You may be surprised to learn that OUTSIDE scholarships could actually reduce the amount of need-based financial aid you receive from the colleges you choose to attend.
(OUTSIDE SCHOLARSHIPS: those scholarships given by sources other than a college itself or the federal or state government.)
Because colleges have financial aid award policies that determine how much and what types of financial support they’ll provide students.
In fact, most scholarship organizations send your check directly to the school you are going to attend.
When your college receives the check for the outside scholarship you earned the financial aid office has to reconsider (and sometimes reduce) their initial financial aid package.
This may not seem fair but, in some situations, the school has no choice.
That’s because the federal government has strict regulations concerning “over-award situations.”
An "over-award" is when financial aid from all sources is more than the school’s cost of attendance by more than $300.
If this happens, the school is required to reduce the amount of financial aid it has offered you so that it falls under the total cost of attending the school.
Here’s an example from the University of Washington's policies:
“In compliance with long-standing federal and University guidelines, the University requires students receiving any form of financial aid through the Office of Student Financial Aid to report awards from foundations or trustees or other sources and have their financial aid packages adjusted appropriately.”
Before you get too worried, know that...
Most schools have a policy that allows them to reduce the loan or the work study monies the student has been awarded (which are not free money) and not the grant (aka, free money) awarded
They will do this before they reduce and need-based or merit money awarded.
Here is an example from the University of Puget Sound (a liberal arts college in WA state):
As you can see in the example above, the worst-case scenario (at most colleges) is that the school “replaces” existing need-based grants and scholarships awarded by the college itself with your outside award.
The result: the aid dollars you receive remain the same even though the scholarship dollars have been added.
This is not the best scenario for two reasons:
1) The student had to spend a lot of time (usually) to earn that outside scholarship money when, in fact, they were going to get that money from the college anyways, and...
2) outside scholarships are usually awarded for only one year, while scholarships given my colleges themselves are typically awarded for 4 years; the college is not committed to replacing the missing amount in the following 3 years.
This because colleges usually don’t cut merit aid when you’ve won a scholarship.
If you plan to seek outside scholarships be sure to be sure to check how the schools on your list will handle them. Every college creates their own policies and they usually post that information on their websites.
And a better way to spend your time.
Whether you are eligible for need-based aid or not, working to get higher SAT or ACT test scores could earn you more money than applying for outside scholarships.
That’s because colleges award large amounts of merit aid and need-based aid to students with good GPAs and SAT or ACT scores. These awards are often much larger than the average amount of an outside scholarship.
While outside scholarships can be helpful, the single best source of scholarship and grant money are the colleges themselves.
Not by a little, but by a wide margin.
If your student is eligible for a moderate to substantial amount of need based aid, you should be looking for schools that meet 80, 90, or 100 percent of need.
If she is not eligible for much or any need-based aid, you should look for schools that are historically generous with merit aid.
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