So here’s an actual offer we have, and I’m wondering how outside scholarships will apply to it.
Cost of Attendance (direct costs)
Tuition & Fees: 13698
Room & Board: 14088
Indirect Cost of Attendance
Books & Supplies: 1600
Transportation: 1928
Personal Expenses: 2250
Loan Fees: 74
Financial Aid:
Grants & Scholarships: 13000
Loans:
Fed Direct Subsidized Loan: 1951
Fed Direct Unsubsidized: 3549
Total: 18500
Their estimated “out of pocket” cost for us is $9,286 (obviously based on direct costs only)
Two scenarios I’m looking for:
First is a $5k outside scholarship. What exactly happens - will that simply go towards the 9286 and now we’ll owe 4286? Or will they reduce loans and we’ll still have same out of pocket? something else?
Second (more likely scenario) - $20k outside scholarships. Since that more than covers the 9286 - what happens with the rest? Can it be used for the “indirect” costs? If so, there would still be money left over - then what happens with that - will they reduce loans? give cash back? return the overage to the scholarship issuer? etc
Thanks!
All outside scholarships must be reported to the college. Generally, this results in a reduction in aid.
This is school dependent. You need to contact YOUR kid’s college to see what they do when outside scholarships are received by a student. Some will stack the awards…others won’t.
What is your EFC? Usually schools will not allow scholarships to be used to pay the family contribution…it is expected that the family will pay that.
Keep in mind that any scholarships used for things that are NOT qualified educational expenses will be taxable income for the student.
EFC is 19k.
I’ll definitely call them this week, just looking for general information since it’s the weekend.
So are you saying its a possible worst-case that even if (hypothetically) she got a 50k scholarship, the school could simply get rid of all aid and still make us pay 9286 out of pocket?
Yeah, in most cases, they will remove all their aid at that point. It kind of makes it easier to not bother with outside scholarships one you realize this, right? 
“If all the aid you receive — outside scholarships, financial aid from your college, and government grants and loans — ends up being $300 or more above your calculated need, the federal government requires your college to reduce the amount of need-based financial aid it awards you.”
– Source: The College Board
To borrow your example: a $50K scholarship would mean you no longer have any need.
100% of your need has been met. Yes, you will still have to pay the $9286 out of pocket.You cannot use the outside scholarship to pay your EFC. It does not matter if the scholarship is 5k pr 20 k.
What will most likely happen is that your child can use the outside scholarship, to reduce his loans.
If the scholarship is 5k
Ask if some if it can be used toward his books and the one time purchase of a computer and use the balance to reduce his loans (they will probably reduce the sub loan first since it is based on need)
Anything over the cost of tuition and books, which are a QEE, would be taxable income to your child.
If the scholarship is 20k (especially if it is a one time scholarship) ask both the school and the scholarship granter if it can be used over the cost of 4 years. ask to use some for books and then to reduce any loans.
If your son got a 20k scholarship this year, this is what most likely would happen:
He could reduce his loans ($5500)
he could ask for the one time purchase of a computer,
anything left over would most likely reduce the the school’s aid $ for $. Yes, you will have to pay your EFC. anything over the cost of tuition, books and the one time purchase of a computer will be taxable income. So even when he applies it to his loans, some if it will be taxable (it will end up being a wash due to his personal exemption of 12k).
If they reduces loans, that still is a direct benefit to you. And you can always take the loans as unsubsidized.
If is hard to tell from what you wrote. If the grants/scholarship is merit, it is likely they’d let you use all outside scholarships against other costs if those scholarships are allowed to be used for other things (some are restricted to tuition only). If some of the school’s grants are need based, the school might consider your need reduced by the outside scholarships and reduce the grant.
My daughter has a mixture of school awards and outside awards. None of the grants from the school are need based (merit and athletic), so for the most part they aren’t reduced by the outside grants. Some of the outside awards can only be used for tuition, so the school applies those first. The school has a rule that all money from the school has to be used for school billed things (tuition, room, board, fees) and does not cover insurance or things paid to third parties. Only federal grants and loans can be given in cash to the student to use for incidentals, travel, books, etc. She gets that money to pay for rent (her choice not to live on campus, but she does have a meal plan that is covered).
