It appears to be common for colleges to apply outside scholarships first to student loan and work earnings expectations (and unmet need if any) before reducing grants.
For example:
https://financialaid.stanford.edu/aid/outside/ (clear example of various levels of outside scholarship for a student receiving a financial aid grant)
https://fas.ucsd.edu/frequently-asked-questions/index.html (“We would first reduce any unmet need in your financial aid package. If you’re still over the budget, then we’d reduce your other awards in the following order: University loan, work-study, parent PLUS loan, student loans, grants. Any scholarship money that replaces a loan reduces your future loan debt.”)