This is another example of the way the whole college game is played. Is it right or wrong? It doesn’t matter. College X is generously choosing to offer $$ scholarship to a few, select students. It is their money, their right to impose their rules.
The next step belongs to your student. Accept the known scholarship, or decline and wait for other college offers. Now is the time to weigh pros and cons. If student will not be able to attend college without a huge scholarship, you may need to go ahead and choose what’s been offered. If finances are such that you could juggle tuition with a lesser award to a school higher up on student’s list, then you graciously decline and move on.
We don’t always like the choices we are forced to make, but the great news is there are lots of good colleges out there where your student can succeed.
Best of luck to you as your student decides.