Lesson 3.5 · 3 minHow an outside award changes your packageHow an outside award changes your package
This lesson explains what happens to your financial aid when a scholarship arrives from outside your college, so you can plan for it instead of meeting it as a surprise. Federal rules and school policies shape how the award fits with the rest of your package. Knowing those rules lets you ask the right questions before the money arrives.
Reporting every award
Tell your school's financial aid office about every scholarship you receive from outside the college, including small ones and awards paid directly to you. Federal rules require schools to count this money as part of your aid. Most aid offices have a form or a portal section for it, and some sponsors send a notice on your behalf.
Report the award as soon as you accept it rather than waiting for the check. If the aid office learns about it later, it may need to change aid you have already been paid, which can leave a balance on your account partway through a term.
Why aid can change
Your total aid cannot be larger than your cost of attendance. Federal need-based aid also has to fit within your financial need, which starts from your cost of attendance minus your Student Aid Index. When an outside scholarship arrives, the school checks whether your package now goes past either limit.
If it does, some other part of the package has to come down. If your package sat well under both limits, the scholarship may simply be added with no other change. Your aid office can show you how these limits apply to your own package.
Which part of your aid is reduced first
Many schools reduce loans or work-study before they touch grants, which leaves you borrowing less. Others reduce their own institutional grants first. Each school sets its own order, and some states have passed laws that limit how far a college can cut other aid because of an outside award.
Ask your aid office for its written policy on outside scholarships before you accept an offer of admission. If you are comparing colleges, this policy can make a real difference to what you end up paying.
Payment, renewal and taxes
Check how the sponsor pays. Many send the money to your school once the school confirms your enrollment, so a sponsor may need your student ID number and the aid office's address. A check made out to you and the school usually has to be signed and taken to the bursar or cashier's office.
Read the renewal terms, which may ask for a grade average, a number of credits or a short report each year. Scholarship money spent on tuition, fees and required books is generally not taxed, while money used for housing and meals can be taxable income. The IRS website and its Publication 970 explain the rules.
Try this week
- Find your aid office's form for reporting outside scholarships
- Ask for the school's written policy on outside awards
- Note each sponsor's renewal terms in your tracker
- Keep a record of what each award paid for
Takeaway. Report every outside award to your aid office, and ask before you accept which part of your aid it will replace.