Overaward: A student is said to be overawarded when the total need-based financial aid exceeds the student’s demonstrated financial need or when the total financial aid plus the expected family contribution exceeds the college’s annual cost of attendance.
When a student who is receiving need-based financial aid wins a private scholarship, it reduces the student’s demonstrated financial need. The college’s financial aid office must then reduce the student’s need-based financial aid package to compensate, since the student is considered to be an overaward.
College financial aid administrators have flexibility in how they reduce the need-based financial aid package. The college’s outside scholarship policy specifies how the college reduces the student’s need-based financial aid when the student receives a private scholarship.
The Federal Pell Grant is never reduced, not even if the student is overawarded. Colleges are also not required to reduce campus-based aid, such as the Federal Supplemental Educational Opportunity Grant (FSEOG), Federal Perkins Loan and Federal Work Study (FWS), unless the student is overawarded by $300 or more.
The National Scholarship Providers Association (NSPA), the national professional membership organization for scholarship-granting organizations, conducted a scholarship displacement survey in 2013. This resulted in a detailed white paper about the impact of award displacement.
Before a college displaces a student’s private scholarship, there are a few workarounds that should be considered:
Students who have won significant amounts of private scholarship funding should consider each college’s outside scholarship policy when calculating the net price of the college’s financial aid award letter. This can affect the tradeoffs between college affordability and college quality when the student is deciding which offer of admission to accept.
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