It seems that for many students in my town, the small local, one-time scholarships go to the college who then reduces their grants, and do not apply it to the EFC. It has made me less willing to donate to some of the PTA and other local groups that give out scholarships. Most of the kids here are not Pell grant or first gen, but those with incomes that still allow some financial need. I can understand your concern OP. Not sure what the answer is, as the decision as to what the scholarship goes towards is up to the college.