Treatment of Outside Scholarship

<p>Hi--I'm posting a finaid topic here in the hope of encountering parents with similar experience. My son, who will be a freshman at a LAC this fall, just received a hefty scholarship from a veterans organization, to be paid directly to his school. When he received another, much smaller outside scholarship, the college reduced his finaid accordingly. Has anyone had success in persuading a school not to reduce the finaid package when an outside scholarship is received? </p>

<p>The college says we have no unmet need, though our cost is considerably more than our EFC on the FAFSA. This outside scholarship would just about half our own out-of-pocket cost. </p>

<p>Any advice much appreciated.</p>

<p>As I understand it, your FA package is determined by the costs associated with college expenses. If these scholarships reduce your costs, then it makes sense that your FA would be reduced as well. </p>

<p>Imagine it this way: If CoA is $10,000 and originally your FA covered $8,000. But now, with this scholarship paying $5,000, your FA would not still be $8,000. I don't mean to annoy you with these numbers, because I know CoA is not $10K, but do you see my point? The govt comes in to help, only after all other avenues are explored.</p>

<p>Most schools will reduce FA dollar for dollar. The trick will be to get them to reduce loans and WS and leave the grants alone (which is the policy at many schools). I have heard of a couple that will only reduce FA by 1/2. But , hey. IMO it doesn't hurt to ask as long as it is done politely. ;)</p>

<p>I wonder if the donors of these awards have any idea that their hard work raising funds sometimes has no net benefit to the students they are helping.</p>

<p>My daughter's school will let students replace their campus jobs with outside aid. They also encouraged students to ask if the award could be spread over more than one year.</p>

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I wonder if the donors of these awards have any idea that their hard work raising funds sometimes has no net benefit to the students they are helping.

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<p>Why would you say that there is no net benefit to the student? Outside scholarships usually reduce self help aid (work study and loans) first. Last I checked, not having a loan, being a step closer to debt free especially ITE, not having to work and still getting the $ as a stipend is definitely a benefit.</p>

<p>I was referring to schools which don't share that policy or to larger awards which go above the work study threshold. Understandably, need-based schools aren't going to award for need that isn't there, but knowing how hard some of these small organizations work to raise scholarship money, it's kind of a shame.</p>

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The college says we have no unmet need, though our cost is considerably more than our EFC on the FAFSA. This outside scholarship would just about half our own out-of-pocket cost.

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<p>Ask for a clarification of your unmet need and an explanation about the differences between your FAFSA EFC and the expected contributions for the family and the student. If the school won't budge and does not allow for any type of reduction in work study or student contributions, contact the donor organization. Some scholarship organizations have specific rules to preclude a school to deny "any" benefit to the student, and might cancel the scholarship without a fair distribution. While this won't help lower the federal EFC, the support of the donor organization might be sufficient for your LAC to reassess its calculation of your unmet needs. </p>

<p>Unfortunately, not all schools are flexible.</p>

<p>You need to keep this in perspective.

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This outside scholarship would just about half our own out-of-pocket cost.

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Congratulations. This scholarship cut your out-of-pocket expenses in half, not everyone is so fortunate.</p>

<p>I sit on a scholarship board. We have come up against this issue many times.<br>
One solution that has worked for us and for our scholarship winners is to defer when the money is awarded. Students often have several one-time scholarships that are paid out during the freshman year. By deferring the award to the sophomore year, sometimes that makes a big difference in the amount of institutional aid.</p>

<p>Thank you for everyone's help. I will certainly ask the school (politely!) to reduce our loans, and re Xiggi's comment, I'll ask just what they mean by unmet need. Limabeans, thanks, we DO feel fortunate that our son merited this award. But unless the school adjusts our finaid package, the outside scholarship will NOT reduce our out-of-pocket expenses, which remain considerable. It won't change our CofA at all if the school's finaid is reduced dollar for dollar. Even if the outside scholarship only reduces the loan, we'll be grateful. Maybe reducing the loan over all four years would be the solution, though the terms say the scholarship is for the coming academic year. Thanks again!</p>

<p>Most colleges will NOT allow outside scholarships to reduce your family contribution. The exception would be schools that allow "stacking" of scholarships up to the cost of attendance. Not very many schools have this policy.</p>

<p>Remember, the FAFSA EFC only is used to determine the awarding of federally funded need based aid. If your school uses the INFORMATION on the FAFSA to determine the awarding of their institutional aid, they can use this information in any way they choose to. They are awarding THEIR money. It is very possible that the school has not deemed you eligible for additional need based aid that is institutional (their) money. They can do this.</p>

<p>Does your kiddo's college use any additional information to award financial aid, CSS Profile, school finaid form, required submission of tax returns? </p>

<p>Typically, outside scholarships reduce your financial need....you no longer NEED that amount of money. So the schools will reduce their need based awards. As noted by Curm...loans are usually reduced first, followed by work study. If you have additional scholarship monies, your school grants will also be reduced. Simply put...your need HAS been met but by someone outside of the college. </p>

<p>Schools expect you, the family, to pay the family contribution they have calculated. This is not usually reduced by scholarships unless they are university merit awards which are not tied to need.</p>

<p>
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The college says we have no unmet need, though our cost is considerably more than our EFC on the FAFSA.

