How Outside Scholarships Affect Your Financial Aid Package

Getting an outside, or private, scholarship can reduce the amount of financial aid you get from your college. But that doesn't mean you have to pay a bigger share of your college costs. It means that the scholarship dollars replace financial-aid-package dollars.

Outside Scholarships and College Financial Aid

If the aid you receive (outside scholarships, financial aid from your college, or government grants and loans) ends up being $300 or more above your calculated need, the federal government requires your college to reduce the amount of need-based financial aid it awards you.

Your aid can shrink even if you're under that limit. Many colleges can't meet every student's full need. Some of them lower your aid when you receive an outside scholarship, even if your total aid is below your calculated need.

If you don't report your outside scholarship awards to your college's financial aid office, you might receive what's called an "overaward." You have to pay back that money.

Colleges Decide What to Cut

Each college sets its own policy on which aid to reduce when you win an outside scholarship. Some cut down the college's grant. Others reduce the amount of your loan. That works in your favor because you swap loan dollars, which you pay back, for scholarship dollars you don't pay back. Other colleges may apply your scholarship award toward the next semester.

If you win an outside scholarship, tell your college's financial aid officers about it. Then ask them which they would reduce first—your grants or your loans.