What is Scholarship Displacement?

Scholarship displacement

The process of applying to, and more specifically, winning scholarships, is without a doubt an exciting one. 

You’ve gone through all the steps to search for private scholarships, write the essays, gather the other required application materials, and apply, and finally, your hard work has paid off - wahoo! 

However, before you start jumping for joy, I want to introduce a term that is well-worth being familiar with. That term is scholarship displacement.

What is scholarship displacement?

In a perfect world, a student should be able to receive scholarships and grants from their institution, and, if or when they win outside private scholarships, those awards can be added or stacked on top of the institutional aid that the student is already receiving. 

When a student wins and reports a scholarship, common practice should be for a student's loans and work-study offers to be the first forms of financial aid that get reduced by the institution.

Unfortunately, that’s not always how the cookie crumbles. 

Rather than lowering loan and work-study amounts first, certain institutions are instead lowering the amount of a student's scholarship aid, and this is exactly where scholarship displacement comes in.

Scholarship displacement, at its core, is when your receipt of a private scholarship leads to a reduction of other forms of financial aid (specifically, the free money!) that you may be receiving from your college or university. 

How does scholarship displacement happen, and why is it bad?

The vast majority of colleges and universities in the US mandate that students must report information regarding any outside or private scholarships that they win while in school.

While the reporting alone should be okay, what’s NOT okay is when schools take advantage of the private scholarships that a student has won and subsequently lower the amount of money in scholarships that THEY award the student. 

Scholarship displacement is an unfair practice because it essentially means that students who have worked hard to apply for and win private scholarships might not even be able to reap the full benefits of winning those awards, since other forms of financial aid that they may have been receiving (specifically, the scholarships) get decreased by the same amount. 

This leaves students in the roughly same financial position that they were in before putting in all of the effort to seek out private scholarships.

What is being done to mitigate and prevent scholarship displacement?

Currently, only two states in the US have laws banning scholarship displacement: Maryland and New Jersey. 

On September 27, 2021, government representatives from New Jersey and Pennsylvania proposed a bill called the Helping Students Plan for College Act of 2021. The goal of this bill is “To require institutions of higher education to notify students of the impact of private scholarships and grants on eligibility for institutional financial aid, and for other purposes.” 

As a recent college graduate who is now working in the financial aid space to help connect students with private scholarships, it is of the utmost importance to me that you and your family are transparently equipped with all of the information that you need to know about scholarships in order to make the smartest higher education decisions. 

Plus, I have given out thousands of dollars in scholarships since starting Access Scholarships, so of course I want to make sure that if you win my scholarships (or any others you apply for through Access Scholarships) you can actually use them to put towards your tuition without having other scholarships taken away!

What can I do as a student to avoid experiencing scholarship displacement?

While I truly hope that the Helping Students Plan for College Act of 2021 bill does in fact get passed ASAP, in the meantime, you can help protect yourself from scholarship displacement by doing as much research on the topic as possible.

If you’re a high school student in the process of researching or applying to college, call up the financial aid offices of the schools you’re interested in to inquire about their policies in regards to reporting private scholarships. Ask them what the process looks like once you report a private scholarship: specifically, if the money you earn in private scholarships will subsequently reduce the amount of scholarships you might receive through the institution. 

If you’re currently enrolled in college, you should still make a point to reach out to your financial aid office to ask similar questions, because ultimately the answers you receive can have a crucial impact on how you proceed in terms of applying to private scholarships. 

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