Hawai'i college students may find it more difficult to get scholarships and grants in light of the plummeting economy, higher education officials warn.

Not only should students expect stiff competition, but college counselors warn there will likely be less scholarship money to go around.

The problem lies with the hundreds of local scholarships that rely on the interest earned on endowed funds. With the slowdown in investment markets, local financial aid experts are predicting that more people will be applying for significantly less scholarship money than in years past.

Scholarships from community organizations such as the UH Foundation and Hawaii Community Foundation, which rely heavily on endowed funds, are likely to see an impact from the economy.

"For these kinds of specific donor scholarships ... their investments are not doing well. They're accepting applications, but some of these funds have less money. Some don't have any money," said Karen Lee, vice president for student affairs for the 10-campus University of Hawai'i system.

The UH Foundation typically doles out more than $12.5 million a year from hundreds of funds and charitable donations. Of the foundation's 1,396 student aid accounts, 555 are endowed.

"It's going to be less. We know that," she said. "We are now seeing some reports from some of our endowed scholarships that they're not spinning off as much revenue."

In a typical year, an endowed fund of about $35,000 will earn about $1,200 to $1,500 in interest. That money is then used to fund a scholarship or grant.

But this is not a typical year, Lee said.

State government is planning spending cuts because of an estimated $1.1 billion deficit by the end of the 2011 fiscal year.

Gov. Linda Lingle has proposed some $395 million in cuts to the state's general fund budget, which includes about $40 million in cuts to the state Department of Education and $13.5 million in cuts to the UH system.

Still, financial aid counselors urge students not to despair, because there are lots of options available.

UH SCHOLARSHIPS SOLID

So far, scholarships offered by UH have remained solid, Lee said. That's because funds for those scholarships come from money already set aside by state lawmakers or from research money already garnered by the university.

Last year, UH distributed some $31.2 million in student aid in the form of tuition waivers, need-based grants and merit and service scholarships.

But Lee stressed that it's important for students to apply for these scholarships early. The university has a priority application deadline of March 2.

Frank Green, executive council member for the Pacific Financial Aid Association, said historically, colleges and universities — especially community colleges — see a spike in enrollment when the economy tanks.

In fact, enrollment in the 10-campus UH system was at an all-time high this past fall, with total students reaching more than 53,000 — a 5.3 percent increase from the previous year.

So this year, college counselors are telling students to expect more people to be seeking private, community-based scholarships, he said.

"There will be a lot more competition this year," Green said. "I suspect we will be seeing reduced dollar amounts as well," he said.

So far, however, scholarship organizations are not specifying exactly how much — if any — decrease in awards may occur.

Rhona Kekauoha, scholarship officer for the Hawaii Community Foundation, said there have been some "minor effects" from the economy.

"We don't exactly know our budget yet for 2009. We're working hard to keep the same level of awarding," she said.

In 2008, the Hawai'i Community Foundation awarded some $5 million in scholarships to 1,800 people. The foundation has thousands of scholarships available from local donors, business, corporations and community organizations.

About 85 percent of its scholarships are tied to endowed funds, Kekauoha said.

She also noted that the foundation has seen a higher than usual number of applicants. Just a week after the application process began in December, the foundation received more than 1,200 applicants.

"It's much higher. Just for a little perspective, last year we received about 6,900 total," she said.

KAMEHAMEHA AID

Kamehameha Schools, which spent some $24 million on preschool and post-high school scholarships last year, said its scholarships should not be affected by the economy.

"Our endowment has seen some decrease in value. But because of the great gains that our endowment has made, our spending formula allows us to budget for maintaining that level of support," said Ann Botticelli, spokeswoman for Kamehameha Schools.

Kamehameha Schools said on Friday the trust's total endowment value fell by $1.7 billion, or 18 percent, to $7.7 billion in the first four months of the school's fiscal year 2009, based on preliminary figures.

Even with the collapse of the credit market, and student loan lenders pulling out of the market, Green said that students should not have a problem obtaining federal loans.

"There hasn't been any problem in access to that. But the choice in lenders has dropped a little bit. You used to be able to go to a community college and have 10 different lenders to choose from. Now, maybe you're down to three or four to choose from," Green said.

Private loans have become tougher to get, Green said. But he advised students against taking out private loans.

"For the federal loans, interest rates are controlled by federal law, repayment schedules are controlled by federal law," he said.

The federal Pell Grants, which are awarded to college students based on financial need, are still safe and guaranteed to those students who qualify, Green said.

This past fall, the maximum award for a full-time student was $4,731. Congress has not appropriated the 2009-2010 Pell Grant yet. But Green said it is unlikely to be cut.