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Author: Zaniya L.
After looking at the title, you may have thought I made a typo. Well, sadly, I did not. There has been a scholarship misconception circulating for years suggesting that scholarships can decrease your debt. However, that is not accurate.
For students who receive some sort of financial aid, scholarships can increase their student debt. This practice is called scholarship award displacement.
So, what do you mean scholarships can increase your student debt?
In the scenario below, Student A receives federal and need-based financial aid.
Student A receives a $5,000 scholarship to pay off a $5,000 outstanding balance.
Then, the university eliminates Student A institutional scholarship by $5,000.
Now, the student has an outstanding balance of $5,000.
If Student A cannot pay for their outstanding balance they will either have to resort to an institutional loan, private loan, or drop out of their postsecondary institution.
What is the definition of scholarship award displacement?
Our organization has expanded the definition of scholarship award displacement after finding out that institutions use AI tools when creating their financial aid packages, and the formula ensures scholarship award displacement will happen when making their financial aid packages.
Scholarship award displacement is when one form of student financial aid (i.e., federal scholarships, federal grants, state scholarships, state grants, external scholarships, private scholarships, military benefits, and/or other outside scholarships/grants/aid.) replaces another form of student financial aid (for example, an institutional scholarship or institutional grant). The outside scholarship can also impact a student's federal loan or work-study package, depending on the postsecondary institution's outside scholarship/aid policy. Each postsecondary institution has its own outside scholarship/aid policy.
Scholarship award displacement disproportionately impacts need-based recipients. It is important to note that postsecondary institutions may still practice scholarship award displacement even if a student does not have an over-award package based on federal guidelines. Postsecondary institutions are creating their own overaward policies, disguising them as federal overaward regulations.
Outside scholarships and grants are considered the following: federal scholarships, federal grants, state scholarships, state grants, external scholarships, private scholarships, military benefits, and other outside scholarships/grants/aid.
How many schools practice scholarship displacement?
100% of schools practice scholarship award displacement in some form against students who receive financial aid of any kind.
How can I learn more about scholarship displacement?
Our organization is hosting two Free the Scholarships Virtual Clinics.
January 27, 2024 (Tomorrow): 10:00 am - 12:30 pm ET: https://www.disscholared.org/ftsc
February 24, 2024: 10:00 am - 12:30 pm ET: https://www.disscholared.org/ftsc
Author:
Zaniya L.
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