Ethics of Outside Scholarships

Paying for College
21

<p>When someone wants you to do something that is unethical or would result in unethical consequences- for instance to cover up a crime or to tell them where the Frank family is hiding, it would be unethical to comply IMO.
Of course that is what torture is about- to get people to comply against their will.</p>

<p>The discussion we would have in our house is what is the behavior we would want to model for our kids ... and we will land on following the system and living with the consequences. We may also try to change the system but we won't end run it ... and parenthood has made this much easier to do for us.</p>

<p>I agree that this is important.
I haven't lived in any other countries with more restrictive behavior, and its probable that if I did, I would find myself afoul of the "law", but I don't know if I would be able to convince myself I was behaving unethically.</p>

<p>In our country, we can enjoy civil disobedience & I think this is an important right to have- not that it has anything to do with lying for financial gain.</p>

<p>Those practicing civil disobedience, should be willing to accept the consequences of their actions- and they often do, in order to stick with their principles.</p>

<p>Ive noticed that kids really pay attention to what you say and do & what you don't say or do. If someone is doing something I don't approve of, I would probably be more likely to say something if my kids( or any kids) were there, than if I was there by myself.
For instance if someone was making a racist/sexist joke.
When you are silent, kids assume you agree. Even if it wasn't something I really wanted to get into, I have tried to show my kids- that you don't have to listen to that, even if they are your relatives.</p>

<p>I would also lie- for instance- not concerning a job application, because if you do you can be fired for cause- and not only that , if you are harmed on the job you can't sue, but if for instance I had friends who were undocumented political refugees who would be harmed if they had to go back to their country, while at the same time I would put effort toward changing policy, I would also lie about their whereabouts, if I knew that it could buy them some time in hopes that their legal status could change.</p>

<p>But this case - is relatively simple.
Its not like turning down the scholarships is going to eliminate her chance to attend college, or telling the university about them, is going to harm her in some way.
There are other colleges- although it sounds like, the family decided it could afford this one with or without the scholarship.It also sounds like that the school will reduce loans instead. but the EFC will be the same.</p>

<p>Accepting the scholarships, and not telling the school, getting so to speak "free money", will benefit them in the short term, by making it a little easier financially.</p>

<p>But if we are really interested in making life "easier" in the short term, we wouldn't be so focused on colleges.
Long term goals require hard work and planning-but can have big payoffs.
Teaching your kids ( and yourself) that it is better to be the ant instead of the grasshopper will get them farther in life- than teaching them to focus on the short term benefit.</p>

<p>Im sorry I got preachy- I know it isn't fun to listen to- I live with a grasshopper myself ;)</p>

22

<p>So, 3togo, you're saying if our extended family were rich enough that various members of the family could give our daughter multiple individual gifts of $10,000 each, she wouldn't need to report that money to financial aid because it's not "income" according to the tax code? Yet it's unethical not to report $1,000 outside scholarship? If this is true, the law is clearly written to benefit the rich and is itself unethical. By the way, my daughter has not been given a loan or work study which she could use the scholarship to replace. Bottom line, I know we have to be honest, but oftentimes laws -- especially tax codes --are written to benefit the rich at the expense of the poor and middle class While this may be legal, I think it is unethical!</p>

23

<p>The money, once it is given by a relative to your child, becomes the child's asset. Since colleges generally deduct assets held in the child's name dollar for dollar from the financial aid package the effect is identical to the ouside scholarship and so is the reporting obligation.</p>

24

<p>
[quote]
Since colleges generally deduct assets held in the child's name dollar for dollar from the financial aid package the effect is identical to the ouside scholarship and so is the reporting obligation.

[/quote]
</p>

<p>Under FAFSA 20% of the childs assets are assessed to the EFC.</p>

25

<p>"I don't usually give money- unless I think the recipient really needs it & prefers it.
In an area where it is common to give hundreds or thousands as a gift, what is the rationale?
It seems kind of "common" and doesn't really require much thought or knowledge of the recipient."</p>

<p>Yea, if only you knew where I lived, you'd understand.
Personally, I sent out my announcements saying that a donation to the Juvenile Diabetes Research Foundation would be better than any gift. (I have the disease). However, in a place where BMW's and Mercedes are given to children on their 15th birthday, I guess it's easy to stereotype. </p>

<p>As much as that statistic about the Dr. Seuss books amazes me, I would be weirded out if my parents gave me that as a grad gift.</p>

26

<p>
[quote]
So, 3togo, you're saying if our extended family were rich enough that various members of the family could give our daughter multiple individual gifts of $10,000 each, she wouldn't need to report that money to financial aid because it's not "income" according to the tax code?

