From textbooks to a spring break trip to Cancún, if you’ve won some scholarship money, you may be trying to figure out what you can spend it on.
The answer depends. Just as colleges and scholarship organizations have application requirements, many also have rules covering how to spend an award. Tuition, fees, textbooks and supplies often qualify, but some independent scholarships may be less strict and allow recipients to use the money for things like housing, meal plans and technology.
It’s important to know that the way you spend a scholarship could affect your financial aid package, tax filings and how much you borrow in student loans. Here’s what you need to know about using scholarship money to make the most of it.
[Read: How to Find and Secure Scholarships for College.]
Scholarships, Fees and Books Are Usually Covered
Kevin Ladd, chief operating officer and co-creator of Scholarships.com, estimates 95% of scholarships cover things like tuition, room and board and books. This is particularly true with most merit-based and institutionally awarded scholarships, he says.
There’s some wiggle room with the other 5%, he says. “It’s going to be up to the person who’s giving you the money, like most things are.”
Many scholarships awarded by schools or outside organizations are sent directly to your college’s financial aid office to be applied to your bill.
For example, the McDonald’s HACER National Scholarship Program for Hispanic students asks its 30 winners to verify their attendance at accredited schools. The program awards three tiers of scholarships, ranging from $5,000 to $100,000, and the money is sent directly to their respective schools.
“One of the benefits of having the provider directly send the scholarship award to the college is that a student doesn’t have anything else to worry about as far as the scholarship being applied improperly,” says Will Geiger, co-founder and CEO of Scholarships360.org, which offers free services to help students find applicable scholarships.
What’s Not Typically Covered by Scholarships
Unless it’s tuition, fees, books and room and board, it’s generally unwise to presume an expense will be covered by scholarship money, Ladd says. Transportation, groceries and off-campus dining, technology and clothes are typically not covered, but some scholarships may be less strict on how the money is used.
For example, some scholarships allow you to use the money to pay for public transportation related to attending school, such as a subway, bus pass or parking pass. In some cases, however, on-campus parking is included in fees charged by your school.
Laptops and other technology that could be used for class are in a gray area, Ladd says. “It’s 2024. I don’t think anyone is going to class without a laptop, a Microsoft Surface or an iPad. At the very least, it’s something that costs over $1,000. Things have changed a lot as far as what’s necessary to be in school.”
Although many students tend to buy new clothes around the beginning of the school year, it would be difficult to convince schools and some scholarship committees that they qualify as a valid educational expense, Ladd says.
“You certainly need to go to school dressed,” he says. “That’s definitely still a thing you have to do, so it’s on the edge of allowable.”
[Read: How to Find Local Scholarships in Your Own Backyard.]
Check with both the scholarship organization and your school’s financial aid office about guidelines on spending your scholarship money. If the rules feel too limiting, find out if the committee can make an exception or apply the scholarship to an academic year when you’ll have greater financial need.
“If someone is going to be writing a check for however many dollars to you, you’re going to have a line of communication with them,” Ladd says. “You can always ask if you’re not sure.”
Scholarship Refunds
Although some scholarship organizations send checks to your school, others give the award directly to you. If you get the funds directly, or indirectly as a tuition refund, you can typically spend the money on a range of education-related expenses.
For example, Arunabh Sinha attended Indiana University–Bloomington on a merit-based scholarship earmarked to cover the full cost of tuition and fees, but he was responsible for paying for his own food and housing. However, because his scholarship amount exceeded the cost of tuition and fees, he received the surplus back as a refund and could spend it how he wanted.
“For me, that was just $100 or a few thousand dollars per year,” he says. “It wasn’t that monumental and it would just go straight to the housing, which I would do off campus.”
Refund amounts vary because scholarship amounts and tuition costs vary. Many students use their scholarship refunds on things not covered by their scholarship, such as groceries, housing, furniture or a laptop. Sometimes these things are approved expenditures, but even if they’re not, there’s often not much a scholarship provider can do to enforce its spending rules.
“They’re not monitoring how you spend that money once it gets refunded to your bank account,” Sinha says.
It’s important to use extra money wisely, says Kristina Ellis, founder of College Ninja, a company that helps students strategize paying for college. Any money spent on nonessentials means less for books and other needs.
“Think of it as a part of your educational investment, not as free cash for a shopping spree,” she wrote in an email. “Handling these funds responsibly can really help in managing the overall costs of your college experience.”
[Read: 10 Sites to Kick Off Your Scholarship Search]
Plus, how you use scholarship money could affect tax refunds for yourself or your parents. Scholarship money for some education expenses is taxable, but it’s not for qualified expenses like tuition, fees and books. Record your expenses and consult a tax professional if needed, Ellis says.
It’s also wise to report outside scholarships to the school, Geiger says. Many schools require this, which he says “will ensure that the scholarship is processed properly so students do not have to worry about the tax implications of the scholarship.”
Scholarships Can Affect Financial Aid
The amount you receive in scholarships could affect your need-based financial aid, as it likely will change your expected family contribution. After you win a scholarship, your college could adjust your financial aid package by reducing the grants or loans it gives you, which could require you to contribute more out of pocket, Ladd says.
For example, your need-based aid includes $10,000 in grants and $5,000 in student loans. If you win a $3,000 scholarship, your college may subtract an equal amount from your loan, so you would need to borrow $2,000 instead of $5,000. Or the school may subtract that money from your gift aid in a move known as scholarship award displacement.
“The reason for this is that a student’s financial aid award can’t exceed the total cost of attending a college,” Geiger says. “How this plays out will vary from college to college, so it’s best to check in with the colleges you are considering to understand what their displacement policy is.”
If displacement happens, you would get only $7,000 in grants and still have to take out $5,000 in loans. Your scholarship award wouldn’t help you, since it would merely replace the free money you were already getting from the school. That could be a tiebreaker when choosing a school, Ladd says.
“There’s the prestige of having won a scholarship, but if they’re just taking it off from what they’re offering, then I’m netting nothing from that effort,” he says. “So you always want to make sure it’s coming off the loan. Your objective going to college is to have as few loans as possible when you graduate. If it’s not coming off that side of the column, then it’s not worth your time doing.”
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What Students Can Use Scholarship Money For originally appeared on usnews.com
Update 02/01/24: This article was published at an earlier date and has been updated with new information.
