I received a full-ride scholarship offer in college and graduated in 2018. However, I did not pull money from my 529 plan until 2020. How do I avoid the 10% penalty?

If assets in a 529 plan are used for something other than qualified education expenses, you'll have to pay both federal income taxes and a 10 percent penalty on the earnings.

Q. How do I avoid the 10% penalty?

A. Change the beneficiary(s) to another family member and use it for their education. This will also avoid the tax. But, it sounds like it may be too late for that.

Otherwise, the rule is: if you don't take the money out in the same year that scholarships paid the expenses, the scholarship penalty exception does not apply. 

For a discussion on this topic, see this previous thread:  https://ttlc.intuit.com/community/college-education/discussion/529-plan-withdrawals-and-prior-year-scholarships/00/825550#:~:text=To%20be%20a%20qualified%20distribution,the%20scholarship%20paid%20for%20expenses.