[/quote]
my first entry must have been written poorly ... </p>

<p>If a gift is large (>10,000) it must be reported on the recipients income taxes ... so it would be seen by the financial aid world.</p>

<p>If a gift is smaller than the limit it does not need to be reported on income taxes but the recipients assets would likely change and that would also be seen by the financial aid world.</p>

<p>For it not to be seen it would need to be spent or hidden.</p>

<p>Sorry about the confusion about my earlier post</p>

27

<p>Swimcats mom,</p>

<p>Yes, I over simlplified. But using 20% of the child's assets each year is virtually identical to using all of a four year scholarship doled out in annual increments each year.</p>

28

<p>I just read a post, on another thread, by Swimcatsmom, that points out that non-scholarship student income is protected from being used to offset aid to some degree. I don't understand the philosophy behind this distinction, does anyone know why the two are treated differrently.</p>

29

<p>If you read the Dr. Zeuss book that people give you would understsand that it's a very reasonable graduation gift and good advice. "Oh the Places You'll Go"</p>

30

<p>
[quote]
I just read a post, on another thread, by Swimcatsmom, that points out that non-scholarship student income is protected from being used to offset aid to some degree. I don't understand the philosophy behind this distinction, does anyone know why the two are treated differrently.

[/quote]

I'm not sure I understand the question . A certain amount of student income (@$3000)) is protected in the FAFSA formula when it calculates the EFC. 50% of income over that goes to the student portion of the EFC. Scholarship money is all protected in the FAFSA formula so would not be used toward the EFC at all. (some scholarship money might be taxable so would be included in the AGI but then deducted on one of the worksheets). The EFC is the basis on which financial aid is calculated (for FAFSA schools).</p>

<p>So scholarship money is not used in calculating the EFC. Financial need is the difference between the EFC and the COA. Scholarships (whether from the college or from outside sources) are awarded specifically to pay for college so will reduce that 'need' dollar for dollar.</p>

31

<p>Sorry if I am confusing the issue. As I understand the OP his/her child received need based financial aid from a college and some outside scholarship money. He/she is upset because they believe that the school will reduce its need based financial aid by the amount of the outside scholarships, if he/she reports them to the college. My understanding is that it is true that most colleges will do that. Reducing non grant monies first but ultimately even reducing need based grants by the amount of outside scholarship money. I also thought that they would do so for any additional income (and on an annualized basis, assets) that goes directly to the student. Your posts have led me to doubt this second belief. Perhaps the problem is that I am thinking about institutionlly funded need based aid. Your last post seems to imply that outside scholarships will not affect the need based award. That seems to imply that the OP has nothing to worry about. I am confused.</p>

32

<p>I think the OP said that her daughter didn't have any loans- so the outside scholarships- will- reduce the money that the university is contributing, instead of reducing loans in her aid package.</p>

<p>which sounds pretty sweet-
my daughter had loans- subsidized Stafford and Perkins in her aid package, and workstudy as well.
While they "counted" as meeting need- it was actually self help as it was money that ultimately comes from the student.</p>

33

<p>I reread your post and think I understand. Are you saying the outside scholarships reduce need based aid dollar for dollar and that other income in the name of the student reduces need based aid 50 cents on the dollar after the first $3,000 of such income? And that additional other assets in the name of the child reduce the need based grant by 20 % of the assets each year?</p>

34

<p>
[quote]
Are you saying the outside scholarships reduce need based aid dollar for dollar and that other income in the name of the student reduces need based aid 50 cents on the dollar after the first $3,000 of such income?

[/quote]
</p>

<p>Yes. The 50% of the income is reflected directly in the EFC. The scholarship money is not in the EFC but has to be reported to the college and will directly reduce the financial aid.</p>

<p>
[quote]
And that additional other assets in the name of the child reduce the need based grant by 20 % of the assets each year?

[/quote]
</p>

<p>Yes - under FAFSA student assets (of the financial sort - not cars etc) are assessed at 20% towards the EFC. Not sure what you mean by 'additional other assets'. Assets and income are reported and treated seperately on FAFSA. But this is where students need to be careful as there an element of 'double dipping' here - if they have saved some of the income it becomes an asset. For instance - if they earn $2000 over the protected allowance then $1000 goes to the EFC from income reported on FAFSA - if the $2000 is in the bank on the date they file FAFSA then 20% of that goes to the EFC from assets reported on FAFSA. So pay anything that needs paying before filing FAFSA.</p>

35

<p>
[quote]
my daughter had loans- subsidized Stafford and Perkins in her aid package, and workstudy as well.While they "counted" as meeting need- it was actually self help as it was money that ultimately comes from the student.

