As far as I know, you won't pay any tax if the scholarship money is used directly to offset tuition. Anything you get past that (such as housing, etc...) may need to be reported as income on a tax form. But even then, the tax is likely to be minimal unless he has other income as the standard deduction (even if he's a dependent) is at least several thousand dollars. But check with your college financial aid office.I think that if your kid can get into one of the top five or top ten schools, the difference in lifetime income, education, satisfaction, networking, and prestige is so vast that practically no amount of difference in cost can match it.With such high scores, unless he doesn't want to there's no reason your son shouldn't attend one of the top 5 or top 10 schools. Even if he goes into debt heavily to do so, it's likely to be worth it as his first job will probably cover the loan payments quite well. Moreover, not only are college loans very attractive in terms of financing rates, they're also tax deductible (which means they're even cheaper).