This fall, as more than 20 million American college students prepare to return to campus, students who earned private scholarships should beware of a damaging practice in enrollment management known as award displacement.
According to the National Scholarship Providers Association (NSPA), displacement occurs "when one form of financial aid, such as a private scholarship, leads to a reduction in other forms of financial aid."
The focus at Central Scholarship since our founding in 1924 has been on higher education affordability and price transparency, particularly for low-income students in Maryland. We are deeply concerned about the practice of award displacement, which could affect hundreds of millions of dollars in scholarship funds for tens of thousands of students each year, and we are in good company.
The Gates Millennium Scholar Program, which has awarded $845 million to 17,000 students nationwide since 2000, is concerned. So is the Dell Scholars program, which has awarded $49 million since 2004 to students nationwide who have overcome significant obstacles; Dell found that 60 percent of their recipients were impacted by award displacement. And NSPA is so concerned that they issued a paper, "Impact of Award Displacement on Students and Their Families: Recommendations for Colleges, Universities, Policymakers and Scholarship Providers."
Often, the victims are low-income students who qualify for need-based federal, state and institutional financial aid, which universities pair with student loans and campus work-study to meet the overall cost of attendance. If such students then win a private scholarship, universities may use those funds to replace institutional money, while retaining a student's federal loans and work-study — after the student's financial aid award letter has been sent, sometimes even after the student has arrived on campus and started attending class.
According to NSPA, 90 percent of universities publish their outside scholarship policy on their website. A survey of institutions throughout Maryland mirrored that percentage. Some, for example, Johns Hopkins University, with an endowment exceeding $3.4 billion, explicitly prohibit award displacement: "Johns Hopkins University grants/scholarships will not be reduced for students receiving outside scholarships unless total aid resources exceed the student's need or cost of attendance." Other institutions, both public and private, clearly state their intent to reconsider the financial aid package after notification that a student has received a private scholarship.
For low-income students, a private scholarship can be the deciding factor in success. When a university reduces institutional scholarship aid after a private scholarship has been awarded, the benefit of the private scholarship is shifted from the student to the institution. This is clearly not the intent of donors who fund private scholarships for the benefit of students.
Two recent Central Scholarship recipients, attending two different public institutions in Maryland, reported our private scholarship as required, then noticed a change on their reissued financial aid award letters: Their institutional scholarships had been reduced. Both students, on their own, walked into their campus financial aid offices requesting reinstatement of their institutional scholarships. Both won their appeals.
We like the policy of a private scholarship fund in Florida, as posted on its website: "The George Snow Scholarship Fund's sole stated and implied objective in granting scholarships is to provide the scholars with 'benefits' that place them in better positions than if they had not received the awards. It is intended that the scholar, not the institution, benefit from the scholarship." We suggest that private scholarship providers throughout Maryland institute a similar policy, and we encourage scholarship providers to alert students to be on the lookout for award displacement.
Furthermore, we support the recommendations of NSPA, and ask the federal government to modify federal student aid policy to mirror the NSPA recommendations. We ask Maryland higher education institutions to minimize the practice of award displacement and guarantee that private scholarships will first replace student loans and work-study before reducing institutional scholarships. We ask the Maryland state legislature and Gov. Larry Hogan to introduce, pass and sign legislation prohibiting award displacement in Maryland public higher education institutions, and we ask University System of Maryland Chancellor Robert Caret to join with us in supporting this legislation.
The American system of higher education is the envy of the world. We strongly support continued public and private investment to maintain and advance that position. However, we object to higher education's use of need-based financial aid through the practice of award displacement, to advance their position to the detriment of low-income students.
Michele Waxman Johnson is vice president of Central Scholarship, based in Owings Mills. Her email is email@example.com.