The New York Times opinion piece “The Catch 22 of Applying for Private Scholarships” shares one student’s frustration with “scholarship displacement.” If you win private scholarships (also known as “outside scholarships”) from companies, churches, non-profits, etc., many colleges reserve the right to reduce your need-based financial aid award accordingly. For example, if you win a $1,000 scholarship from the local Rotary Club, your college may reason that you now need 1,000 fewer dollars in financial aid. It raises a logical question: What’s the point of actually applying for private scholarships if the net gain will be $0?
But it’s important not to make rash decisions around college financing. So here are a few important points that are not made clear—or are left out altogether—from the article.
First, not all need-based financial aid is free money. It can also come in the form of loans or work study programs. According to the National Scholarship Providers Organization, 80 percent of colleges will reduce loans or work study first if you receive a private scholarship. That’s not such a bad displacement break.
Also, remember that every dollar you win in scholarships is a dollar less you’ll be required to pay for college. Yes, that dollar in scholarship terms may count for more at some colleges than it does at others depending on each school’s displacement practices. But free money (that does not have to be paid back) to pay for college is pretty much always a good thing because it gives you more control over your financial destiny.
And finally, there are steps you can take to mitigate your award displacement if you find yourself in that situation. Financial aid expert Mark Kantrowitz shares some of his tips in this article.
The vast majority of the funds available to help students pay for college are accessed by applying for need-based financial aid. But private scholarships can help reduce your costs even further. If you’re concerned about college costs, don’t let fear of displacement deter you from availing yourself of every option.