Winning private college scholarships can certainly help make college more affordable, but you need to know the realities of competing for college cash. My pet peeve about private scholarships is that people assume that they are the biggest source of college cash when they are really the smallest.

Before you start hunting for private college scholarships, here are eight facts about these awards that you need to know:

1. Private scholarships aren’t the biggest source of college cash.

I suspect most families believe that private scholarships, which students can earn from organizations like the Rotary Club or by creating a clever prom outfit out of duct tape, is where most of the money for college is hiding.  The biggest sources of scholarships and grants, however, are the federal government and the colleges themselves.

Here is the breakdown of sources of college grants:

1. Federal government (44 percent)
2. Colleges (36 percent)
3. State governments (9 percent)
4. Private scholarships (4 percent).

2. Full-ride scholarships are extremely rare.

While many parents dream that their children will receive full-ride scholarships, they should definitely not count on it. There are less than 250 private scholarships that provide enough money to pay for all college costs, according to Mark Kantrowitz, the publisher of Fastweb, the highly popular scholarship search engine. Among full-time college students, a mere .3 percent receive a full ride to college from any sources.

3. Scholarships can reduce your financial aid award.

If a teen wins a private scholarship, the college could shrink his or her financial aid package by the amount of the award. So if a child wins a $3,000 scholarship, the college could cut the aid package by $3,000. Why is a student penalized for winning a private scholarship? Federal rules require that a college consider outside scholarships when calculating a financial aid package. Ideally you’d want the college to reduce the loan portion of a student’s financial aid award and not grant money. Some reduce both. You need to ask schools about their policies.

4. You should apply to less popular scholarships.

Many students,  don’t want to apply for scholarships that are worth less than $1,000, but these scholarships can be easier to win. Students also tend to dismiss competitions requiring the submission of art, poetry, or writing.

5. Some majors are more lucrative than others.

Students who major in a STEM field (Science, Technology, Engineering, and Math) are more likely to win a scholarship, Kantrowitz says. In one survey, 23.2 percent of math/statistics majors and 17.6 percent of engineering students earned a scholarship, while only 9.5 percent of business majors won one.

6. You’ll have better luck with local scholarships.

There can be less competition for local scholarships. Ask your guidance counselor about local scholarships and also check out the jobs and career section of your local library. You need to do the footwork because some local scholarship sponsors don’t want their listings in the national scholarship databases.

7. Do some volunteer work to increase your chances.

Many scholarship providers include a requirement that recipients be engaged in volunteer activities. Sponsors would rather see a student who sticks with one volunteer activity for a long time than one who hops around to various charities.

8. Read up on private scholarships.

If you’d like to learn more about private scholarships, a handy resource  is a slim book, Secrets to Winning a Scholarship, that Mark Kantrowitz wrote. Check it out.

Read more:

Do You Enjoy a College Scholarship Advantage?

Lynn O’Shaughnessy is the author of The College Solution and a financial workbook, Shrinking the Cost of College. Follow her on Twitter. and Facebook.

How To Decode a Financial Aid Letter

Today, I’m going to cover the types of college grants that parents typically find in a financial aid letter.

College Grants

Many families believe that the biggest source of college cash is private scholarships, which is absolutely untrue. You can find the biggest pile of scholarships at the schools themselves. And that’s why you want to pay close attention to whether a student financial aid award letter contains college grants.

Studying for College Scholarships

A Primer on College Scholarships

Can This Teenager Win a College Scholarship?

Colleges dispense their grants in two main ways.   Almost all colleges and universities, state and private, award merit scholarships without regard to financial need. You often don’t need to be an “A” student to receive a generous scholarship. In fact, at some schools everybody pockets something.

Often colleges will notify students that they won a merit scholarship in their letters of acceptance. The acceptance letter could arrive weeks before the financial aid package shows up.

When the financial aid letter arrives….

You want to see if the school is providing any additional grant money. The schools dispense this extra grant money based on need. How generous the school is with the second round of grants will not just depend on the family’s income. The grant awards will also depend on whether a college really wants a child.

A student who has barely gotten into a “reach” school will often get a package loaded with loans rather than grants. In contrast, a student, whose parents make the same income as the reach applicant, could receive a big need-based grant if he or she is someone who the admission office wants to entice to its campus.

Obviously, you want a financial aid package that’s stuffed mostly or exclusively with grants because these don’t have to be repaid.

Financial aid award mistake….

Sometimes parents mistakenly believe that a financial aid award is more generous than it really is because plenty of schools don’t do a good job of differentiating the grants from the loans.

If you aren’t sure what your financial aid award contains, call the school’s financial aid office. Ask how much grant money is in the package versus loans. Only then will you begin to understand whether the school is affordable.

If the package doesn’t contain enough grants, you can always appeal.

How to Negotiate for a Better Financial Aid Package

Lynn O’Shaughnessy is the author of The College Solution and she also writes a college blog for CBSMoneyWatch. Follow her on Twitter.

Well, that’s too bad.

Colleges cost too much money for families to automatically agree to a six-figure commitment. If you’re going to negotiate, however, you’re nearly out of time. The traditional deadline for deposits to secure a spot in the newest freshmen class is May 1.

In recognition of the economic meltdown, most colleges have boosted their college financial aid budgets this year. So even though times are tough, there is a lot more financial aid cash sloshing around. Here are some ways to increase your chances of securing more of that financial aid:

Try some crazy arguments. If a school really wants your child it might accept any lame reason to toss you more money.  I mention this  college financial aid secret in a story that I wrote this month for CBS’s new financial website.

Get your teen involved. A school will be impressed if your child calls its office instead of you.

Provide a number. Try to be as specific as possible about what further student financial aid you need. Don’t just complain that the school costs too much. That’s what stressed financial aid officers hear all day long. If you need another $4,000 a year to make the commitment doable say so.

Be diplomatic. Negotiating is okay, but you can’t approach the process like you’re A-Rod’s agent. You’d be surprised how often FA officers are mistreated – honey goes a long way.

Make a better case. Share any change in your financial circumstances. If there has been a layoff, high medical bills or you’re now caring for an ailing parent, speak up.

To learn how to pay for college and shrink the cost, read The College Solution by Lynn O’Shaughnessy.

Further Reading:

Researching Colleges in 10 Minutes

Cutting the Cost of College With Better Grades