[/quote]
</p>

<p>Ditto emeraldkitty. We were delighted my daughter just won one smallish and one quite large additional scholarship as it reduces her loans enormously :)</p>

36

<p>That being said (post #34) I have some sympathy for the OP. I still think they have a legal and ethical obligation to report the outside scholarships, but I don't understand the logic that treats investment income in the name of the child more favorably than the proceeds of an outside scholarship.</p>

37

<p>fiskelove, have you contacted the FA Office to ask about the effect of outside scholarships? That's what I did. My D received a few nice scholarships and we had the same concern that it would reduce her FA (which does include loans and work study). We were told that any outside scholarships over "X" amount of dollars would reduce her FA, but not dollar for dollar. It can't hurt to ask.</p>

38

<p>
[quote]
I still think they have a legal and ethical obligation to report the outside scholarships, but I don't understand the logic that treats investment income in the name of the child more favorably than the proceeds of an outside scholarship.

[/quote]
</p>

<p>I don't think FAFSA differentiats between earned and unearned income. However I would think for the majority of students the income is probably earned income (though maybe I am basing this on most of the students I know none of whom have large sums of unearned income). Any student who is getting more than $3000 in unearned income will have assets that probably exclude him from getting any financial aid anyway. Penalising students at 100% of what they earn would discourage them from working at all so I think the logic is directed toward that majority rather than the minority with unearned income. Personally I think the $3000 income protection allowance is a little low for those students who have to work to pay part of their way through college. </p>

<p>The logic of scholarships being treated differently is still (in my opinion) that scholarship money is awarded specifically to pay for college. Financial aid is to help pay for the portion of college the family cannot afford to pay for (the problem is that sometimes a families idea of what they can afford and the schools idea of what they can afford differ).</p>

39

<p>I agree that any student with $3,000 plus of investment income would be unlikely to qualify for need based aid but my point was more about the unequal treatment of outside scholarships and other income of any type. I only illustrated it with investment income to illustrate how unreasonable such a distinction is. I think the outside scholarship is every bit as earned as money from a job so I can't see any logical basis for colleges making this distinction. To be perfectly clear it seems to me they should treat income in the child's name and outside scholarships identically. Other than "thatis the way they do it", is anyone aware of a justification for this approach.</p>

40

<p>My D received a combo of merit, need based grant, loans, and outside scholarhips. Almost all schools reduce need based financial aid (loans, work, grants) either dollar for dollar or their own formula (ask!) if the student recieves outside money.</p>

<p>The schools should also publish (or at least tell you) their order in which their financial aid is reduced. For my D it first was applied to her Subsidized loans, then her need based grant. (her merit grant wouldn't have been touched). All but one of the outside scholarships was forwarded directly to the school </p>

<p>She received only one outside scholarship for $2000, made out to her and not the school. We informed the school but it was already December & they did not alter her FA package. Yet, for THAT scholarship she received a 1099 ? (like a W-2) for tax purposes. Which meant if I could not prove that it went for tuition (not room & board) and that her student income was low enough (as people have written above) she would have had to pay taxes - AND HERE BEWARE PEOPLE - the next year she applied for financial aid, she had to submit all her tax forms AND W-2's to the school FA office! </p>

<p>Thus, I think it will be very difficult for someone to circumvent the system with unreported outside scholarhips two years in a row. </p>

<p>But I too, originally felt the pain and frustration of first realizing there exists - A WALL - a maximum amount - beyond which applying for and winning outside scholarships no longer benefits the student and family (it could be seen as benefiting the school which takes back that financial aid). It is one of the realities associated with the Federal Student Loan system, and the concept of family responsibility and sacrifice for students higher education. (maybe also as the original poster inferred, profit is made by financial institutions when students are forced to 'borrow' - but thats a political issue) </p>

<p>Such a college financial aid policy also makes it impossible for the family to reduce the FASFA determined family contribution (EFC) though an outside scholarship. The only options I am aware of that can decrease this EFC expectation is a Parent's Plus loan or if Parent' Plus has been refused by lender, a Stafford Unsubsidized Loan</p>