share this post on:


Private Scholarships Can Reduce Aid

YOU MAY BE SURPRISED TO LEARN that scholarships that come from community groups, companies, and charities (what colleges call “outside scholarships”) could actually reduce your financial aid award.

If  your student wins a private scholarship, the college he or she attends can cut his or her financial aid package by the amount of the award.

For example,  if a student wins a $4,000 scholarship, the college could cut the aid package they have offered by $4,000.

Why is a student sometimes penalized for winning a private scholarship?

Federal regulations require that a college consider outside scholarships when calculating a financial aid package (because some of the aid given to  students comes from the federal government).

This particular regulation has to do with “over-award situations.”


An “over-award” is when financial aid from all sources is more than the school’s cost of attendance by more than $300.

If this happens, the school is required to reduce the amount of financial aid it has offered you so that it falls under the total cost of attending the school.

Most schools have a policy that allows them to reduce the loan or work study monies the student has been awarded (which are not free money) before they reduce any grant monies (free money) that have been awarded.

If your child is writing essays to win private scholarships, be sure to ask the colleges he/she is applying to how they will handle “outside scholarhship” awards.


Here’s an example of the University of Washington’s over-award policies:

“In compliance with long-standing federal and University guidelines, the University requires students receiving any form of financial aid through the Office of Student Financial Aid to report awards from foundations or trustees or other sources and have their financial aid packages adjusted appropriately.”

And a 2nd example from the University of Puget Sound (a liberal arts college in WA state):

As you can see in the example above, the worst-case scenario (at most colleges) is that the school “replaces” existing  need-based grants and scholarships awarded by the college with your outside award.

The result: the aid dollars you receive remain the same even though the scholarship dollars have been added.


1) Usually, students have to spend a lot of time finding and writing essays for outside scholarships. Since colleges give far more money than scholarship providers give, students are often better of using that extra time bringing up grades and/or SAT/ACT scores, upon which most merit aid is based.

2) Outside scholarships are usually awarded for just one year, while scholarships  given by colleges themselves are typically awarded for 4 years. 

While outside scholarships can be helpful,  the single best source of scholarship and grant money are the colleges themselves.

Not by a little, but by a wide margin.

Selecting schools that will give YOUR child generous need or merit awards is THE KEY for making college more affordable!  

If your student is eligible for a moderate to substantial amount of need based aid,  you should be looking for schools that meet 80, 90, or 100 percent of need.

If he or she is not eligible for much or any need-based aid, you should look for schools that are historically generous with merit aid.