Generally, outside scholarships reduce the amount of financial aid received because the amount of need goes down. I have seen it mentioned that some schools are nice about it and first reduce work study and loans and only then tap into the need based award received. I have seen a number of students upset that they worked hard to get a scholarship and the financial aid package received is similar with or without the outside scholarship. Well, my son received an $8,000 outside scholarship. For his first 3 years of college they have not been so harsh with applying the outside scholarship. In his case, he also has a $5K extra scholarship from the college that eliminated the work study. Then the outside scholarship reduced the amount of subsidized loan by about $3K and reduced the amount of aid by $1,500 to $2,000 (depending on the year). That’s it. In other words, from the part of the aid package I care about, at most 25% of his award went away. I know this depends on the school, but just thought I’d post this if anyone thinks it’s not worth it to apply for outside aid.
I’m confused. Didn’t you just confirm exactly what everyone says? Maybe I’m missing something.
I was initially concerned that I would lose $8K of the free money. I lost a total of around $5K of which a good chunk of it was a subsidized loan being converted to an unsubsidized loan. So, from a cash flow perspective, it only cost me $1,500/yr (it was $2,000 one year). From a total out of pocket perspective, it cost me that plus the little bit of extra interest on the now unsubsidized loan. So, in my eyes, I really kept about 75% of the outside scholarship.
Financial aid is dependent on your need and EFC, merit money changes your need and EFC. Why would colleges let anyone pocket that money or eliminate work-study. Money they saved would go towards another needy student.
Yeah I didn’t miss anything. Outside scholarships eliminate work study and loans first. That’s how it worked for you too. It didn’t lower your EFC. Many caution families correctly that outside scholarships won’t cover EFC. They rarely do.
My guess is this college does not meet full need. And that the financial aid award your kid received still had a gap between your EFC and the cost of attendance. It’s very possible you were allowed to maintain the awards because of this.
@itsgettingreal17 - Not really sure what you mean. The $8,000 got offset as follows:
- $3,000 not offset at all
- $3,000 - converted subsidized loan to unsubsisdized loan
- $1,500-$2,000 offset against free money
Maybe that was your understanding of how this worked, but not mine.
@thumper1 - Actually, it is a a meets full need school. Which is part of the reason for my post as I did not expect it to be offset as they did. There is a shopping sheet section of the financial aid and it states “what will you pay for college”, “loan options” and “Family Contribution”. Without the $8K applied, “what will you pay for college” minus “loan options” was very close to “Family Contribution”. After they readjusted the package for the outside scholarship, what will you pay for college" minus “loan options” was greater (about $6K) than the “Family Contribution”.
It appears to be common for colleges to apply outside scholarships first to student loan and work earnings expectations (and unmet need if any) before reducing grants.
For example:
https://financialaid.stanford.edu/aid/outside/ (clear example of various levels of outside scholarship for a student receiving a financial aid grant)
https://fas.ucsd.edu/frequently-asked-questions/index.html (“We would first reduce any unmet need in your financial aid package. If you’re still over the budget, then we’d reduce your other awards in the following order: University loan, work-study, parent PLUS loan, student loans, grants. Any scholarship money that replaces a loan reduces your future loan debt.”)
@Riversider - You really think if they award me more then someone else gets less? Not sure I believe that. Let’s assume for a moment there is one pot of money for a given year (not so sure that is even true with these rich schools). Well, they made all the awards. Then I come around, after the awards are awarded, and tell them I have this outside scholarship. They actually have gained money into the pot when I do that. As it turned out, they gained $2K of the free money they took away.
In addition, every person I have spoken to who has a child that earned an outside scholarship is upset when they find out it may not have made any difference. That is why I posted this, because it may be that many colleges do a compromise (or maybe my son’s school is different).
Maybe it’s your explanation that is lacking. Because now I am confused. The point is simple: is your family paying less after the scholarships is applied (excluding work study)? How much in loans do you have now as compared to before the scholarships were applied?
@privateID Same pot of money should be used to bring cost of attendance down for everyone, instead of letting people pocket in merit and use full aid. Colleges are getting too expensive for paying families because of high amount of financial aid. Most students can’t attend schools they like because their families will go bankrupt paying high cost.
