Imagine you planned to make a big purchase, a new vehicle perhaps, and you've successfully negotiated the price with the dealer down to a palatable figure. Before you sign the paperwork though, you go out and find a no-interest loan for $500 to help pay for the car. When you tell the dealer, he re-negotiates your price up $500. Doesn't seem very fair, does it?
Essentially, that is what colleges and universities have been doing with financial aid for years when students get outside scholarships or loans, a practice known as scholarship displacement. Federal law requires that students who win a private scholarship after receiving financial aid from a university must report it.
This month, Maryland became the first state to ban such a practice by public institutions, limiting the conditions in which colleges and universities can decrease financial aid, allowing reductions only if a student's total aid exceeds the cost of college or with permission from a scholarship provider.
It's a good move that promotes access and affordability to students as the cost of a degree seems to creep ever higher, while salary gains for those entering the workforce fail to keep pace — leaving many recent college graduates with crippling debt.
Nationwide, individual student loan debt exceeds $37,000 on average, and the typical college student in Maryland borrows about $28,000 during their time in college, according to Central Scholarship, an Owings Mills-based nonprofit that provides scholarships and interest-free loans to Maryland students and was instrumental in getting the legislation passed.
College administrators argued scholarship displacement allows them to spread the wealth among more students who may need financial aid, we think the practice punished those students who worked hard to seek out, apply for and earn scholarships and additional money to help pay for their schooling.
But what's the incentive to seek out scholarship money and put in the effort to meet requirements if the net gain is zero? As one student at Johns Hopkins University whose aid was reduced after receiving a $700 scholarship from a state delegate's office told The Baltimore Sun: "It felt like they were stealing the scholarship money I earned and using that money for themselves."
We'd like to see state legislators take it a step further when they reconvene next winter in Annapolis and expand the ban on scholarship displacement to private universities in the state as well.
Beyond that, while we assume there are myriad reasons other than displacement that factor into why some students don't seek scholarships, this is a good chance for us to encourage anyone in high school to spend a little time this summer digging into what scholarships are available to you. There are a number of scholarships that don't necessarily require a 4.0 GPA, perfect SAT scores or all-state athlete status to qualify. Many of these go unclaimed. Check with your school guidance counselor, or a nonprofit like The Community Foundation of Carroll County or the aforementioned Central Scholarship to learn what's out there for you.