*Maryland’s new law now limits the conditions under which institutions may decrease financial aid, allowing reductions when a student’s aid exceeds the cost of college or with permission from a scholarship provider…
The longstanding practice of scholarship displacement has exasperated nonprofits and students across the country. University officials say it’s intended to redistribute limited financial aid to the students who need it most. Scholarship recipients say it essentially punishes them for having the wherewithal to find other sources of financial aid.
Under federal law, a student who wins a private scholarship after receiving a financial aid package from a university must report the scholarship to the university. Some universities then reduce the student’s aid by an amount equal to the scholarship…*
Unfortunately, the Baltimore Sun article that is linked is the only one on the subject, and does not give the bill number, nor does it clearly distinguish between grant aid versus loan / work-study aid, nor does it explain what prior policy on outside scholarships Maryland public universities had.
If the amended (third reading) version of SB 313 was the one enacted, it effectively means that outside scholarships must be applied first to unmet need (where financial need is defined in 20 USCA 1087KK, https://www.law.cornell.edu/uscode/text/20/1087kk ). If total aid exceeds financial need, then aid may be reduced; loans must be reduced first, then work-study, before reducing grants and scholarships.