Outside Scholarships

I have a question about outside scholarships. The schools we are considering for our daughter use outside scholarships to reduce student loans and work-study before reducing need based grant aid. What if my daughter needs to take out more student loans than are included in the financial aid package?

For example, if the self-help portion of the aid package (loans and work study) is $4,000, and the remaining cost is $10,000 for the parent to pay. What happens if she takes on an additional $2,000 loan amount and receives a $6,000 scholarship (assuming she needs to use the scholarship in the first year). Will the school typically apply the $6,000 scholarship to the $4,000 self help portion of the financial aid package and the $2,000 additional loan, or will they apply it to the $4,000 portion of the aid package and reduce the institution’s need based grant aid by $2,000?

Thank you!

There isn’t a ‘typical’ way a school does it. It is up to the school whether to reduce its own aid before reducing loans and work study.

In your example, I’d say yes, the school will eliminate the $4000 (loan and work study) and then reduce the school grant before touching the $10k for the family contribution. You can ask if the outside loan (assume it is a one-time award) can be spread over 2 years by the donor.

She can take out the full $5500 in student loans even if not in the package, but they will be unsubsidized.

In our case they took it off the subsidized loan eligible amounts first. School scholarships applied, loans applied, efc portion stayed the same, work study stayed the same, the eligible loan amount of subsidized loans went down. In other words - you were still expected to earn’/pay as much as you are expected.