Your student did hard both in school and in the scholarship application.
You're excited that they have won some small scholarships, that you simply hope will help create a dent within the high cost of college.
Suddenly, you get an update to your student's aid offer from their target school.
The amount of need-based aid they offered went down – as you have other scholarships.
How can that be possible??
You've just experienced “scholarship displacement” or in short the school is telling your student they are unable to stack their private scholarships with aid or scholarship money provided by the college.
This is a rule that isn't readily discussed during college visits and tours.
But, it can have a huge effect on the value of any private scholarship your son or daughter may receive.
Some schools decide that because you have outside scholarships, your require is lower plus they won't award you as much.
It almost makes you wonder if the efforts of all those scrappy students who work their fingers towards the bone by applying for small awards count it.
Is there whatever you can perform?
What Is Scholarship Displacement?
No university or college comes with an unlimited amount of money to give to students.
Instead, most attempt to meet just as much need as possible for those students.
If students has outside money from another source – for example outside scholarships – then they have less of a need for the money that the school might award them.
That institutional money can turn to another student whose require is greater.
This generally happens in case your student is recognized as “over-awarded.”
That is, if outside scholarships along with other financial aid provided by the school is over the cost of attendance (COA) in the college or university when your EFC is deducted.
Sue is really a parent within our Paying For College 101 Facebook group. Here’s what she'd to say of Scholarship Displacement.
“The trainer told us whenever we went for the educational funding ending up in the school my daughter now attends.
I didn't understand why for years we were told to apply for every scholarship on the planet.
‘Make that the student’s full-time job,’ but in reality we would have lost on money the school was giving us if my daughter hadn’t received ANY private scholarships (DD only applied for several and didn't get any).”
Most families want to put outside scholarships toward their EFC, but that is not how schools handle it much of the time.
What Aid Can Be Affected By Private Scholarships?
Keep in your mind that usually only need-based aid is affected.
According towards the National Association of Scholarship Providers, “Certain kinds of federal aid, like the Federal Pell Grant, are not subject to the over-award regulations and therefore are never reduced.”
Merit awards commonly are not reduced because of outside scholarships, however it is effective ask the school to make sure.
Nothing is cut and dried, however.
Federal laws that dictate how schools must handle scholarship funds when they ascertain what to offer inside a student's financial aid package are, more times than not, unclear.
Several kinds of need-based aid can be reduced in case your student wins outside scholarships.
Generally, they're reduced inside a specific order. Here's an order you will see reductions:
Government student education loans – Unsubsidized
Government student loans – Subsidized
Work-study allotments
Grants
In certain cases, the financial aid office can reclassify unsubsidized loans to use for your EFC, which can help your loved ones have access to that aid.
But, as with any case, you should check with each school to see what their policy is.
If you're concerned that the student's aid offer could be affected by outside scholarships, look into the school's website under the educational funding information or contact the financial aid office.
They can let you know if displacement occurs and just how it really works.
This is what happened to Jackie’s son: “Our son’s aid was used in unsubsidized federal loans and work study was pulled because of him winning local scholarships. Catch 22!”
Can You Prevent Scholarship Displacement?
If you're frustrated using the idea that your son or daughter's aid might be reduced because they won another award, there are some things you can do.
Displacement may affect which schools your student is interested in attending.
After all, it affects affordability greatly.
Not all schools use displacement, and you can find out the policies by contacting the financial aid office.
The University of Pittsburgh, for example, has publicly stated they differ with the practice and do not utilize it at their institution.
If it's a possibility for you, you could concentrate on public schools in Maryland, where scholarship displacement is banned.
You might get active in the lawmaking process in your own state as well, trying to get an identical ban passed where you reside.
You may also encourage your student to pay attention to scholarships that help avoid displacement, such as the Michael & Susan Dell Foundation, which allows students to defer their scholarship award money until they graduate.
It won't affect current aid and could be used to help repay student education loans later on.
Many scholarships will even agree to divide the awards up into four installments, so there will be available money for those four years of faculty.
Finally, you are able to request a reconsideration of the displacement in the school's financial aid office.
There's no guarantee it will work, however, you can always ask and see if the decision can be changed.
Are Outside Scholarships Well worth the Effort?
Because one thing to be reduced are loans – which your student has to repay – some outside scholarships can be quite helpful.
Anything that does not increase debt is good!
If you have a significant educational funding gap, though, those federal loans might be a fundamental part of affording school.
Realizing that the scholarship will replace the loan instead of lowering your gap can be frustrating.
Another valid reason to keep a scholarship is that if it's a four-year scholarship.
Because your aid package will change each year based on taxes, financial changes, and other factors, it may be easier to possess a guaranteed four-year amount than depend on need-based aid.
On another hand, when the scholarship is hard to keep since it requires service hours, a specific GPA, or any other qualifications, it might be better to turn it down and retain the need-based aid instead.
How Other Parents Have Handled Displacement
Parents in our Paying for College 101 group have frequently encounter scholarship displacement.
One parent chose not to even focus on scholarships:
“By getting some other scholarship, you reduce your need. Hence, the award is reduced.
That’s why I did not insist upon my kids putting things off on applying for scholarships.
The colleges they are in, or trying to get, are on the very top end.
These colleges WILL lower your award when you get an extra scholarship.”
Another parent shared:
“Apply for financial aid first.
I would just discover what the policies are around this for the schools so you’re not surprised.
Not all of them do this.
My kid’s school handles external and internal scholarships differently.
Now we know.”
Another family noticed that asking them questions is the key to avoiding unpleasant surprises:
“The questions to ask each school are whether scholarships will stack, whether outside aid reduces institutional aid, and make them spell it out.
Have some hypotheticals to inquire further about.
For example, I can get my kid a scholarship through my union.
If we do that, and that we bring $5,000 to the table, what exactly are you going to use his merit scholarship? What exactly are you gonna use his work-study? Together with his grant? (Anything you think you're going to get.)”
Another parent shared that they found different schools had different policies:
“It really depends on the college.
Usually the way a school handles outside scholarships is located somewhere on their educational funding pages.
I Google '[college name] outside scholarships.’”
Steps to Avoid Scholarship Displacement
Affording college is a challenge, and scholarship displacement makes it harder.
It's a common practice, but you can pick schools that don't utilize it.
It's an extra research step, but it is worth the time and effort!
Are you interested in finding schools that provide excellent merit help to students like yours?
We'd like to help.
Check out our essential tool, College Insights, for researching colleges and creating a list of affordable schools that may offer your student merit scholarships.
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