NASFAA Mention: Why Getting Too Many College Scholarships Can Actually Be a Problem

"When it comes to college scholarships, more could mean less," The Wall Street Journal reports. "That is because unbeknown to many families, outside scholarships and grants—which students are required to disclose—can reduce the amount of their college’s financial-aid package."

"The issue is known as 'scholarship displacement,' and it effectively means that students who received private scholarships and grants may not reap their full benefit, if any. It can be especially frustrating to families because each school has its own policies for dealing with the issue.

Typically scholarship displacement occurs when the total amount a student receives in aid (including outside scholarships and grants) exceeds the cost of college, or when the total is more than their demonstrated financial need, a calculation that is based on the family’s financial situation and the college’s cost of attendance. The student is then considered 'over-awarded.'

When the package includes federal aid—as most aid packages do—federal regulations dictate that the student’s financial aid must be reduced accordingly. In some cases, however, students may experience scholarship displacement even when there is no over-award. One reason this can occur is because certain universities, as a matter of policy, reduce their institutional grant money based on outside scholarship awards.

More infuriating for outside scholarship recipients is when the school’s policy is to start off by reducing its institutional grant money in the case of an over-award, or to reduce institutional aid whenever a student receives an outside scholarship. This would mean that a student who receives $1,000 in grant money from the school and a $1,000 private scholarship could stand to lose the $1,000 school grant. Also upsetting to students is the policy of some colleges to factor in the amount of a renewable scholarship when doling out aid in subsequent years.

From a school’s perspective, swapping out institutional grants for outside scholarships can make sense, since the student’s level of need is being met, albeit from a different source, says Karen McCarthy, director of policy analysis at the National Association of Student Financial Aid Administrators.

Given that institutional funds are often limited, such swaps often help schools offer more money to more students in financial need. Even so, it can be devastating for students who receive large scholarships and had expected them to supplement their original financial-aid package, she says."

NASFAA's "Notable Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented.


Publication Date: 2/11/2019

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