Most scholarship awarding groups do NOT give scholarships in excess of the cost of attendance.
If your kiddo gets an outside scholarship…in most cases, the cost of attendance will be the max he or she will get.
If it’s a merit award, I suppose it could cover your EFC…but that’s only if it’s a merit award. That would be up to the awarding agency.
In your make believe example…if your kid got a $50,000 MERIT award…it most likely would be reduced to the cost of attendance…and if the school awarded you any need based money…most likely, that would be reduced…because your need would be far less.
The 13k is a merit scholarship. Outside scholarships wouldn’t be need based either.
Thanks for all the info everyone!
Merit scholarships that cover FULL cost of attendance will include any family contribution.
Merit scholarships that are partial, and are outside scholarships…have the potential to reduce need based aid. You need to contact the college(s) to find out THEIR policies on what happens when a student receives an outside scholarship. They will tell you…and the answers will vary from college to college…so take notes.
The answer is college-dependent.
A few colleges describe on their web sites what happens with outside scholarships (e.g. https://financialaid.stanford.edu/aid/outside/ ). But most do not go into enough detail, so you may need to ask directly.
It depends on the school, but it is not likely to reduce your EFC in any case. In my D’s case, the school reduced the loan and work study first and then the grant when outside scholarship is applied.
The OP said the $13000 is non-need based merit. In my experience, that’s not reduced unless the total of outside scholarships is over the COA (which in her example it is not). Of course the school would love any student to bring in more in outside scholarships which can free up the school’s money for other students.
Tuition $13,700
R&B $14,000
misc $ 6.000
Total COA $33,700
Less:
Merit $13,000
Outside
grant $20,000
$33,000
OOP $700
That’s if the $13000 is merit (from the school) and if the outside scholarship ($2k) can be used for ALL costs, not just QEE or room and board. If the scholarship or school restricts the use of the outside scholarship to billed costs, the student could take the direct loan of $5500, but it would probably be unsubsidized.
OP said the $13,000 is GRANT and scholarship. The grant part is likely need based.
It’s merit (automatic based on SAT scores), they just have the line item as “scholarship and grants”, she just didn’t get any grants to factor in.
They call awards so many different things at D’s school. I’m not sure anything is called a scholarship except the athletic money, which is technically a ‘Grant in Aid’. Go figure. Of course, it has nothing to do with need except that it excludes her from need based aid from the school, but it is a grant and always referred to as a scholarship.
What is important is what were the qualifications for the award. Academics only, need as a consideration, none of the above.
For my son, his scholarship did not seem to be done as I expected. He got two separate amounts that needed to be offset (an award from the school and an outside scholarship). The award from the school was offset against workstudy and a little from his grant (I had expected the amount above the workstudy to go against the loan). Then, after the school got the outside scholarship, they offset it against part of the loan and part of the grant. So, I feel it was a bit of compromise with them, which to be honest, seemed fair compared to other stories I heard where everything went against the grant.
First, look and see if that is their estimated cost for tuition, room and board for next year. A lot of school have not finalized their costs yet so it may differ a little. Let’s just go with this being their final cost.
Total direct cost is $27,786. Merit scholarship is $13,000
You are left with $14,786. Forget the loans for now.
If she receives $20,000 in outside merit scholarships, this will exceed the direct costs. I am assuming these are multiple scholarships with the added ‘s.’ For any that are one time scholarships, you would need to find out if they can be used for books, etc. You can also ask them if they could be retained for future use.
Regarding outside aid, it appears that at the Ivies they apply it to the student’s expected contribution and then to the schools. It cannot be used to reduce the parent’s contribution. Specifically, I found this on Harvard, Yale, Brown, Dartmouth and Princeton’s websites. It appears that under federal regulations (Brown’s site) they cannot reduce the federally calculated expected family contribution without creating an over-award (Dartmouth’s website).
Also, it is my understanding (but I could be wrong) that currently Freshman loans are capped at $5,500 and other students can borrow up to $7500 per year. There was a big push to prevent undergraduates from ending up with too much debt, so this appears to have been the solution.