Fighting Award Displacement and Student Loan Debt While Finding a New Moral Compass

imageEver hear of “award displacement?”

Neither had I, until a higher education maven recently brought it to my attention.

For example, if you are struggling to finance your higher education and are able to line up a $5,000 private scholarship on your own from a Rotary Club to help make up the still unmet financial aid you were deemed eligible for, it is not uncommon for the college you attend to reduce whatever aid they had promised you as part of your financial aid package by that same $5,000 you were able to cobble together. What?

Chances are, the local Rotary Club has no idea that their generosity, meant to benefit you, is really helping the college. Not what either a financially strapped student or a generous private donor had envisioned.

Outrageous you say? Somebody should do something? Well, according to an article by Stephen Burd in NewAmerica EdCentral, the Maryland Senate and House of Delegates have introduced bills this year to bar public colleges and universities from engaging in such award displacement. According to Burd, that effort has been spearheaded by a Maryland non-profit group, Central Scholarship, who provides over $1 million in scholarships and interest free loans to students so they can attend college and graduate school.

According to Burd, the folks who administer the program seek to justify award displacement by saying at the end of the day they have a responsibility to direct their aid money to students with the greatest need. This argument seems a bit disingenuous to me, and apparently to Maryland legislators as well. This award displacement practice actually hurts the low income students these donors are trying to help. Generous donors are often clueless that their generosity ends up helping the institution and not the needy student.

If the legislation becomes law, Maryland would become the first state in the country to ban the practice of award displacement. On one level, that fact seems hard to believe. Do you know what colleges and universities in your state practice award displacement? Maybe it’s time to ask some hard questions.

This leads to the broader question of why do we as a nation continue to make financing a higher education so challenging? We profess to value education and wanting an educated America, yet our actions speak louder than our words as we continue to make it difficult for students trying to finance an education while they are in school and after they finish.

The increasing student loan debt, estimated at over $1 trillion with over 11% of that 90 days past due, seems, unfortunately, to be a logical fallout from award displacement. You get hammered trying to afford college going through it and again when you are trying to pay your loans off after you finish. We need to ask why terms made available for student loan debt repayment for young people just getting started in life are intentionally worse than the generous terms we make available to the financial institutions that only a few short years ago nearly brought this nation to financial ruin. What we profess as values and how that manifests itself in real life continue to be totally at odds.

Why do we continue to let special interest groups, lobbyists, and politicians put our next generations in such an untenable situation? Sure, some of us had some student loan debt when we finished years ago, but nothing approaching the crippling debt that will limit what is possible for the next generation of home buyers, consumers, and young parents who will want a college education for their own children.

Ironically, and sadly, it is the same generations that benefitted from the GI Bill and low college tuitions that are now the leaders making the laws that are negatively impacting this next generation of college students. Do not our current political leaders who benefited from a country that truly recognized the value of higher education affordability have that same moral obligation to our next generation of college students? What should that moral obligation look like? Should it perhaps look like no award displacement or stifling student loan debt?

Current Democratic presidential candidate Bernie Sanders speaks often of the importance of making college free. While his critics roll their eyes, other countries find a way to make it happen. Whether we get to that place or not, if we’re serious about valuing affordable higher education for our young people, we need real systemic changes to make that happen. Let’s start by eliminating award displacement and offering student loan repayment terms that say we know you are our future, we value you, and you are going to be treated fairly. Or, we could dare to be remarkable by making student loan repayment terms even more favorable than the terms we continue to provide to those same financial institutions that brought this country to its financial knees in 2008.

America needs a better memory and a working moral compass.

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Tom Fiebiger is a recovering civil rights lawyer and politician, having spent 25 years representing workers that were discriminated against and a term in the North Dakota State Senate. The God he understands is more about grace than judgment, has a sense of humor and a big tent. Fiebiger's best gift is his family.

2 thoughts on “Fighting Award Displacement and Student Loan Debt While Finding a New Moral Compass”

  1. Thanks Tom. Thought provoking indeed. I’m not sure if this is a heinous crime or simply an approach to the allocation of limited resources to help the maximum of students in need.

    Ex: College tuition and fees = $8,000
    Assistance available from institution = $5,000
    Student Jim and student Jane have identical financial resources and need, and identical academic merit, but Jim then receives a $5,000 scholarship from Rotary because his father is a member of the club.

    If the award displacement practice is used, Jane and Jim would each have $5,000 with which to pay their educational costs. Jim would get his from the Rotary and Jane would get her’s from the institutional fund.

    If award displacement practice was outlawed, Jim would receive $7,500, and Jane would receive $2,500 to defray educational costs. Jim goes to school because he can now afford the $500 remaining cost and Jane decides not to go because she cannot afford the $5,500 remaining cost.

    On its face, award displacement sounds unfair, but from the perspective of making college affordable to as many students as possible, especially for those in financial need, it sounds like a reasonable tool.

    I’m assuming that this does go on at many institutions, and I certainly understand the frustration that the Rotary or the Rotary scholar might feel about it, but I also know that many organizations make these scholarships as a way to support the institution(s) in their community. I guess I need to learn more. Thanks.

    1. I think you know a lot . . . raise a good points, Lee. One of the concerns I have seen raised is that the award displacement is used in a way that does not allow more students in difficult financial circumstances to attend, as your example envisions. Rather, schools use the funds freed by a Rotary scholarship going to a student in need to make a more attractive award proposal to try and entice a high achieving student to attend and thereby improve the school’s reputation and bragging rights about its high academic standards. Thanks for sharing your thoughts on this challenging and important issue.

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