Scholarship Displacement: What is It & How to Avoid

Impact of scholarship displacement
June 17, 2024
4 min read
Expert Reviewed


Reviewed by:

Mary Banks

Former Admissions Committee Member, Columbia University

Reviewed: 6/17/24

Thinking of applying for private scholarships? Watch out for scholarship displacement before you end up losing any money. Read on to learn more about scholarship displacement and how to avoid it!

Getting into college is hard enough. It can feel like there’s a million steps just to get accepted at a half-decent school. You need a great GPA, outstanding SAT scores, the right AP classes, and competitive extracurriculars. The last thing you want to think about is the gigantic price tag that comes with your degree at the end of it all.

Many students apply for private scholarships to ease the monetary burden of college. Some private companies, organizations, and institutions understand the value of a college education and seek to help those who are struggling. This kindness and generosity, however, isn’t so straightforward.

What if you were told that all your efforts in achieving a private scholarship actually led to you losing money? The reality of the matter is it’s a phenomenon that occurs more frequently than you think, and it’s all due to something called scholarship displacement.

What Is Scholarship Displacement? And What’s the Impact?

So, what is scholarship displacement, anyway? Scholarship displacement occurs when students see a reduction in their grants and loans from colleges after being awarded private scholarships. Colleges tout this practice as a fairness strategy to prioritize students who aren’t eligible for private scholarships.

Scholarship displacement is frequently seen as an unfair practice. It penalizes industrious students trying to make the best use of their resources and the private institutions awarding these scholarships. Often, students are required to write complicated essays or take part in interviews to attain such funding.

The impact can be huge and result in students losing out on thousands of dollars. Sometimes, schools will reduce grants and loans to such an extent that students are often wondering if it’s worth applying for private scholarships at all.

For students with full-ride scholarships, scholarship displacement can be particularly disheartening. These scholarships are supposed to cover all expenses, so any reduction can be frustrating and may make students question the value of seeking such extensive funding. 

However, regardless of whether you secure a niche scholarship or a more substantial one, it's important to understand that external scholarships can still play a crucial role in covering education costs. 

Why Does Scholarship Displacement Happen? 

Scholarship displacement happens because colleges want to reallocate their financial aid to those who need it most. 

Basically, when a student wins a private scholarship, some schools reduce the financial aid they offer, arguing that the student's financial need has decreased. This helps the college spread its resources to other students who might not have won any scholarships.

This approach is meant to make the most of limited financial aid resources. However, it can be quite disappointing for students who secure private scholarships, expecting them to add to, not replace, their financial aid. This could even discourage students from applying for private scholarships if they feel it won't really help them financially in the end.

How to Avoid Scholarship Displacement

So, how do you avoid scholarship displacement? 

The first thing you need to do when learning how to avoid scholarship displacement is inform yourself. It’s imperative you speak to the appropriate admissions and financial aid officers to equip yourself with everything you need to know. If you’re feeling lost and don’t know where to start, consider speaking to your guidance counselor.

The exact details of the practice can vary from school to school. What’s worse is some schools may engage in stealth scholarship displacement, where they claim not to reduce funding but still manage to.

If you’re worried your funds may be impacted, make sure to ask the right questions. Whenever speaking to admissions or financial aid officers, ask about private scholarships, how they impact grants and loans, and if the school has any explicit policies on scholarship displacement.

Questions to consider:

  • What are the policies on scholarship displacement?
  • How will applying for private scholarships affect my loans and grants?
  • Are there any ways to avoid or minimize scholarship displacement?
  • Do certain kinds of scholarships have a bigger impact than others?

States that Prevent Scholarship Displacement

California recently joined Maryland, New Jersey, Pennsylvania, and Washington as the fifth state to prohibit scholarship displacement.

