College Coach

How will receipt of an outside scholarship affect my financial aid offer?

Congratulations, you won the “Born on a Day Ending in Y” scholarship!  All your hard work of searching, completing applications and writing essays has paid off in an outside scholarship award.

What is an outside scholarship?

Outside Scholarships—or awards from corporations, charitable and civic organizations, whether local or national—can be a great way to help pay for college.  However they do need to be factored in to your overall financial aid award.

Notify your college about the outside scholarship

As soon as you know you have won an award, and are not just a candidate, you should notify the college you are planning on attending.  A copy of the award will need to be sent to the financial aid office at that college.  You will also have to tell the sponsor of the award what college you are going to attend so they can write a check co-payable to you and that school.  For most students, this award will just supplement what you have already received for financial aid.  For some students, however, this additional money may result in a change to their existing financial aid offer.

Outside scholarships effect on aid packages

Colleges that have offered you federal or state need-based financial aid (grants, loans and/or work-study) must follow regulations that set an upper limit as to how much financial aid, including outside scholarships, you can receive.  If the college has provided you with the maximum amount of financial aid that these regulations allow, they will need to remove some funds already awarded in order to “fit in” any new scholarship money received. Typically, a school will change a subsidized loan into an unsubsidized loan, or reduce your work-study award, in order to fit in the additional money from the outside scholarship.  Occasionally, a school will reduce a grant or scholarship that they have offered to allow for this new outside scholarship.   You can always ask the college what their policy is on outside scholarships to determine the potential effect on your aid package.

Note that once a student is no longer receiving any federal or state financial aid, the college is not required to follow the rules that set an upper limit on the amount of financial aid the student can receive.  If a college insists that they must reduce their own grants because you have received an outside scholarship, they are implementing their own policy, not a federal regulation or rule. You can ask them to make an exception as part of a financial aid negotiation strategy, if you choose.

Outside scholarships are better than loans

Remember, a scholarship is always better than a loan or work-study, so it is highly recommended that students search for and apply for any scholarships they think they are a candidate for.  Most students do not receive scholarships so large that they can’t be fit into a financial aid package by replacing lower quality aid, like loans or work, with the higher quality scholarship.



Written by Laurie Peltier
Laurie Peltier is a college finance expert at College Coach. Before joining College Coach, she was a Senior Financial Aid Officer at Becker College and Anna Maria College.