Scholarship sponsors have rules for spending their money—and consequences for breaking those rules.
Many students avidly read the scholarship eligibility rules, but they skip the rules for using the money. Make sure you understand what's allowed and what isn't—before you even apply. The scholarship may not be as valuable as you assume.
Typical Rules for Using Scholarship Money
Ask yourself these questions before deciding to apply for any scholarship:
- Is it renewable? A renewable scholarship can help pay for your college costs for up to four years. But you will have to meet certain standards every year, such as a minimum GPA, in order to keep it.
- What expenses does it pay for (or not)? Some scholarships cover only tuition and fees but others cover expenses such as room and board, books, computers, commuting expenses, and school-related supplies.
- Will I need to apply for financial aid? Some scholarships require you to apply for and accept federal financial aid each year. In these cases, the scholarship will cover only unmet need.
- What are the requirements for keeping it? In addition to keeping top grades, many private scholarships require the student to pursue specific studies, majors, or careers. If you change your mind, you may have to give up the scholarship and even return the money you have spent.
The Consequences of Misspent Scholarship Money
What happens if you use scholarship money for something the rules don't allow? In most cases, you will have to repay the entire award—sometimes with interest—even if you drop out of college. Even bankruptcy might not save you from your legal responsibility.
How to Resist Temptation
If possible, have your scholarship money sent directly to the college. The college can then deduct its expenses and issue you any remaining balance. When that money arrives, know what allowable expenses you will pay for and stick to your plan.
- See Finding Scholarships You Qualify For to get help with your scholarship search.
- Managing money in college is tricky. See tips for stretching your college dough.
Note: Financial information provided on this site is of a general nature and may not apply to your situation. Contact a financial or tax advisor before acting on such information.