Students who merit scholarships get aid reduced

In 1994, I founded what would become a precursor of the Voxitatis Research Foundation in Illinois. The foundation awarded college scholarships to outstanding high school music students in the state after they participated in a small chamber music group.

I would audition students, mostly by cassette tape, hold a few rehearsals, bring in some guest performers—once I brought in a viola professor from Moscow and a violinist from the Chicago Symphony Orchestra—and give a few concerts, which were not very well attended, but it was about what I expected from having only a dozen or so students performing.

After the concerts, I would call the financial aid offices at the colleges or universities those students were slated to attend and get the address where I should send the scholarship check, as well as any special procedures I needed to follow to ensure that my donation would be counted toward the tuition of the scholarship recipient.

One university—Indiana University, Bloomington—provided matching funds for every dollar I sent, a policy on their part that effectively doubled my efforts in providing the scholarship, giving the student an additional reward for her efforts in seeking out ways to pay for college.

But other schools, which can remain nameless for the purposes of this article, took the amount I sent and deducted it from the amount that student needed. The school would subsequently reduce that student’s financial aid by that amount.

Colleges tend to see this as a way of redistributing resources in the financial realm where they are most needed. But the net effect on the scholarship awardee was zero.

The net effect on my little foundation—and trust me when I say little—was negative whatever that particular scholarship was worth. It’s hard to justify this as some kind of reward that students have to work for when they don’t actually get any reward—unless you count participation in the chamber music ensemble with other great musicians from across the state, which I suppose counts for something.

But from a scholarship perspective and from a “paying for college” perspective, the whole effort was a complete wash.

The policy is called “scholarship displacement,” and many schools do it. Now the state of Maryland has a law that allows schools to reduce the amount of financial aid a student can receive based on reward scholarships only under specific circumstances, the Baltimore Sun reports.

There are strategies to avoid the scholarship displacement, including:

  • Defer the scholarship money until after the student graduates, when it can be used to pay off loans incurred through financial aid or for other purposes that actually give the student a reward for earning the scholarship.
  • Provide an internship for the student and pay him or her for the work they do, but don’t tell the university. I used this strategy with a few students, but income tax filings, which are required for financial aid, eventually showed this as income.

“Most of the other states, I think, are eventually going to follow suit,” the Sun quoted Mark Kantrowitz, a leading researcher of financial aid and publisher of the scholarship website Cappex, as saying.

Maryland state Delegate Dana Stein, who co-sponsored the bill, said, “It’s grossly unfair to say, ‘Oh, you got some additional outside aid because of your hard work. We’re going to take some of that away from you.'”

Here’s hoping other states follow suit, restricting how state-funded institutions can reduce student financial aid based on reward scholarships.

About the Author

Paul Katula
Paul Katula is the executive editor of the Voxitatis Research Foundation, which publishes this blog. For more information, see the About page.

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