Understanding Scholarship Displacement: A Resource for Students & Families

We at Students First Consulting love scholarships! They are incredible resources to ensure higher education affordability, access, and attainment. But sometimes winning one can unexpectedly reduce a student’s financial aid. This confusing situation is called scholarship displacement.

This guide for students and families explains what it is, how it can affect you and your scholarships, and what you can do to avoid losing out on free money for college. Learn how to identify displacement, who to contact for help, and strategies to maximize your financial aid package overall.

Financial Aid 101

Financial aid comes in various forms, and understanding the difference is crucial:

• Grants and scholarships (also known as "gift aid"): Free money that doesn't require repayment.

• Outside scholarships: Scholarships awarded by organizations or entities other than your college—for example, a foundation, a local club, or an employer—to help pay for college.

• Work-study: Provides income through part-time jobs offered through the institution (though not guaranteed and may require effort to find).

• Loans: Borrowed money that needs to be repaid, usually with interest.

• Financial aid package: A combination of all these resources offered by your college, presented in a financial aid letter.

Scholarship Displacement Explained

Scholarship displacement occurs when an outside scholarship reduces other financial aid. It’s often referred to as “negative scholarship displacement” when it reduces grants or scholarships in your college financial aid package.

Why Is It Important to Understand Displacement?

Scholarship displacement can reduce the free money that you have available to pay for college expenses! That’s one big reason it’s important to understand whether it’s happening to you.

Why Does Displacement Happen?

There are a few reasons, including:

• Federal regulations govern how much financial aid a student can receive. This includes when you exceed your Cost of Attendance. That can trigger a reduction in aid.

• Each college and university has its own policy on outside scholarships, including how they impact displacement.

• Similarly, each scholarship provider has its own policy on how to apply its scholarship awards, including how and when funding can be used and applied to your financial aid.

Identifying & Addressing Displacement

• Find your college's "outside scholarship policy" online or ask your financial aid officer. If you don’t understand it, ask your financial aid officer or your outside scholarship provider.

• Review your financial aid award letters carefully, comparing amounts before and after receiving outside scholarships.

• Contact your financial aid officer and outside scholarship provider if you suspect displacement. Ask your financial aid officer about their policies, professional judgment to reduce loans/work-study instead of grants; increasing your Cost of Attendance to allow for more scholarship use; and appealing to potentially receive more gift aid.

Tips for Maximizing Scholarships & Financial Aid

• Apply for all scholarships you're eligible for, even smaller ones. Even with scholarship displacement, it’s important to have access to as much gift aid as possible.

• Submit the FAFSA every year, regardless of family income. Submit it as early as possible to be eligible for as much aid as possible.

• If you have flexibility in college choice, research college financial aid policies; some offer generous aid or limited displacement.

• Negotiate with your financial aid office to potentially increase gift aid. This is especially important if financial circumstances change for you and your family.

• Maintain good academic standing. Some scholarships and grants require a specific GPA or satisfactory academic progress.

Additional Resources

• Federal Student Aid Website (https://studentaid.gov/)

• National Association of Student Financial Aid Administrators (https://www.nasfaa.org/)

• National College Access Network (https://www.ncan.org/)

• College Board (https://www.collegeboard.org/)

• BigFuture Scholarships (https://bigfuture.collegeboard.org/)

• FastWeb Scholarships (https://www.fastweb.com/)

Don't Forget!

By understanding scholarship displacement and using the resources provided, you can navigate financial aid and maximize your college funding.

Additional Tips:

• Advocate for yourself, including by gathering as much information as possible and talking to financial aid and your outside scholarship provider.

• Keep copies of all your financial aid documents and scholarship award letters.

• Be proactive and ask questions throughout the process.

• Remember, financial aid is complex, so don't hesitate to seek help from your financial aid officer or a college counselor.