Half of scholarship recipients experience a scholarship shift

According to a recent nationally representative survey conducted by Student beans, 50% of American students who receive private scholarships experience scholarship displacement. This prevents them from making full use of the scholarships they have obtained.

Student Beans is a popular website and app that offers student discounts for 163 million students in 52 countries, with over 2 million students in the United States.

What is the movement of scholarships?

Scholarship shift occurs when receiving a private scholarship results in a reduction in other forms of financial aid, such as college scholarships.

Private scholarships are awarded by foundations, businesses, philanthropists and other private organizations. This contrasts with institutional scholarships and grants awarded by colleges and universities.

Most colleges require students to declare when they get a private scholarship, which allows the scholarship to move.

The displacement of scholarships is unfair to students as it eliminates the financial benefit of winning a private scholarship. The move of scholarships is also unfair to scholarship providers, who seek to reduce their student’s debt and workload, thereby improving outcomes by making colleges more affordable.

A previous stock market displacement study by the National Scholarship Providers Association (NSPA) found that 20% of colleges cut institutional grants when a student wins a private scholarship. Some colleges reduce institutional grants even when the student has unmet financial need.

The Student Beans survey is the first survey to assess the impact of the scholarship shift on students. The results of the student survey suggest a much larger impact than the NSPA study on college policies.

Statistics on the movement of scholarships

Almost a third (32%) of survey respondents said they had received a private scholarship. Students at private non-profit colleges were more likely to report receiving a private scholarship.

Among students receiving private scholarships, more than three-quarters (78%) spoke about the private scholarship to their university financial aid office.

Half (50%) of those students said the college had revised its financial aid program, 62% cutting institutional scholarships, 55% reducing student loans, and 24% reducing student employment. The percentage of colleges reviewing financial aid awards was similar by type of college, with half of public and private college students experiencing a scholarship move.

The combination of the 50% and 62% figures suggests that nearly a third (31%) of scholarship recipients who report their scholarships to the college’s financial aid office experience a reduction in institutional grants.

Stealth scholarship move occurs when a college claims it does not practice scholarship moving, but nonetheless takes receipt of a renewable private scholarship for granted when preparing for financial aid or award programs at the university. over the following years.

To assess the impact of the stealth shifting of scholarships, second-year college students were asked how the institutional grants in their financial aid program compared to the previous year, ignoring private scholarships. Of college sophomores, 18% said institutional grants had increased, 36% said institutional grants had decreased, and 46% said institutional grants had stayed about the same.

Positive and negative impact of private scholarships

Private scholarships have a positive impact on college planning.

Of the scholarship recipients, 45% received less than $ 2,500, 35% received $ 2,500 to $ 9,999, and 20% received $ 10,000 or more. Just over half (53%) said their private scholarships were renewable.

Four-fifths of scholarship recipients (80%) said that getting a private scholarship made college more affordable. Just under half (45%) said that obtaining a private scholarship influenced their choice of university and a quarter (23%) said it influenced their choice of major.

But private scholarships can also negatively impact college planning.

A sixth (16%) of survey respondents and 22% of scholarship recipients said they had faced a scholarship scam, such as a scholarship that charged application fees, taxes, or other fees. (If an scholarship is taxable, taxes are paid when the recipient files their federal income tax return. Taxes are never paid to the scholarship provider.)

Only 28% of survey respondents and 42% of scholarship recipients knew that scholarships used to pay for room and board, transportation and other living expenses are taxable.

According to data from the IRS Statistics of Income (SOI), more than 806,000 taxpayers reported $ 3.4 billion in taxable scholarships in 2018.

Bursaries are the only form of generosity that is taxable to the recipient. Many students are surprised to learn later that they owe taxes on their grants and scholarships.

The House Ways and Means Committee proposed to repeal the imposition of the federal Pell Grant in the Build Back Better Act of 2021 (HR 5376), but scholarships would still be taxable.

Federal and state laws on scholarship relocation

Two states have passed laws prohibiting the movement of stock exchanges. Maryland was the first to enact a travel ban, in 2017, followed by New Jersey in 2021.

Representatives Andy Kim (D-NJ-03) and Mike Kelly (R-PA-16) presented the Helping students plan for the Colleges Act of 2021 (HR 5380) on September 27, 2021. This bipartite legislation would require all colleges to disclose their scholarship movement policies to prospective and enrolled students, letting them know how receipt of private scholarships may affect a student’s eligibility for a scholarship. institutional financial assistance and the amount of institutional financial assistance scholarships.

This will help students and families make more informed decisions about paying for college education. More transparent disclosures will help students understand whether the scholarships they earn will reduce the amount of student loans they will need to borrow.

“Practices like… the relocation of scholarships make it more difficult for students and their families to plan for college education,” Congressman Kim said. “Our bipartisan bills will increase transparency and help students and parents make the best financial decisions for their families.”

The legislation also directs the United States Government Accountability Office (GAO) to conduct a study on scholarship displacement and scholarship demographics. The report will include recommendations for legislative measures to ensure that private exchanges extra charge and not supplant institutional financial aid scholarships.

About the survey

The Student Beans scholarship shift survey was conducted in July and August 2021. The survey was not prompted. There were 564 respondents aged 16 to 24. The survey results are statistically significant with a confidence interval of +/- 4% at the 95% confidence level.

Of the respondents, 29% were freshmen, 33% were sophomores, 22% were juniors, and 16% were seniors.

The geographic distribution by college location mirrored college enrollment patterns, with 13% of students enrolled in colleges in California, 10% in New York City, 8% in Texas, 7% in Florida, and 4% in Pennsylvania. .

Almost three-quarters (72%) of respondents were enrolled in public colleges, 19% in private not-for-profit colleges, and 9% in private for-profit colleges.

Almost half (44%) of students had previously received a Federal Pell Grant.

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