Will scholarships affect fafsa?
Will scholarships affect fafsa? Getting an outside, or private, scholarship can actually reduce the amount of financial aid you get from your college. But that doesn’t mean you’ll have to pay a bigger share of your college costs. It just means that the scholarship dollars replace financial-aid-package dollars.
A scholarship will affect your other student aid because all your student aid added together can’t be more than your cost of attendance at your college or career school. So, you’ll need to let your school know if you’ve been awarded a scholarship so that the financial aid office can subtract that amount from your cost of attendance (and from certain other aid, such as loans, that you might have been offered). Then, any amount left can be covered by other financial aid for which you’re eligible. Ask your financial aid office if you have questions.
What’s an Outside Scholarship?
An outside scholarship is a scholarship awarded by an organization other than the government or your college — scholarships sponsored by your parent’s employer or a community organization, for example.
Outside Scholarships and College Financial Aid
If all the aid you receive — outside scholarships, financial aid from your college, and government grants and loans — ends up being $300 or more above your calculated need, the federal government requires your college to reduce the amount of need-based financial aid it awards you.
If you don’t report your outside scholarship awards to your college’s financial aid office, you might receive what’s called an “over-award” — and you’ll have to pay back that money.
Colleges Decide What to Cut
It’s up to your college to decide what type of financial aid to reduce or cut if you receive an outside scholarship. Some cut down the college’s grants. Others may reduce the amount of your loan. That’s to your benefit — it means replacing loan dollars, which you must pay back, with scholarship dollars that you don’t pay back. Other colleges may apply your scholarship award toward the next semester.
If you win an outside scholarship, tell your college’s financial aid officers about it and ask them about your college’s policy on outside scholarships.
Fitting scholarships into the financial aid package
Most financial aid offices will do their best to allow the student to keep all financial aid and scholarships that have been offered so that a scholarship doesn’t negatively affect the financial aid package. Customarily, this is how it’s done:
- A school first calculates a student’s eligibility for need-based financial aid, which is the total Cost of Attendance of the school minus the student’s Expected Family Contribution (EFC). If a student receives any need-based financial aid from the federal government, state government, or the school itself, the total of that aid, plus any private scholarships, must fit within the student’s eligibility for need-based financial aid. For example, if a student has $25,000 in eligibility for need-based financial aid and receives $15,000 in need-based financial aid from the federal government and the college, the student has room to receive $10,000 in private scholarships. You can contact the financial aid office to find out your need-based financial aid eligibility and to learn which parts of your financial aid package are based on need.
- If a student receives a financial aid package that includes need-based aid and that equals the student’s financial aid eligibility (which is rare), and therefore leaves no room for private scholarships, the financial aid office will need to reduce certain elements of the financial aid package. Most financial aid offices will reduce a student’s subsidized loans or federal work-study first to make room for a private scholarship. If any part of the financial aid package is reduced, the student will be notified, and the family can follow up with any questions.
- If a college removes a student’s subsidized loans and federal work-study to make room for a private scholarship and still needs more room within the financial aid eligibility, the college may need to reduce some college-specific grants or scholarships in order to make room for the private scholarship. The college will contact the student if this needs to occur. This is not a common occurrence, and it’s usually the last resort. This is the only instance when a scholarship could negatively affect any grants and scholarships already offered, and again, it doesn’t happen very often. If you find yourself in this situation, speak with the financial aid office if you have any questions about the adjustments made to the student’s financial aid.
- If the financial aid package only includes merit-based aid (aid offered regardless of a student’s financial situation) and not any need-based aid, the student is eligible to receive private scholarships and merit-based aid that add up to the total Cost of Attendance of the school. In this situation, the total eligibility for need-based aid is irrelevant.
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