The easiest way to say it is if you intend to attend an OOS school or a private, and it is more than the cost of your IS college, that Type 7 4 yr will need to be converted to a Type 2 3 yr.
The big difference between a 2 and a 7 is recipients for type 2 can pay the difference if it is over 18K in tuition, 7 cannot. If the IS is 10K, that will be the bar they will use, read the wording carefully. UP TO 18K. It doesn't say 18K.
For example, if you want PSU and you live in NJ, the likelihood will be the 1st yr is on your dime.
You will have the scholarship in hand, but you will not be contracted, there will be no stipend, no book allowance, etc. You will have to be in AFROTC as a freshman.