<p>My D has just been notified of a fairly substantial institutional merit scholarship. How does this work in relation to our even more substantial EFC? </p>
<p>Will the scholarship be added onto the need-based offer, thus helping us meet our EFC? Or does the college reduce the need-based offer by the amount of the scholarship, in which case our bottom line would remain unchanged? In other words, will it help us actually pay for college, or will it just look pretty?</p>
<p>Thanks!</p>
<p>Depends on your school but legally any scholarship is considered a resource when calculating need. At U of M, they attempt to first apply it to the GAP, then to loans and work-study, then grants BUT in some cases have to apply it against state-funded grants. I don’t know what school your D is looking at. Search its fin aid site. At U of M, the explanation is right on the site so I would expect the same to be true at others.
Congrats!
K</p>
<p>My D’s school uses merit aid to replace any loans and work study in her financial packet. Any “extra” merit money above and beyond loans and work study does not help - it is used to replace institutional need money. My limited research shows that this is a common policy at lots of colleges, but it probably isn’t universal. You should contact your school’s FA office to check.</p>
<p>The primary purpose of EFC is eligibility for Federal Aid. Outside scholarships should first be applied against Unmet Need (when Actual Family Contribution is higher than EFC).</p>
<p>What happens next depends. The school has to keep things “in balance” in order to maintain your qualification for Federal Aid. If you are not receiving Federal Aid, then they can adjust anything they want. My daughter was receiving Federal Aid, so I asked the school to adjust: Summer Earnings, then Work Study. I knew my daughter wouldn’t be able to work that much. They seemed happy to do that.</p>
<p>OP states that this is an institutional scholarship. In my experience, institutional scholarships generally reduce need based merit - because the need is less when the merit award is applied. COA-EFC=need. If COA-EFC-merit award means need is reduced, it stands to reason that need based awards may be reduced. However, if the school doesn’t meet 100% of need, it’s possible that the need based awards won’t be affected. If there would be a gap after the school awarded all need based aid, the merit scholarship may help to fill that gap. You will just have to wait & see the award letter.</p>
<p>One really good thing about merit awards - they aren’t reduced if your EFC rises in future years.</p>
<p>Thanks for the replies. I will contact the FAO.</p>
<p>But it sounds like it may help D by reducing her subsidized loans and/or eliminating the need for work-study. But it won’t help us get her in the door in the first place. EFC is the big barrier, and it seems there’s no way around it. Grandparents want to contribute, but my understanding is that money from non-household family would be considered a resource, and therefore reduce aid. So that would only end up helping the school, and we’re still stuck with our #@#&*#@! EFC.</p>
<p>If grandparents pay for college costs, it will go on next year’s FAFSA as untaxed income, which will impact EFC. It is not actually treated as a resource - that is, it’s not counted dollar for dollar.</p>
<p>But if the money from grandparents is a loan then it will not impact the EFC will it?</p>
<p>Technically, it wouldn’t be a gift if it were a loan, so I would say no - it wouldn’t be entered on the FAFSA.</p>
<p>Sorry, I should have specified that most of D’s schools also require the PROFILE, which asks: “Enter the amounts you expect to receive from your relatives and all other sources.” (SR-165A) My assumption is that this amount would come straight off of her aid offer from those schools, dollar-for-dollar. (The offer was for a gift, not a loan.)</p>
<p>Yes, it would have to be reported for FAFSA as untaxed income, which would raise our EFC. Not dollar-for-dollar, but maybe worse. We are in that income zone where the sliding EFC scale becomes very steep. I’m afraid that a grandparent gift of, say, $10K would bump our EFC from $16K to the full COA.</p>
<p>Ask grandparents to make it a loan rather than a gift. There will be plenty of time for gifts later down the road.</p>
<p>Ohhh swimcatsmom – So for now, Gparents call it a loan, then after graduation, they just happen to forgive the loan? Hmmmmmm…</p>
<p>I am just starting this process too, so take this with for what its worth :)</p>
<p>A few ideas that I have read about.</p>
<p>Grandparents (or others) can gift up tp around $11,000 per person per year without affecting estate tax issues. This would mean they (assuming 2 grandparents) could give “mom & dad” up to 44,000 per year. If this is done at teh right time of year, the parents dont have it as an asset at paperwork time, and it does not count as income to my understanding to the parents. My understanding is that parents can give a student as much “support” as they like through the year without the student having to claim it as income.</p>
<p>Also, if a student (or parents too) has means to get loans throughout school, the grandparents could be setting aside money in a “designated” (but NOT in students name) account that would then be used to pay off the loans when the student graduates.</p>
<p>I believe the “Loan Idea” would also work, and it could be forgiven, or for family members that arent fortunate enough to be able to just “gift” the money away, maybe a very or no interest loan could be done. If it is a true loan, PLEASE get things in writing so everyone is in the same page. I speal from family experience her :((.</p>
<p>Maybe some of the more seasoned “pros” could chiome in her too.</p>
<p>DJD</p>
<p>A lot of good ideas and answers. As to how the merit award will be applied, will depend on the financial aid your D has received. If she received government money, the law requires that the award be directly applied to the package. However, if it is college money, it can be used however the college has its rules on this subject. Most colleges will use the award to reduce loans and work study. </p>
<p>Your D can still take out Stafford unsubsidized loans to help towards the EFC and grandparents can lend the money. Parents can take out PLUS.</p>
<p>My mom thinks she has come up with the perfect way to help us out. She proposes buying our (husband’s and my) groceries for the next 4 years by the following ingenious method: Each month she would send us Safeway gift cards. So one of our regular expenses would be covered, leaving more available to meet our EFC. Nothing would hit our bank account. Would THAT have to be reported on FAFSA/PROFILE?</p>
<p>Loans aren’t income, and they don’t get reported on tax forms or on FAFSA.</p>
<p>The Safeway gift cards would not be a loan; Grandma proposes them as a gift or help or support – I’m not sure what they would be called under the rules. She would not expect to be paid back now or any time in the future. The point is to free up more of our income for EFC.</p>