State Year Law Passed Details
California Late 2022 Bans scholarship displacement for Pell Grant recipients or students under the California Dream Act
Maryland 2017 The first state to enact laws against scholarship displacement. Unlawful unless aid exceeds the cost of attendance.
New Jersey 2021 Eliminates displacement unless scholarships exceed financial need or if permitted by the scholarship provider.
Pennsylvania 2022 Displacement is allowed only if scholarships exceed financial need or due to athletic financial restrictions
Washington Early 2022 Requires meeting 100% of a student’s needs before displacement due to outside scholarships can occur

If you were considering attending schools in these areas, you could potentially save yourself a lot of headaches when it comes time to apply for private scholarships. Although no two states are the exact same, there are a few that stand united against scholarship displacement policies.

Maryland was one of the earliest states to discourage the practice in 2017. The only exception is if your private scholarship would be greater than attending the college in question or with influence from the scholarship provider. This was followed by New Jersey in 2021 with similar restrictions in addition to rules for athletic groups.

Recently, three more states joined the ranks to stand against scholarship displacement. Pennsylvania, Washington, and California now all have rules where students’ grants and loans are no longer jeopardized as a result of private scholarships. 

Don’t forget to familiarize yourself with scholarships for out-of-state students if you’re interested in attending a school in these states.

You might also want to explore Quad Education’s Quad Access to Education Scholarship. It helps high-achieving, low-income, first-generation students reach their goals. 

To qualify, you must be a high school junior or senior, a first-generation college student with a household income under $75,000, and have at least a 3.5 GPA. Winners get over $1000 in tutoring for college applications or SAT/ACT prep, making higher education more accessible.

Also, check out our Merit-Based Scholarship Directory. It makes it easy for students to find financial awards based on their achievements, not financial need. 

You can quickly search by GPA, award amount, and other criteria, helping you pinpoint scholarships that match your talents and academic goals. It's a straightforward way to ease the cost of college while rewarding your hard work.

FAQs: Scholarship Displacement

Still wondering if your grants and loans are safe from scholarship displacement? Check out some expert answers to our top questions!

1. How Do You Fight Scholarship Displacement?

The best way to fight scholarship displacement is to be prepared and familiarize yourself with the exact guidelines and practices of your colleges of interest. Asking the right questions to admissions and financial aid officers will ensure that you know what to watch out for when applying for financial aid and private scholarships.

2. What States Ban Scholarship Displacement?

Maryland, New Jersey, Pennsylvania, Washington, and California are the five states with active policies discouraging scholarship displacement. Although the exact legislation varies by state, they all have similar policies to prevent scholarship displacement. There’s also information on Ivy League scholarships for relevant states.

3. What Is the Scholarship Displacement Bill in California?

The scholarship displacement bill in California bans the practice for those who earn the federal Pell Grant or state scholarships if they come from a low-income background. This would allow students to keep more of the money scholarship providers give but still exclude those from different levels of affluence.

Final Thoughts

Although not everyone applies and receives private scholarships, the few who do should make sure to take every step to reap the rewards of their hard work. Financial planning is a huge part of the college process, and you don’t want to be caught off guard when a school is cutting your funding short.

Dealing with scholarship displacement can be a huge hassle and cheat you out of the compensation you deserve from being awarded private scholarships. It’s always a good idea to conduct thorough research when applying for these programs and double-check what your college has to say about scholarship displacement. 

If you’re planning on attending school in one of the five states that stand against scholarship displacement, you’ll definitely have an easier time making sure you keep any money you’re awarded. 

In any case, having a college game plan means developing a financial strategy so you can thrive as the best version of yourself when it comes time for graduation.

Subscribe to Our Newsletter
Thanks ! You're now subscribed!
Oops! Something went wrong while submitting the form.

Get A Free Consultation

Speak to a college admissions expert about how we can help you get into your dream school
Schedule a Call

You May Also Like

Before you go, here are a few facts about us!
The Quad Factor: Working with us can increase your chances of admission by 11x!

The Best of the Best: Our team comprises of only 99th percentile tutors and admissions counselors from top-ranking universities, meaning you work with only the most experienced, talented experts.

The Free Consultation: Our experts would love to get to know you, your background, goals, and needs. From there, they match you with a best-fit consultant who will create a detailed project plan and application strategy focused on your success.