3 Tips to Ensure Fair Treatment of Scholarships

Don't let colleges reduce your need-based grant aid or loans just because you won a scholarship.

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This might surprise you, but not all colleges treat your hard-won scholarship dollars the same way. Some colleges will reduce the amount of need-based grant aid, loans, and/or work-study if you get a scholarship.

Think this is unfair? Me too. Read on to learn how to ensure your scholarships actually help you pay for college.

First, it's important to understand all the factors that play a role in your financial aid package and how your scholarships may affect it. Financial aid packages may consist of some combination of need-based grants, college/institutional financial aid, and student self-help (through work-study and loans). Sometimes, the financial aid awarded—along with your expected family contribution (EFC) and federal and state financial aid—is not enough to cover the cost of attendance. This is called your "unmet need."

[Know your expected family contribution.]

In other words:

Cost of attendance minus expected family contribution = demonstrated need

Federal/state financial aid (need-based loans, grants and/or work-study) minus institutional financial aid (need-based grants) = unmet need

Any unmet need in your financial aid situation will have to be paid for by you and your family in addition to your EFC. Scholarships can help reduce unmet need or eliminate it all together depending on the total amount you receive—but only if your college of choice will apply the money that way.

Follow these three tips to ensure your scholarships receive fair treatment:

1. Research the college's outside scholarship policy: "Outside" scholarships, also called "external" or "private" scholarships, are those scholarships you receive from sources other than the college. Your outside scholarship may include community-based scholarships (like Dollars for Scholars, a program of Scholarship America*, or those from the Rotary, Elks, your high school foundation, or your church); scholarships from your parents' employers; or scholarships you earn as a result of a larger regional or national competition.

[Read 4 do's and 1 don't for finding scholarships.]

Some colleges share their policy toward outside scholarships right on their websites. Make sure you search the college websites for both "outside scholarship policy" and "external scholarship policy," as they may go by either name. For those colleges that don't list their policy, you will need to ask your financial aid officer. Look for schools that apply scholarships to the unmet need portion of your financial package, rather than those that will reduce the amount of institutional grant aid.

2. Talk with your financial aid officer: see if he or she will first apply your outside scholarship(s) to your unmet need, and if there are dollars remaining, use the scholarships to reduce your loans (reducing loans now increases the money in your pocket later). Some schools may also adjust the cost of attendance to include the cost of a computer, art supplies, or other expensive gear to help you keep the full amount of your outside scholarship. It's always worth it to ask.

[Read 10 factors that may determine your aid package.]

3. Ask your scholarship sponsor to defer all or part of your scholarship: request to defer to a future academic year, if the result of the scholarship will be an "over award" for the current year.

After reading this, you may be considering keeping the news about your scholarship to yourself, so you can use the funds as you see fit. Don't. Report all the scholarships you receive—federal law requires students to disclose all scholarships when federal financial aid plays a role in your aid package. If you don't report your outside scholarships, you may be required to repay the school or the federal government all or part of your need-based financial aid package.

*Scholarship America's Collegiate Partners pledge to first apply all scholarships awarded by Scholarship America programs to unmet need or loan reduction; some also match the scholarships. This includes all Dollars for Scholars awards, as well as those awarded through the organization's Scholarship Management Services division.

Janine Fugate joined Scholarship America in 2002. She is an alumna of the College of Saint Benedict, Saint Joseph, Minn., and is currently pursuing a master's of public affairs at the Hubert H. Humphrey Institute of Public Affairs at the University of Minnesota. Fugate is the recipient of numerous scholarships at both the undergraduate and graduate level.