- $3K of it was just applied to my bill and not offset anywhere
You lost a subsidized loan (need based aid) which was replaced with a scholarship. Obviously, the scholarship is better than a loan, but your outside merit replaced a need based award. (Not sure at all what you mean by “offset”) - $2K of it reduced grant money given to me
This is clear - $3K of my loans got shifted around - instead of it being a subsidized loan, it is now an unsubsidized loan. So, the total loan amount is the same.
Your loans were not shifted around. Every single student who fills out the FAFSA can take $5500 in unsubsidized loans. The $5500 is not need based aid and outside scholarships will have no effect on this award (unless the loan would give you funds in excess of your COA).
Your $8k outside scholarship replaced $5K in need-based aid. Granted, you got some free money instead of a loan (which is good for you), but if you take the full unsub, you haven’t reduced your college debt, and if fact will have increased it as your full loan amount will start accruing interest right away.