By TamaraWhen I won my first scholarship for college, I was ecstatic. I proudly walked into the financial aid office and turned over my check to be deposited into my account. A few days later, I pulled up my account online to view my financial aid package and noticed that one of my college grants had been reduced. Livid, I called up the financial aid office to find out why. That’s when I learned about a little-known rule called the Federal Overaward Regulation (34 CRF 637.5). Under this provision, outside scholarships are considered resources and can reduce your financial aid dollar-for-dollar. In fact, colleges are required to reduce your aid package whenever the total from all resources exceeds the school’s tuition costs by more than $300. Unfortunately, not all colleges follow the same method of recalculating your financial aid package. That’s why it’s very important to check with your college’s financial aid office and ask about its outside scholarship policy. In some cases, you may even be able to negotiate with your college and request that your student loans be reduced before any institutional grants or other self-help aid, such as work-study opportunities. This is what I did, and the financial aid staff was happy to comply.Here’s an example of how an outside scholarship might alter your financial aid package.Without Outside Scholarships:Financial Aid TypeAmountOutside Scholarships$0Institutional Grants$2,000Student Loans$4,000Pell Grant$5,730TOTAL AID PACKAGE$11,730 With Outside Scholarships:Financial Aid TypeAmountOutside Scholarships$3,000Institutional Grants$2,000Student Loans$1,000Pell Grant$5,730TOTAL AID PACKAGE$11,730 It’s also helpful to understand the rules for notifying your college about your outside awards, too. Many schools have a form (electronic or paper) that must be completed, especially if the check is sent directly to you and not the school. And don’t even think about hiding the money, either. If your college finds out about it, and it probably will, you will be required to reimburse your school for the full amount you did not report.In some circumstances, your college may allow you to use your scholarship proceeds to purchase a computer or other related accessories instead of using it to reduce your grants and loan amounts. If, however, you fail to follow through with the purchase, the college will likely charge your student account for the full amount of the intended purchase. Just be sure to check with your financial aid office before heading out to buy that new laptop or printer, as it’s not an option at every school.I will admit that I was a bit upset that the time I spent researching and applying for scholarships didn’t seem to be helping my bottom line while I was in school. Every time a scholarship check came in, my financial aid balance remained the same, so it didn’t seem like I was making any progress. It wasn’t until I graduated that I really appreciated the true value of winning outside scholarships. Unlike most of my fellow classmates, who neglected to apply for scholarships, I was able to graduate nearly debt free. Each scholarship check that was sent to my financial aid office meant another $500, $1,000 or $5,000 less that I had to borrow.If I had to do it all over again, I would happily apply for more scholarships because, in this case, a penny earned was definitely more than a penny saved!