Scholarship award displacement is one of the root causes contributing to the student loan debt crisis. Need-based recipients cannot use their private scholarship funds to fund their gap after federal, state, and institutional aid, as intended by private scholarship donors, causing many students to borrow more or drop out of college. Scholarship displacement occurs when colleges and universities reduce a student's financial aid package after the student receives an outside scholarship. In many cases, the amount of the outside scholarship is subtracted from the student's financial aid award, resulting in no net gain for the student. Scholarship displacement can have implications for student loan debt, as reducing a student's financial aid award after they have received a private scholarship can leave them with a larger unmet need, which may lead to increased borrowing of student loans.

For example, if a student's financial aid award was reduced by the same amount as the private scholarship they received, they would still have the same amount of tuition and fees to pay, but less aid to cover those costs. This could lead to the student taking out more student loans to make up the difference. Additionally, if the student is unable to cover the full cost of attendance, they may have to take out private student loans, which often have higher interest rates and less favorable terms than federal student loans. This can result in the student accumulating more debt and facing greater financial hardship after graduation.

We want to dismantle scholarship award displacement.

Our organization has been doing research on scholarship award displacement for about three years. We recently found out that scholarship award displacement is a violation of the Equal Protection Clause. We would like help understanding our legal options.

Scholarship award displacement is one of the root causes contributing to the student loan debt crisis. Need-based recipients cannot use their private scholarship funds to fund their gap after federal, state, and institutional aid, as intended by private scholarship donors, causing many students to borrow more or drop out of college.