Q.I’ve heard I shouldn’t apply for outside scholarships because it will impact my financial aid. Is that true?

 

A. All outside scholarships need to be reported to the financial aid office at the colleges you are applying to. This can impact the financial aid award, but in most cases, the student still benefits. 

Here’s why: the financial aid package (including scholarships from outside sources) cannot exceed the student’s financial need according to their financial aid forms.

For the few colleges (like USC) that meet each student’s full need using a combination of grants, loans and work-study, additional awards from outside sources would cause the student to be “over-awarded.” This requires the college to adjust the award and make room for the additional funds. Exactly how the college will adjust the package depends on the institution, but in most cases, the financial aid office will reduce the least favorable funds like loans or work-study before other grants and scholarships. In this case, the student benefits from replacing money that needs to be repaid or earned through work with free money in the form of scholarships.  At USC, we may also work with the student to see if there are any educational expenses greater than or not covered in our Cost of Attendance (COA), such as housing or a one-time computer purchase. This allows us to increase the student’s COA, allowing room for the additional scholarship.

For institutions that are not able to meet the full financial need for all students, outside scholarships can help fill any unmet need before impacting other funds in the award. Policies vary from one college to the next, especially when it comes to how they treat their own institutional grants and scholarships. Check with each college directly regarding their policies.

You may also like:

2020

Chatting with the College Financial Lady

Chatting with the College Financial Lady

I sat down recently with Ann Garcia, the College Financial Lady. We had a great conversation about the importance of early college savings, building a balanced college saving portfolio and exploring all college savings options, including Private College 529 Plan. Ann...

read more
Waiting Room Reward

Waiting Room Reward

What does flipping through a magazine in a doctor’s office have to do with saving for college? For Brenna DeLaine, a physician herself, it resulted in saving thousands of dollars for her children’s higher education tuition costs.  It was about 16 years ago when Brenna...

read more
From the Beginning

From the Beginning

Andrew Spargo likes his newspapers—the printed version—not the online sites. So he was reading The Wall Street Journal in 2003 when he saw an ad for a new way to save for college, called Independent 529. (It’s now Private College 529 Plan.)  At the time, Andrew and...

read more