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(From the Financial Literacy Blog) – As high school seniors begin to wrap up their final year before graduation, many are beginning to receive and review acceptances to colleges and universities—part of which includes applying for scholarships and financial aid.
Scholarships are a crucial way for students to afford to continue their education. For many, a college education is not feasible without the support of scholarship funding. However, scholarship displacement is a growing concern for students and guardians alike, who now must be extra-vigilant when it comes to the rules around scholarships depending on the universities of interest.
Scholarship displacement is essentially when a student wins private scholarship funding, but it results in a reduction of other financial aid offerings—generally based on the rules and regulations of individual universities. College and university policies can vary in terms of how they treat outside aid, which makes investigating their processes important for prospective students.
The Process
After a student completes the Free Application for Federal Student Aid (FAFSA), a outlining what assistance will be available to cover the costs of attendance. It also will outline the EFC, or expected family contribution.
To help offset that contribution or reduce loan amounts, many students will apply for outside scholarships.
Unfortunately, in some situations—not all—a college will adjust the financial aid package they previously offered a student if that student earns a scholarship. This could mean a reduction in institutional scholarships, grants, and/or loans . To avoid the financial shock that can occur when a student learns a scholarship has negatively impacted their overall aid, students and their families should do their homework in advance.
What Can/Should Students & Their Families Do?
Scholarships are an incredible resource to students because they provide financial assistance that students don’t have to pay back. Students should not be discouraged from applying for scholarships; rather they should be encouraged to educate themselves on all aspects of the scholarship process.
Students and their families should review a college or university’s “outside aid or scholarship policy” before deciding on a school. If a student is planning to utilize scholarship dollars to pay for their education and scholarship displacement happens at a college or university they are interested in attending, they may want to look elsewhere. Students and their families also can inquire whether a scholarship program would defer the distribution of its scholarship dollars until after graduation or bank it for a future year.
Conclusion
Choosing a college education, and especially how to fund it, is an immense, important decision—one that people generally are making as a young adult. If you are a student navigating this, do not feel nervous or shy asking questions to ensure you are making the right choice for your future. Guardians: help your child fully understand what debt they are taking on and what their options are regarding financial aid and scholarships and be sure to review the guidelines of scholarships from any universities your child is interested in attending.
College is a significant investment, and this is a complicated issue. Take the time and do the research so you aren’t caught off guard.
In the News
The Maine Credit Union League’s Jen Burke, AVP – Outreach & Communications, discussed this topic on WMTW Channel 8 on January 18.