When high school seniors start getting notified of college scholarship earnings, we receive calls and emails from families asking how scholarships could affect a student’s financial aid package. It’s a great question, and we’ve included a detailed response below. The short answer is that, in most cases, a scholarship won’t affect the financial aid offered by a college. Instead, it will help to cover costs not already paid for by financial aid, and is therefore of great benefit to the student. Read on for a full explanation.

Reporting scholarships

Though colleges and universities can offer their own scholarships, which appear within the financial aid package, there are numerous scholarships offered by other entities, such as companies, foundations, cities/towns, non-profits, and associations. Students usually receive a letter or email to alert them of a scholarship win, and earnings are then sent directly to the college or university. Once your son or daughter receives a scholarship, let your child’s chosen school know of the prize. Note that the CSS Profile^® asks for the amount of scholarships that the student has earned for the upcoming school year. Only report an amount that a student has definitely won, not any scholarships for which a student has only applied.

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 Student Aid Index (SAI). 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 on 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.

Since policies may differ from college to college, this is a great topic to discuss with the financial aid office when visiting a campus. You may also be able to find information on the financial aid section of a school’s website. And remember, in most cases, private scholarships will help to fill in a student’s eligibility for financial aid and take care of outstanding college costs.