So, just to clarify, there are two separated events related to Gift Cards given to scholarship recipients for use on tuition, books or school equipment.
John addressed the first of these points, which is subject to the usual considerations of donor control (esp. with respect to selecting recipients), whether the contribution primarily benefits the charitable mission of the organization or primarily benefits the individual, etc. Since its unlikely that the donor is providing the education, books, equipment, etc., the issue about whether the gift cards represent services or a partial interest doesn't arise (unless, I suppose, the donor was a textbook supplier or something?).
The question about whether the distribution of the gift cards represents taxable income to the student or might affect their financial aid is probably a question for experts in financial aid.
My US$0.02 worth; the usual disclaimers apply.
Alan S. Hejnal
Data Quality Manager
Smithsonian Institution - Office of Advancement
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