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<p>It seems mean-spirited of a college not to let a student use an outside scholarship to reduce the amount of the loans the student needs to take out to reach the level of expenses beyond the family's EFC. Is that what the OP is saying was done, and what thumper1 says is common? I didn't know that. I think it would be useful for families to see a list of which top 100 LACs (or some group of schools, anyway) do this as a matter of policy. Or which don't do this. </p>

<p>It doesn't seem fair that a school would say a family has no unmet needs unless the student is receiving federal aid, scholarships, and grants (not loans) up to the level that would meet expenses beyond the family's EFC. Sigh. And many families feel their calculated EFC is not a good estimate of that they can contribute.</p>

<p>my son's school does allow stacking thank goodness. his outside scholarship will be refunded directly to him</p>

<p>My S has 2 outside scholarships. They were deducted from our Parent Plus loan amount.
School still cost the same, it was just proportioned differently where the payment came from. </p>

<p>If we have a credit after everything is paid, we will get the refund. If there was not a Plus loan involved, then he would get the refund. Doesn't really look like there will be one by the time we pay for books.</p>

<p>Some local scholarships are given directly to the student to use as they see fit, tuition, books, incidentals. Since they are not sent to the college they do not affect the financial aid package.</p>

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Some local scholarships are given directly to the student to use as they see fit, tuition, books, incidentals. Since they are not sent to the college they do not affect the financial aid package.

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<p>Unfortunately, that is not correct. That should only happen if the schools officials are lazy or asleep. </p>

<p>Students have to report ALL financial aid to the school, regardless if the scholarships were paid directly to the student. ALL scholarships do influence the financial aid package.</p>

<p>The only time a scholarship does not matter is when a student is FULLY covered by merit aid or is full pay. </p>

<p>Fwiw, since every penny of a scholarship is taxable income, this is not solely an administrative issue. Failure to report the scholarship to the school is one thing; failing to report it on the student tax return is another. The fact that a number of expenses can offset the taxable income does not change that the scholarship is taxable. </p>

<p>In so many words, you can only get away with it if you plan to LIE about it.</p>

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Fwiw, since every penny of a scholarship is taxable income, this is not solely an administrative issue

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<p>HMMM....scholarships that cover tuition/fees are not considered to be taxable income. Scholarships covering room/board/personal expenses ARE considered to be taxable income.</p>

<p>So if a student receives an outside scholarship and the scholarship covers only tuition...the student will not have to pay taxes on it.</p>

<p>Students receive a 1098T at tax time. It details the allowable costs AND the scholarships/grants given to the student. If the amount given to the student EXCEEDS the allowable costs, there is tax owed on it.</p>

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HMMM....scholarships that cover tuition/fees are not considered to be taxable income. Scholarships covering room/board/personal expenses ARE considered to be taxable income.

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<p>Thumper, bear with me for the explanation. </p>

<ol>
<li>All scholarships are taxable (although there is a debate about certain athletic scholarships) </li>
<li>You have the right to deduct allowable expenses and offset a part of the scholarship income. </li>
</ol>

<p>The theory of the IRS is to first recognize the taxability of the income, and then to allow offsetting expenses. I also wrote that "The fact that a number of expenses can offset the taxable income does not change that the scholarship is taxable." Being taxable does NOT mean that there will taxes due. </p>

<p>Check your old 1098, aren't the scholarships listed as reportable income and the amount of deductible expenses listed separately? </p>

<p>In the end, it should work out the same.</p>

<p>Just to answer a few questions: No, the college in question does not allow "stacking" of awards to meet the CofA. Yes, the grant we received in our finaid package is a "Name of College" grant, so I assume it's institutional. Yes, we have work-study and loans as part of the finaid package, but this outside scholarship significantly exceeds them. And yes, the college also requires the CSS. I can't even remember now whether they required our tax returns. I think they did take my first born, though. :) </p>

<p>I thought percentages might help. Our bill is about 40% of the total for tuition, fees, and room and board. Our EFC on the FAFSA was only 20% of the total (due mainly to two kids in college at once). The outside scholarship would reduce our bill to 30% of the college's total cost. I am sure we could use the scholarship, but I know that's not the same as whether we officially need it. </p>

<p>If we requested additional federal loans to pay our out-of-pocket cost, would that use the scholarship?</p>

<p>Thanks again...</p>

<p>
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Check your old 1098, aren't the scholarships listed as reportable income and the amount of deductible expenses listed separately?

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<p>Xiggi, I know what you mean...but you do NOT LIST the money from scholarships for tuition/fees as income ANYWHERE on your tax return. Wanted the poster to understand that.</p>

<p>To the OP...</p>

<p>Your college uses the Profile...therefore FORGET ABOUT that FAFSA EFC...it is totally irrelevant. Colleges that use the Profile compute a family contribution themselves, using whatever formula they choose, to determine your family contribution. It sounds like your college has determined that your contribution is higher than the FAFSA EFC...and this happens a lot. The Profile considers many more financial ticks than the FAFSA does. Plus, these colleges can use this information and any formula they please to come up with your contribution.</p>

<p>In any event...if you get a scholarship...it reduces your NEED...your kid needs that much less money. The COLLEGE decides where to make the reductions (loans, work study, grant), but they will NOT usually reduce the amount they expect YOUR FAMILY to contribute. They have calculated this amount and your need based aid is based on YOU contributing that amount. The aid is on top of your family contribution. </p>

<p>So...now your kiddo has $XX in a scholarship. The school reduces your aid by that amount...you HAVE that money, it's no longer a "need".</p>