Key takeaways:
- Scholarship displacement happens when colleges reduce a student’s financial aid package upon the student winning outside scholarships.
- While schools argue that it opens the money for other students with demonstrated need, some states have banned the practice.
- You can appeal scholarship displacement with your financial aid office to explain how the extra funds can help you or request that they displace loans and work-study before gift aid.
Scholarship displacement happens when a college lowers your financial aid package due to an outside scholarship you received. Not all schools practice it, but students can feel blindsided by receiving less money than they expected. In this article, we cover exactly what scholarship displacement is, when it happens, and how you can appeal the decision.
What is scholarship displacement?
If you receive an outside scholarship, it could lower your financial aid package due to scholarship displacement.
Colleges determine students’ financial aid packages largely on demonstrated financial need. You are required to report any outside scholarships you receive, which can lower your demonstrated need. Many schools (but not all!) then reduce your aid package to account for these additional funds.
For example, you receive a $20,000 financial aid package from your school. You then win a $1,000 Essay Scholarship. You have to report the $1,000 to the school. The college sends an updated aid package for $19,000.
Is scholarship displacement fair?
Scholarship displacement can certainly feel unfair, especially in a case where your financial aid package doesn’t cover the full cost of attendance (COA). The outside scholarship could have helped close that gap – but now it can’t due to the scholarship displacement. Students may feel discouraged in situations where winning the award didn’t make college any more affordable.
Colleges that use scholarship displacement view it as opening up funds for other students. They determined your need based on your Free Application for Federal Student Aid (FAFSA) or CSS Profile submission, and winning that scholarship lowers your overall need.
Where is scholarship displacement illegal?
Some states feel the same way the students do – and they’re banning the practice. Here’s a look at a few states that don’t allow scholarship displacement, unless the additional money exceeds the COA:
- California: Private and public schools in California can’t displace funds for students receiving the Pell Grant or eligible for the Dream Act, unless the additional money exceeds the COA.
- Maryland: Maryland banned public institutions from using scholarship displacement, except when the awarder allows for the displacement.
- Minnesota: Public Minnesota colleges can’t reduce institutional grants and scholarships with scholarship displacement.
- New Jersey: Public schools can’t displace financial aid, except with the awarder’s permission or as required for athletic associations.
- Pennsylvania: Pennsylvania public schools also can’t practice scholarship displacement, unless it’s required for athletic associations.
- Washington: Washington requires schools to meet students’ need before accounting for outside scholarships.
How to appeal to your financial aid office
If your financial aid package was affected by scholarship displacement, you can often appeal the decision. Before reaching out to your college’s financial aid office, review how your package was affected. Did the school lower gift aid or loans? Did they remove work-study?
If you need that extra money in order to attend, contact your college’s financial aid office to explain your situation and how the additional funds would help you better afford the cost. Always stick to the facts and be polite.
In the event they don’t, you may be able to request that the school reduce the loan or work study amount before touching the institutional grants or scholarships. You can also ask if the college could put the scholarship towards a future term.
Create a plan for affording college
Not all colleges use scholarship displacement, and the award money can make a huge dent in your education costs and student loan debt. Review your school’s policies on the practice to see how winning could affect your financial aid package.
Some scholarships are so large that they could cover the entire COA. Ready to apply? Head over to our Scholarship Search tool to get started.
