Outside scholarship stacking: could this be right?

Paying for College
1

Situation:

  1. Student receives a four year competitive merit award from state U that covers full tuition ($11k annually) plus a $8k annual stipend for room and board.
  2. Student receives outside merit scholarships that total $6k in year 1 and $3k in years 2 through 4.
  3. Direct billed cost of attendance (tuition, room and meal plan) ends up being $20k annually.
  4. Difference between direct billed cost of attendance and total merit awarded of $5k in year 1 and $2k in years 2 through 4 will be check to the student and used for books and other out of pocket expenses.
  5. School has cap on total institutional aid of $22k annually. Since only $19k annually in institutional aid (excludes outside scholarships), no impact.
  6. If student accepted any federal aid as part of package, then max institutional aid of $22k would be reduced by the outside scholarships. But this isn’t required because no federal aid.

This is my interpretation of what I learned today from school FA office. They obviously know what they are talking about, but since I was struggling to keep up, coming here to check my understanding.

Does this sound right? Possible? Varies I am sure from school to school I imagine.

2

It works as long as the outside scholarships are not required to be used specifically for tuition (or room and board) or if the school will allow its tuition money to be shifted if the outside scholarships can’t be shifted.

My daughter has a bunch of different scholarships. One can only be used for tuition. The school requires one outside scholarship to be used for billed items only (tuition, fees) not including insurance. The school will let its money to be used for any billed things (tuition, fees, room and board IF the student lives on campus) but will not refund any of it to the student. The student can get loans, Pell grants refunded.

She actually had some funds ‘go to waste’ from her athletic scholarship this year. There was nothing left to cover and they wouldn’t give her a refund of those funds.

3

As long as the school is okay with how this is going, and you are prepared for the tax implications, then it sounds like you have things worked out. My daughter received an outside scholarship that did not have to be used for tuition. Her university allowed it to be allocated for summer programs, etc. so it is possible.