As we recently closed out scholarship season and foundations are beginning to notify students of their awards; we’re taking a closer look at an issue that can affect students who receive scholarship dollars – scholarship displacement.

Scholarship displacement occurs when colleges and universities reduce or remove their institutional gift aid, other scholarships or grants from a student’s financial aid when they receive an external scholarship award for a student that puts the student’s total amount in scholarships above the student’s federally determined financial need or the school’s Cost of Attendance (COA).

Scholarship displacement is an area CMF’s policy team has been researching and exploring for years.

CMF was first made aware of the scholarship displacement issue through CMF’s community foundation CEO network and our Scholarship Learning Community. 

It was shared that community foundations were alerted that scholarships they awarded to some students could not be used because they would either exceed the amount of need identified in the student’s financial aid package or could not be applied to other education-related expenses.

According to Central Scholarship, the impact of scholarship displacement can:

•    Force students with low-income to replace displaced institutional scholarships with loans.

•    Punish students who took the time and effort to find private scholarships.

•    Create a system where privately funded scholarships could provide more benefit to the university than the student, which is not the intent of private scholarships.

"Scholarship displacement most often affects students with financial need and prevents them from getting the full benefit of the scholarships they receive. As a foundation, it's important for us to educate our recipients on scholarship displacement but also look at our internal strategies and policies, allowing for the deferral or reallocation of funds to a semester or year, where it will not be displaced,” Lauren Grevel, senior program office and Youth Advisory Council (YAC) advisor at the Grand Haven Area Community Foundation said. 

According to CMF’s 2020 Community Foundation Databook, 27 students reported to their community foundation that scholarship displacement affected them.

Some Michigan foundations are aware of what financial aid offices can do to mitigate scholarship displacement and have developed relationships with financial aid staff at colleges and universities to ensure that foundation scholarships do not displace other gift aid the student already received.

“Our staff, community partners and donors share the goal of wanting to build equity in access to postsecondary education, so addressing and mitigating scholarship displacement is a strategy that is important to us,” Hannah Rodriguez, program office and YAC advisor for the Manistee Community Foundation said. The Manistee Community Foundation has worked with their local community college on this issue.

“We have had the opportunity to work closely with the financial aid office and other staff at our local community college and think about how we can ensure students receiving this particular scholarship award can maximize the use of these funds in combination with federal, state, institutional and other local awards. These discussions have informed our conversations with donors as well as our scholarship award processes,” Rodriguez said. 

Over the last few years, CMF’s policy team has been researching and exploring the issue of scholarship displacement: 

•    In 2019, CMF and the Governor’s Office of Foundation Liaison (OFL) met with representatives from the Governor’s education policy team and the Michigan Association of State Universities (MASU) to discuss the issue of scholarship displacement.

•    In 2020, MASU drafted a set of practice-change recommendations that both financial aid officers and foundation staff could implement to mitigate scholarship award displacement.

•    During Foundations on the Hill 2020, CMF brought the issue to the attention of federal policymakers, some of whom took interest and have followed up with CMF to learn more.

In February 2021, MASU, the Michigan Association of State Universities and CMF convened a group of financial aid directors and foundation scholarship staff to review and revise that set of recommendations to create more clarity for implementation. 
 

CMF is continuing to work with partners to provide resources in support of our CMF community around the issue of scholarship displacement.
 

CMF’s Government Relations Public Policy team is leveraging the leadership of the Michigan Community Foundations Youth Project (MCFYP) Committee in raising awareness about the issue of scholarship displacement among Michigan youth.
 

CMF and MCFYP have partnered to create a resource kit for foundations to share with their networks and youth, outlining an overview of the issue and what students and families need to know. CMF and MCFYP are also developing a social media campaign. 

“We want to remain flexible when our recipients experience displacement and remain committed to ensuring that our donor's intent is met throughout the awarding process. The advocacy work and resources being developed by CMF will help all foundations with consistent messaging as well as policy change across the board,” Grevel said. 
 

CMF will continue to support and partner with our members to gather more data to better understand the issue and find viable and permanent solutions to mitigate scholarship displacement.

Want more?

Access the Scholarship Displacement Resource Kit and share messaging with your network.

Questions? Please contact the Government Relations Public Policy team.