Everyone knows the cost of college is high.  Did you know a college can take away your scholarship?  It’s true. There are two types of scholarships – Inside and Outside.  An inside scholarship is a scholarship offered by a college and may only be used at that college.  An outside scholarship comes from a non-college and can be used at any college.  Examples of outside scholarship sponsors are businesses, associations, and organizations. 

Inside scholarships may be merit-based or need-based.  Students may stack merit scholarships if there is no need-based financial aid award.  For instance, let’s say Colorado College offers Hannah a $20,000 per year merit scholarship.  Hannah’s parents make too much money to qualify for need-based aid, so the $20,000 is all Hannah gets from Colorado College.  But wait!  Hannah wants to help out with her tuition and other costs so she starts applying for outside scholarships.  She wins $10,000 from the  Stuck at Prom Duct Tape Scholarship.  She may stack her scholarships, i.e. add them together.  Now her first year at CC costs only $44,760 instead of $74,760.  Hannah can keep winning outside scholarships to keep reducing the cost of college, although a student can’t be net profitable when earning scholarships!  They can only win up to the cost of college, not more.

But let’s say Hannah’s parents only made $100,000 per year and Colorado College also gave Hannah $10,000 in need-based aid, for a total of $30,000.  When Hannah wins the Stuck at Prom scholarship, the college will begin reducing her need-based award by the amount of the outside scholarship.  Most universities follow this policy (although a few allow stacking scholarships for need-based aid recipients).  The good news is that most colleges reduce student loans and work-study first.  For this freshman, that is $5,500 on loans and $2,500 in work-study, or $8,000.  What happens to the other $2,000?  It will reduce her gift aid by as much as 50%, or $1,000.  It no longer makes sense for Hannah to keep winning outside scholarships because the college will keep reducing her financial aid award.