<p>The real problem is that most scholarships given “by the school” are not in fact given by the school, but by a community organization, or an organization affiliated with the school. The Principal is not in a position to declare something a gift rather than an award or a scholarship.</p>
<p>Non-profit schools do not pay taxes, nor do most of the organizations that provide scholarships. But there are very strict rules about how their money can be used, and I doubt any of those organizations would be willing to risk their non-profit status so you can avoid claiming a scholarship. If you don’t want your aid reduced, decline the scholarship. Let someone else accept the scholarship whose school isn’t meeting need. Or apply to a college that won’t apply your outside scholarships toward meeting your need.</p>
<p>^^^
That may be true of many schools, but we don’t know what the situation is with this school. This school may not be a public school. It may be a private that routinely budgets $10k per year (or whatever) to be awarded to 5 students each year at $2k each.</p>
<p>Doubt very much any public school gives scholarships or gifts, there are pretty strict rules about gifts of public funds. I am aware of some smaller scholarships that are given directly to students, but most organizations send funds directly to the college to avoid improprieties.
Interesting cultural socioeconomic morality question. There is a very significant portion of the US economy that operates around tax avoidance, at one end with lobbyists and tax lawyers, at the other end with cash payments, under reported tips and barter. I have an opinion who is winning. I agree that the scholarship should be reported, but it’s hard for me to be irate if the student manages to avoid losing a sub loan or work study.
Are there bigger problems of fraud in Financial aid? What are financial aid people looking for during verification?</p>