Scholarships can be a great source of financial aid, but when used with the GI Bills, they can have varying effects on the student’s bottom line. What many students do not know is the VA is the last payer when it comes to using other sources of financial aid along with the Post 9/11 GI Bill; other forms of available financial aid (including some scholarships) are first applied to the tuition bill. The VA pays what is left (up to the resident tuition cost at a public school or up to $21,084.89 at a private school). So as long as the tuition bill gets paid, should you care? Maybe.
There are two basic types of scholarships: ones that must be applied towards tuition and others that can be used to pay for anything. If the scholarships are fenced (and must be used to pay for tuition as is the case with many school scholarships and work study programs), then it might be better to use the Montgomery GI Bill – Active Duty (MGIB-AD) then the Post 9/11 GI Bill.
To illustrate the difference, let’s use the example of a full-time student that receives a $6,000 scholarship that will pay the tuition in full for a 16-week semester. Under the MGIB-AD, the student would receive $1,717 per month for four months totaling $6,868. Because tuition is paid, the only other cost would be $500 for books, leaving a balance of $6,368 from the GI Bill that can be used for anything.
The same student with the same scholarship, but using the Post 9/11 GI Bill, could get a housing allowance of $1,300 per month and a $500 book stipend for a balance of $5,200 after taking out the $500 for books. Because the scholarship pays all of the tuition, the VA pays nothing toward it. In this situation, the student using the MGIB-AD would net $1,168 more in spendable income.
The Two Types of Scholarships
But there are two types of scholarships – fenced and non-fenced (scholarships that can be used for anything as is the case with many private and service-based organization scholarships).
Using the same scenario but with the non-fenced scholarship, the student using the MGIB-AD would end up with the same amount of money with either scholarship type at the end of the semester, because the student must pay the tuition of $6,000.
However if using the Post 9/11 GI Bill, the VA would pay the entire tuition amount, the student would still get $5,200 in housing allowance and the $6,000 in scholarship money for a total of $11,200 at the end of the semester.
So there are a few lessons learned from our scenario:
- For the student using the Post 9/11 GI Bill and non-fenced scholarships, their bottom line increased by $6,000 than if a fenced scholarship was used.
- In the case of fenced scholarships, the student ended up with more disposable income by using the MGIB-AD than if using the Post 9/11 GI Bill.
- GI Bill entitlement use was the same regardless of the type of scholarship or GI Bill used – four months.
Maximizing the use of 36 months of GI Bill entitlement can be tricky as shown above, but knowing how each of the two GI Bills work can lead to making a better decision. However, it is worth noting that one can only switch from the MGIB-AD to the Post 9/11 GI Bill once, so it is important to factor in all of the variables before making the switch.
While the MGIB-AD and the Post 9/11 GI Bill were the only two GI Bills highlighted in this article, most of the other types of GI Bills pay the student directly and the student is responsible to pay tuition. The Post 9/11 GI Bill is the only one where the VA pays schools directly for tuition when applicable.