Getting subsidized loans and work study in a financial aid package often isn’t a big deal award, IMO. A student still could have taken out that same amount of Direct Loan—jussi it’s really just the amount of interest accrued during years at college that is the award, not the face amount of the loan Also the time one works at a WS job could be spent at a regular job. It isn’t a full dollar benefit. So losing $
@itsgettingreal17 - You know, maybe it’s just me. But before I would say to another person “Maybe it’s your explanation that is lacking”, I would look hard at myself. I think I was clear breaking down what happened after the $8K outside award was applied. I will try again:
- $3K of it was just applied to my bill and not offset anywhere
- $2K of it reduced grant money given to me
- $3K of my loans got shifted around - instead of it being a subsidized loan, it is now an unsubsidized loan. So, the total loan amount is the same.
I am paying less now than before. A total of $8K was applied to my account. A total of $2K (the grant reduced) was removed from my account. The total amount of loans available to me is the same.
@Riversider - was never getting full aid and pocketing the difference. My EFC is around $30K. I am just paying a little less. Let’s be very clear about something. Colleges are bankrupting people because colleges are getting greedy. They are charging more because they can.
@cptofthehouse - Totally agree. Which why I am saying of the $8K outside award, I got to keep all but $2k plus a little interest lost.
So $3500 of subsidized loans can be replaced with the same face amount unsubsidized. $2000 in workstudy can replaced with a regular job. Yes, you lose some of the benefits that go with the federal awards but not necessarily the face amounts.
- $3K of it was just applied to my bill and not offset anywhere
You lost a subsidized loan (need based aid) which was replaced with a scholarship. Obviously, the scholarship is better than a loan, but your outside merit replaced a need based award. (Not sure at all what you mean by “offset”) - $2K of it reduced grant money given to me
This is clear - $3K of my loans got shifted around - instead of it being a subsidized loan, it is now an unsubsidized loan. So, the total loan amount is the same.
Your loans were not shifted around. Every single student who fills out the FAFSA can take $5500 in unsubsidized loans. The $5500 is not need based aid and outside scholarships will have no effect on this award (unless the loan would give you funds in excess of your COA).
Your $8k outside scholarship replaced $5K in need-based aid. Granted, you got some free money instead of a loan (which is good for you), but if you take the full unsub, you haven’t reduced your college debt, and if fact will have increased it as your full loan amount will start accruing interest right away.
I am going to round some numbers here for simplicity.
Original award:
Grant: $18K
Separate scholarship from school: $5K
Subsidized loan: $5.5K
Unsubsidized loan: $2K
Total: $30,500
After they applied the outside scholarship:
Grant: $16K
Separate scholarship from school: $5K
Outside scholarship: $8K
Subsidized loan: $2.5K
Unsubsidized loan: $5K
Total: $36,500
It’s your choice to take those loans. The school left those in your package and those are often reduced first.
I would much rather have an $8000 outside scholarship than $6000 in need based grant, work study, and a loan.
I’d also rather have an $8000 outside scholarship than an $8000 need based grant from the school. Even though it is the same net to me, I just feel better earning the scholarship (as long as it is just a few essays) and have the school keep its money for other things that will improve my education. For my kids, they got to say “Yeah, I earned this merit scholarship” rather than “Yeah, my mom is poor so they gave me some money.” Vanity plays a part.
There are also times it works out that you get both. Usually school based merit isn’t reduced by outside scholarships so you get an $8000 outside merit award and an $8000 school merit scholarship, you get to keep them both. There are some very lucky (and smart) kids going to Florida schools who get a full ride from the Benacquisto scholarship, then they get to keep, cash in pocket, any other money. If they receive need based aid from their schools, it most likely will be used to pay the bill first and then the Benacquisto will be refunded.
Yep. My D is on a full ride and gets to keep any extra scholarship money she earns. For the past three years she’s earned extra scholarship money. Winning!
As a practical matter, whether one is more preferable than the other can depend on the student. The scholarship may have a college GPA for renewal – if it is high, there is a high risk of losing it. But if the student’s family income is highly variable, or there are other things that can change adversely for household finance and financial aid purposes (e.g. parents about to get divorced), then the need-based grant is at risk.