

For awards hosted on the Going Merry platform, all you have to do is click “start application,” and the form will be auto-populated with all the data you’ve already provided. All you need to do is confirm, then move onto the next section — no mundane, repetitive address-typing required. You can save even more time by applying to “bundled applications,” which let you apply to multiple scholarships with the click of a button.

Some awards listed on Going Merry are hosted by external websites. When you click the “start application” button for these awards, you’ll be redirected to the relevant site, where you’ll have to complete the application yourself. However, Going Merry will still track your progress.

7. Submit and track your status

Once you’ve double-checked all your personal information and uploaded your essays, go ahead and submit. Some selection committees read scholarships in the order in which they’re submitted. It never hurts to submit your applications early. In fact, it might help you stand out.

After you submit all your applications, keep track of them under the “Scholarships” tab. Select “View Submitted Applications” to see all your pending applications. Usually, if you haven’t heard back from a scholarship provider three or more months after the deadline, you likely weren’t selected. But don’t lose hope: there are thousands of awards on Going Merry, so keep the applications coming.

Scholarship FAQs

Scholarships are one of the best tools for reducing the cost of college and graduating debt-free. That said, the application process can be confusing. Here are answers to students’ most common questions.

Do scholarships affect financial aid?

If you’ve received a scholarship, you’ll need to report it to your college’s financial aid office. Depending on the amount of the award and your financial aid package, it might not change anything. However, college students are not allowed to earn more in financial aid than their cost of attendance, so your package may have to be adjusted to account for a big scholarship win.

If you earn $300 or more than your financial need (as determined by your FAFSA®) the government requires your college or university to reduce some portion of your financial aid. However, this isn’t necessarily a bad thing. If winning a scholarship means you don’t have to take out as many student loans — or don’t have to spend as much time doing work-study during the semester — that’s good news. Scholarships are your friend, so pursue every opportunity possible. You can always figure out the financial aid details after you’ve won.

Do scholarships expire?

Many scholarships expire if they’re not used by a certain time period. Other awards, called renewable awards, can be received multiple times over a set number of years. Most scholarship opportunities account for the fact that not all students complete college in four years, so the award might be available to you for five or six years. For other awards that are only available once, the terms might be different. The award could be specific to a single school year, have to be used within four years, or have an entirely different structure. The short answer: read the fine print on each scholarship you receive, and be sure to use it within the designated time period.

Do scholarships count as income?

Generally, no. Scholarships that cover education-related expenses at licensed educational institutions are not considered income. There are instances, however, where your scholarship could count as income. This will depend on how much award money you receive and how you spend this money. If you receive a scholarship that covers more than your cost of tuition and fees, the excess of this award could be considered taxable income if you spend it on things that aren’t directly relevant to your education. While there are scholarships that are designated for expenses like room and board or travel, the IRS would categorize these as non-education-related expenses and these scholarships would be taxable. Another example: if you receive a scholarship that includes a stipend for you to work — like a payment for an internship or a fellowship — that portion of the award could be considered taxable income.

Get more scholarships delivered to you with Going Merry

Scholarships can help you bridge the gap between your financial aid package and the cost of your higher education. Because they never have to be repaid, scholarships are the easiest way to earn free money to help cover your tuition, fees, and other education-related expenses.

With so many different types of scholarship programs out there, there’s bound to be an award that fits your interests. Going Merry is here to help you find those scholarships in just a few quick clicks. All you have to do is fill out a free profile with your unique interests and information. After that, the hard work is on us. We’ll sift through the thousands of scholarships on our site and pick out the best ones for you.

Disclaimer: This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.

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Going Merry is a one-stop shop for scholarships-- allowing students to find and apply for scholarships, right on our platform. It's like the best scholarship search engine, and an efficient scholarship application form, all in one. How does it work? You fill out a profile, get matched to scholarships you're eligible for, and then can filter or favorite scholarships into an application shortlist. Then, when you're ready to apply, our platform auto-fills any information you've already told us, so that you never have to answer the same thing twice. Counselors often call us the "common app for scholarships."