Picture this scenario: you’ve worked tirelessly for your scholarship. Whether it’s academic or athletic, you’re depending on your scholarship to help offset the cost of college tuition. You might even graduate without any financial aid debt!
What happens when your college or university reduces how much financial aid you’ll receive because of your scholarship? You might feel frustrated — after all, you earned your scholarship. This situation is called scholarship displacement, and it happens to students and families without warning.
To put it simply, the student’s scholarship no longer reduces the amount they’ll pay to attend school; it merely replaces the amount of need-based financial aid they would have received. Students and their families are understandably upset when this happens, which is why they need to understand why this happens in the first place.
How Does Scholarship Displacement Work?
When students are offered a financial aid package, a significant amount of consideration goes into determining this number. The admissions office compiles a student’s information, obtained from the FAFSA, to determine a student’s financial needs. This financial aid package is meant to offset the cost of attending a particular school, making it more affordable.
Some things that factor into a financial aid package include your family’s income and the total cost of attendance. You may even receive a private scholarship, which your school might see as extra money, therefore reducing the price of your financial aid package.
Different types of financial aid that can affect need-based aid include grants, Federal Work-Study programs, and even scholarships awarded by the college itself.
Keep in mind that not all colleges participate in scholarship displacement, so it’s best to find out ahead of time before applying, as this can impact the amount of student loan debt you graduate with.
Why Do Colleges Reduce Aid When You Win a Scholarship?
One of the main reasons why colleges alter the amount of financial aid for students receiving scholarships is equality. They try to keep funds fair for all students, and if one attendee receives significantly more than another student, it might be deemed inequitable. Colleges don’t have unlimited funds to offer students, so they work to keep things split as evenly as possible.
The argument against this is that if a student receives higher grades than one of their classmates and has a similar financial need, their scholarship funds should be recognized.
The Impact of Scholarship Displacement
Although colleges have arguments for scholarship displacement, its consequences are real for many students. In certain instances, scholarship displacement may prevent students from applying for scholarships in the first place.
Additionally, scholarship displacement negatively affects student loan debt. This is because scholarship funds can reduce a student’s overall financial aid package. On top of that, scholarship displacement can make it difficult for students to plan for college in the first place. They can’t just select a school based on their career path — they have to focus on how scholarship funds are treated alongside financial aid packages.
Unfortunately, low-income students are the most affected by scholarship displacement. Instead of getting excited about their scholarship, they’re met with even more student loans and debt than they anticipated, proving to be a financial hardship for themselves and their families instead of offering financial relief.
Can You Avoid Scholarship Displacement?
This comes down to the school a student attends. Although students can’t avoid scholarship displacement if they’re interested in attending a college that utilizes this practice, there are other ways of avoiding it.
Students should always contact the financial aid office of the school they’re interested in attending to see if there are any exceptions for scholarship displacement and if every student is subject to this. Ask them about the type of financial aid packages they offer to help students afford college, as they may make exceptions on a case-by-case basis.
Next, students should research the different types of scholarships available. Some scholarships are specifically for housing, books, transportation to and from school, and more. It’s possible that any scholarship they receive won’t count against these specific expenses, so long as they’re not for tuition or other fees.
It’s also possible for students and their families to request that scholarships be applied in other academic years. This way, students can still access these funds, but at a later time when their overall financial aid package may change.
Additionally, students can apply for scholarships that state they won’t affect any financial aid packages. These scholarships work in tandem with any need-based financial aid granted to students.
Steps Toward Change
Scholarship displacement affects countless students and their families. As such, there are advocacy groups pushing to prevent scholarship displacement. Some states have even banned scholarship displacement.
These states include:
- California
- Maryland
- New Jersey
- Minnesota
- Washington
- Pennsylvania
Unfortunately, private colleges and universities may have their own policies in place, which is why students need to contact their prospective admissions office before applying.
Scholarship displacement advocates push for greater transparency, encouraging all schools to inform students in advance of how scholarships are treated. Advocates also push for more legislative action to ban scholarship displacement and its unfair practices. Additionally, advocates want more need-based financial aid available for students to reduce scholarship displacement.
Take Control of Your College Funding
Scholarship displacement can often feel disappointing, and for good reason. Although students can contact schools ahead of time to learn about their policies regarding scholarship displacement, it can feel frustrating for them and their families. All students should be able to attend the college or university they’re interested in without financial aid preventing them from achieving their dreams.
Fortunately, there’s help with navigating this challenging part of the college application process. College Funding Professionals is well-equipped to handle college applications and can offer advice on scholarships and how to apply for them. Join our free online Facebook Group to gain access to the best college planning advice anywhere.
To speak to a member of our dedicated team, give us a call at 201-285-7890 or send us an email at info@collegefunding.com.
