Could That Scholarship Wind Up Costing You Money?

You'd have to be crazy to turn down an offer of free money – right?

Actually, that may not be the case if the financial aid package from your school is supposed to cover all of your assessed financial needs. In that case, accepting an outside scholarship could lead to a reduction in your financial aid package.

For example, say you've been accepted to Acme College and have accepted a financial aid package from it that will meet all of your assessed aid needs through a combination of grants, loans, and paid employment. A few weeks after you accept the financial aid offer, you're notified that you've won a $1,000 scholarship from a local service organization.

If Acme College's aid package had been covering only part of your school costs, you would have no problem. You could accept the scholarship without any penalty.

But because Acme College is covering your full financial need, it would be obliged to reduce your financial aid package by $1,000 if you accept the scholarship. It's not because the school is being mean. It's because it's using U.S. Government funds for your financial aid package and has to obey laws about how those funds are used. If you get a $1,000 scholarship from another source, that means that your financial aid need has been reduced by that amount. The school would be obliged to reduce your aid package accordingly because the amount it is pledging is based on need, not merit.

Does that mean that anyone receiving a full aid package should automatically reject outside scholarship offers?

Not necessarily. Check with your school's financial aid office to see how they would go about reducing your aid package.

If the school would adjust your aid package by reducing the amount of a grant, you'd come out even, in financial terms. In that case, you might want to decline the scholarship so that the organization could use the money to help someone else – or you might want to accept it, if there's some prestige attached to the award. A scholarship can be a nice item to add to your resume.

If the reduction would be made by rescinding an offer of paid employment, you should think about what the job would mean to you in non-monetary terms. If you think you would gain some work experience or skills through campus employment, you might want to decline the scholarship and keep the job. But if the job would only mean giving you less time to study, you might want to accept the scholarship and let the work opportunity go.

Finally, if the school would adjust your aid package downward by reducing your loans, it's probably best to accept the scholarship. Reducing the amount of money you have to borrow now by $1,000 would save you much more than that over the long run.

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