What to Do When a Student Has a "Full
Ride": Scholarship Awards Exceed Need
The 1986 Tax Laws established the following guidelines for
scholarships:
- A student may not 'make a profit' from scholarships. If scholarships received by one student exceed the total cost and actual 'need' as established by the federal government, additional dollars cannot be retained for use beyond legitimate school expenses.
- Acceptable items for scholarship awards include: tuition, room and board, mandatory fees, books, supplies (such as tools for auto mechanic programs). A computer can be a legitimate expense.
- Unacceptable items include: travel expenses to and from school, general living expenses such as health insurance or car payments.
- Bottom Line: Student scholarship awards cannot exceed costs of school as defined by the IRS.
Several scenarios commonly arise for any scholarship program. The following examples may assist you in determining how to proceed if you / your student has been fortunate enough to receive many scholarships.
If the award covers ALL student costs, other awards will have to be returned for use by other students. Be sure to call and check with the financial aid department to verify that your understanding is indeed correct. If all IRS acceptable costs are covered, and the check for a private scholarship has been sent to the school, it is common for the school to call the student or return the check to the donor due to no additional need.
If the organization is made aware of the situation before the checks are sent, the student may report it to the group making the award and request that the award be used for another deserving student. The student needs to be responsible to check with the school to be certain that their definition of 'full ride' covers all the acceptable costs. Once this is confirmed, the student can determine whether additional dollars are warranted from private scholarships. A school that is giving a student a full scholarship (no loans, no work-study, etc.) will be forced to return the money to the student / donor. In this case, the local Dollars for Scholars chapter would be best served to congratulate the student on their accomplishment and then provide the award to another deserving student.
When a student receives several private scholarships that total more than the legitimate costs of their program, it is important to examine the guidelines for each award to determine how to proceed.
Some awards will be flexible with 'holding the award' until the student needs it. For example, if a student receives two awards and one will cover the freshman year, the student can check to determine if one of the programs will hold the award check for the student's sophomore year. Many Dollars for Scholars programs will hold awards for up to 4 years to accommodate those entering the military or those needing to wait to get into their program of choice. This is not automatic for all chapters so the student must check with the local chapter to determine the details of their awards policy.
A highly needy student may be able to document circumstances that indicate their financial aid package is not enough to enable them to attend. For example, if a student's EFC (Expected Family Contribution) is $0, this student is considered by the federal government to have the greatest need. It may be possible to document a need for transportation to and from campus or other special financial needs that could be covered by private scholarships if the donor intent lines up with this need. If this is the case, the local Dollars for Scholars chapter should handle the decision to award the money on a case-by-case basis.