The University of Maryland, College Park, will be one of the public colleges in the state impacted by the new state law regarding scholarship displacement.

In a new law effective July 1, 2017, Maryland has become the first state in the United States to outlaw scholarship displacement by public colleges.

The new law bans state public colleges from cutting financial aid for students who have earned private scholarships. This practice conducted by higher education institutions involves reducing financial aid, usually by the amount of the student’s scholarship, so that the financial aid funds can be redistributed amongst other needy students.

The new law in the state of Maryland was spearheaded by a nonprofit organization known as Central Scholarship that provides scholarships and interest-free loans to Maryland students. Central Scholarship would often reward a student with a scholarship only to have that student’s financial aid package reduced by the same amount.

Jan Wagner and Michele Waxman Johnson, Central Scholarship’s President and Vice President, respectively, conducted a two-year campaign to stop this government practice, and their effort has finally paid off.

Central Scholarship’s efforts to help make college more affordable were not as effective because of scholarship displacement. The practice can punish students that seek other sources of financial aid by putting them deeper into debt because they lost their government assistance.

In a comment to the Baltimore Sun, Wagner said, “It totally undermines our very existence.”

According to federal law, a student that receives a private scholarship after also being granted financial aid from a college must report the scholarship money to the higher education institution. Universities than have (or had) the right to reduce that student’s financial aid package.

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In the minds of the universities, they need to be able to redistribute the financial aid to the most needy of students, not the ones who were just granted a scholarship. According to the new law, Maryland’s state colleges can still lessen financial aid packages, but only with consent from the scholarship provider or if the student’s full assistance exceeds the cost of college.

Many believe that the move by Maryland may prompt other states to follow suit and pass similar laws that limit scholarship displacement. As of now, the Maryland ban only impacts state colleges, but legislators are considering trying to extend the law to private institutions as well.

Dennis O’Shea, a representative from John Hopkins University, disagrees with the law. "When a student's financial position changes, perhaps because of a well-deserved honor like a state legislative scholarship, then the student's need for our help has also changed," said Dennis O'Shea, a Hopkins spokesman. "We can put that money to use helping another student who may not have that resource."

As of today, four-year public institutions in the state of Maryland include the University of Maryland’s 11 campus, including Bowie State, in addition to St.Mary’s College of Maryland and Morgan State University.

Students across the U.S. certainly need all of the financial assistance they can find. According to the Student Loan Report, the national student loan debt is currently at $1.41 trillion, while about 70 percent of college students are student loan borrowers. The average student loan borrower holds a loan debt of $27,857.

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