Sophia AlexanderContents
- What exactly is scholarship displacement?
- Is scholarship displacement fair?
- Does your college use scholarship displacement?
- Can you avoid scholarship displacement?
- Final thoughts on scholarship displacement
- How to research college costs on your list
There are plenty of scholarships out there for college applicants. You’d think they’d help ease the financial burden, but here’s the catch: all that effort you put into finding and applying for outside scholarships might not pay off if your college practices something called “scholarship displacement.”
It’s important to understand why scholarship displacement happens, how it affects you and your family, and—most importantly—how you might be able to avoid its downsides.
What is scholarship displacement?
Scholarship displacement is when a college cuts back—or “displaces”—the financial aid they originally offered you by the amount of an outside scholarship you win.
For example, say your financial aid award letter shows you’re eligible for $10,000 in grants or merit aid. Then, you land a $1,000 scholarship from a local community group.
If your college requires you to report that scholarship, they might reduce your original aid package to $9,000, since you now have an extra $1,000 to put toward your education costs.
Is scholarship displacement fair?
Colleges argue that this practice helps them redirect funds to other students in need—which is true. They also point out that they can’t give more aid than the total cost of attendance.
But not everyone agrees. Critics say it’s unfair.
At least six states—Washington, California, New Jersey, Pennsylvania, Maryland, and Minnesota—have laws limiting or banning scholarship displacement, according to the National Conference of State Legislatures. In these states, even if your total aid and scholarships exceed the cost of attendance, it’s still allowed.
Other states are considering similar laws. Congress even introduced a bill in 2021 to restrict the practice, but it didn’t move forward.
Does your college practice scholarship displacement?
The Hechinger Report notes that no one keeps track of how many schools use scholarship displacement or how many students it impacts. However, a 2013 study for the National Scholarship Providers Association (NSPA) found that half of colleges cut institutional aid for students who got outside scholarships.
To find out if your school does this, dig into their financial aid website or contact their financial aid office directly.
Can you avoid scholarship displacement?
Yes! There are ways to structure your funding so your school doesn’t reduce your aid—meaning you get the full benefit of both institutional and outside scholarships.
Here’s the key: If you decline an outside scholarship, your college’s original aid package stays untouched. But since every dollar matters, you’ll want to explore all options before turning down money.
Tips for getting around scholarship displacement
- Ask the college to apply your scholarship first to any unmet need, then to reduce room and board or your expected student contribution.
- If direct costs (tuition, housing, meals) are already covered, request that the scholarship go toward fees, books, travel, or even a computer.
Scholarship providers want their money to help you, so they’re often willing to work with you. Reach out and ask how they can structure the award to maximize its impact.
For example, if your financial aid already covers tuition, ask if the scholarship can exclude “tuition” in the award letter so the funds can go toward other expenses like housing or books.
Another option: See if the scholarship can be deposited into a 529 college savings account (or open one if you don’t have one). This keeps the funds intact for future education expenses.
You could also ask if the scholarship can be applied to student loans after graduation—sometimes called a “reverse scholarship.”
Final thoughts on scholarship displacement
Declining a scholarship should be a last resort—but if your school practices displacement, it’s an option. Instead, try working with the scholarship provider first to find the best way to use all available funds.
How to research the costs of colleges on your list
If you’re still comparing schools, knowing the real cost of each one is crucial. Look at tuition, average financial aid awards, and other factors to make an informed decision.
