Ethics of Outside Scholarships

ahoo2u
Sat, 07 Jul 2007 06:06:37 +0000

My D received a combo of merit, need based grant, loans, and outside scholarhips. Almost all schools reduce need based financial aid (loans, work, grants) either dollar for dollar or their own formula (ask!) if the student recieves outside money.

The schools should also publish (or at least tell you) their order in which their financial aid is reduced. For my D it first was applied to her Subsidized loans, then her need based grant. (her merit grant wouldn’t have been touched). All but one of the outside scholarships was forwarded directly to the school

She received only one outside scholarship for $2000, made out to her and not the school. We informed the school but it was already December & they did not alter her FA package. Yet, for THAT scholarship she received a 1099 ? (like a W-2) for tax purposes. Which meant if I could not prove that it went for tuition (not room & board) and that her student income was low enough (as people have written above) she would have had to pay taxes - AND HERE BEWARE PEOPLE - the next year she applied for financial aid, she had to submit all her tax forms AND W-2’s to the school FA office!

Thus, I think it will be very difficult for someone to circumvent the system with unreported outside scholarhips two years in a row.

But I too, originally felt the pain and frustration of first realizing there exists - A WALL - a maximum amount - beyond which applying for and winning outside scholarships no longer benefits the student and family (it could be seen as benefiting the school which takes back that financial aid). It is one of the realities associated with the Federal Student Loan system, and the concept of family responsibility and sacrifice for students higher education. (maybe also as the original poster inferred, profit is made by financial institutions when students are forced to ‘borrow’ - but thats a political issue)

Such a college financial aid policy also makes it impossible for the family to reduce the FASFA determined family contribution (EFC) though an outside scholarship. The only options I am aware of that can decrease this EFC expectation is a Parent’s Plus loan or if Parent’ Plus has been refused by lender, a Stafford Unsubsidized Loan