You Got a College Scholarship. Now Make Sure It Doesn’t Reduce Your Financial Aid.

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For many college students, receipt of a private scholarship is reason to rejoice. But the rejoicing may be unexpectedly short-lived.

That is because colleges and universities routinely adjust students’ financial-aid offers based on outside awards, and this sometimes means reducing, or taking away, need-based institutional scholarships or grants that have already been offered. This could happen for a number of reasons, including a desire by the school to redistribute limited institutional funds to others who need it. However, the practice is disheartening to students who have worked hard to obtain these additional funds, only to find out that it nets them little or no financial gain.

“Most families don’t know about the practice; they become aware of it when it happens,” says Robert Ballard, president and CEO of Scholarship America, a Minneapolis-based nonprofit that awards scholarships.

There is movement in at least some states to limit schools’ ability to reduce aid when private awards are received. In 2017, Maryland passed a law that severely restricts scholarship displacement at public universities. In New Jersey, both houses in the Legislature have passed a similar bill, which is awaiting the governor’s signature. And in California, a similar state assembly bill that was introduced in 2021 has been postponed in committee, but it is expected to be reintroduced in 2022.

Earlier this year, the True Cost of College Act was introduced in the U.S. Senate. This bill, among other things, would require schools to disclose their scholarship-displacement policies. Proponents of another bill, one that would limit scholarship displacement on a national level, meanwhile, are pushing for its introduction this year.

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