My DS was awarded Type 7 AFROTC scholarship. He was accepted at in-state public, in-state private, and out-of-state public and private schools. The Type 7 can only be used at a PUBLIC IN-STATE school or an out-of-state public school that will give you their in-state rate. None of his OOS schools offer IS rates to OOS students. To use at a private institution, even in-state, he has to convert to 3yr Type 2.
In addition to the out-of-state limitation, HQ told me on the phone that they will apply the Type7 (govt) funds AFTER all other merit scholarships and other govt funds have been applied. Also, since DS received additional merit scholarships with conditions (i.e., maintain 3.0 GPA), the AFROTC funding would not pay anything. HQ said to accept non-ROTC merit scholarships and still be able to use ROTC funds, DS should either 1) ask the school to rewrite the merit scholarship award letters to omit any conditions or 2) convert to Type 2. HQ stated that there is not a conflict between Type 2 and other merit scholarships. However, the fine print on the Type 2 also has the same language about how they may apply the funds, so I'm going to request something in writing. I know policies differ by school; some schools work with you, but some don't.
There are a lot of costs at college - more than tuition, R&B and books/supplies. AFROTC scholarship funds apply to tuition only "and some fees." Stipend is considered to cover R&B, and AFROTC cut their book allowance to $600/year. I did a lot of research on this because there is a financial upside and downside to converting a 4yr Type 7 to a 3yr Type 2. In some instances the 4-year bill is lower; however, if you have govt grants and aid, you will most likely lose it when the ROTC funds are applied. Call the school and discuss it with them. If they tell you that they don't know until they apply the funds, push them to guestimate and review the policy with you. Also, if you have other merit scholarships, find out if those funds can be used to cover non-tuition costs, such as R&B, transportation, dry cleaning (your uniforms), etc..
BTW, I didn't bother asking the school to remove conditions on the scholarships b/c I can't imagine a school or entity negating any conditions of their sponsored scholarship.
Most people don't know that ROTC funds will negate non-ROTC govt funds and private grants that cut into your EFC. Know all the details before you convert. Make a spreadsheet and compare the costs by scholarship type AND by school. If you have questions, call HQ for your branch, your prospective detachment, and the financial aid counselor at each school. One size does not fit all.