From the NCAA website (read that last line):

What about athletic scholarships?
There are two factors that control the availability of scholarships at the D1 and D2 levels. The NCAA scholarship limits per sport and whether or not the school is fully funded. For D1 fall sports, seniors who have scholarships and who will be using the extra year of eligibility will not count against the team’s scholarship limit for the 2021-22 season. The D2 level has not provided any waivers, so there is no potential for D2 programs to offer additional scholarship money for fall sports recruits.

This does not mean a college will go over the limit of maximum scholarships. Each school will decide how many scholarships they can fund for each team depending on their budget. In a recent survey, 80% of college coaches said they do not plan on cutting scholarships as part of their budget cutting measures. For recruits pursuing an athletic scholarship, hopefully this means the maximum, and possibly over the maximum number of scholarships, will be available for the 2021-22 school year.

Here is an example of how this could play out for a college team:

A fully funded NCAA D1 FBS football team has a maximum of 85 scholarships. All D1 FBS scholarships are full-rides.
For the 2020-21 season, the team has 25 seniors on scholarship. Let’s say all of these seniors get an extra year of eligibility.
For the 2021-22 school year, this program could bring back up to 25 seniors and all of those seniors are eligible to keep their scholarships.
If the school is able to fund the maximum number of scholarships it can for the 2021-22 school year, they could have 110 athletes on scholarships. That means 25 returning seniors and 85 others.
The determining factor is whether or not a school can afford to give scholarships over the maximum.
[Post edited by HokieJay at 03/23/2021 4:11PM]