Universities Can’t Withdraw Financial Aid From Students Who Receive Private Scholarships, New Law Says – LAist | CarTailz

As Dixie Samaniego prepared for her freshman semester at California State University Fullerton, she had one focus: finding a way to pay.

“I knew my family wouldn’t be able to pay or help financially,” said Samaniego, now a senior, “so I started applying for scholarships everywhere.”

As a low-income student, she qualified for a federal Pell Scholarship and a state Cal Scholarship, but still had a significant balance to cover. After hours of applying, writing essays, and interviewing, she received a $5,000 freshman year award from a private foundation dedicated to helping students struggling to get into college.

But then, Samaniego said, she received an unwelcome message from the Cal State Fullerton tax office: Adding the scholarship to her financial aid package would reduce the amount of assistance she received from the university.

Confused and disappointed, Samaniego decided not to accept the scholarship she had worked hard for.

“I knew nothing about higher education. I didn’t know anything about financial aid,” said Samaniego, who is the first in her family to attend college. “I got all this money and then I had to make some really tough decisions.”

What she experienced, says Samaniego, has a name: the expulsion of scholarships. The practice occurs when a student receives a scholarship after providing their initial financial aid and their college or university reorganizes their institutional aid package, often resulting in a net gain of zero for the student. And starting next fall, it will be banned in California for low-income students who qualify for a Pell grant or for state financial assistance under the California Dream Act.

California is one of five states in the US with such laws and only the second in the country to outlaw crowding-out of scholarships at both public and private colleges and universities.

It is difficult to quantify how many students are being squeezed out by the scholarship or how much money they are losing. However, a 2013 study by the National Scholarship Providers Association found that 20% of colleges nationwide cut institutional grants when a student receives a private scholarship, even if a student has demonstrated need. Low-income student advocates say the practice can be a significant barrier to college affordability.

A spokesman for Cal State Fullerton said federal privacy laws bar the university from commenting on a specific student’s financial aid package. However, guidelines from the Federal Student Aid Office direct universities and colleges to renegotiate student aid awards when there is a possibility that the funds will exceed either the cost of attendance or the student’s needs, as demonstrated in their free federal student aid application. However, the rules also give financial aid officials some discretion in working with students to package their awards, and colleges have their own guidelines that they follow in addition to federal law.

“Within the financial aid office, the details are more complex,” said Christina Tangalakis, president of the California Association of Student Financial Aid Administrators. “Some students are very successful in seeking college funding and are offered more assistance than they have to bear,” Tangalakis said, according to the federal government’s methodology. But schools react differently to so-called “overawards,” she said.

To make matters worse, debate over whether colleges are accurately calculating tuition in California, where the cost of living has skyrocketed in recent years. Colleges and universities are required by the government to provide “reasonable” estimates of expenses incurred during a school year, according to the Federal Student Aid Handbook. Most schools use average spending in a region when calculating estimated costs for housing, transportation, and supplies, which can skew the results.

But it is precisely these non-study expenses that put the greatest strain on the students. A 2021 study of college affordability by the Public Policy Institute of California concluded that “For the majority of students attending public postsecondary institutions in California, the combined costs of housing, fees, books, and transportation are higher than the tuition fees”.

“We believe that California leads the nation in student financial aid…but the total cost of education, and particularly non-tuition costs, are not covered by financial aid programs. So students have to rely on outside sources,” said Marcos Montes, policy director of the Southern California College Attainment Network.

The new law, Montes said, will allow students to maximize the use of scholarships. “A student can use this money to pay for his apartment, his books, his food, his transportation, a new appliance, a new computer.”

Montes himself grappled with the stress of scholarship crowding out while a student at California State University in Los Angeles. Schools often charge different fees for attending students based on their living situation. As a home commuting student, Montes was in the lowest category for cost of attendance. But he still needed money for textbooks and car maintenance.

“I received a scholarship to represent the student body,” Montes said. “And when that scholarship came, I was expecting a money check to come my way to cover some expenses outside of class, and that check didn’t come.”

The school’s financial aid office told him he had exhausted the help the school was willing to provide, Montes said. In order to access the funds, Montes had to move out of his parents’ home and change his residency status. He was able to use the grant – although not in the way he intended.

“I found, you know, a little one-bedroom apartment to live in and I used that money to pay the rent,” he said.

Prior to the passage of the law, the Southern California College Attainment Network and other advocacy groups were already working personally with students facing scholarship crowding out.

Counseling these students can take hours and requires studying the financial assistance grant letter, understanding what dollars have been moved, and working with the counselors to come up with strategies for recovering the funds. And not all students know what happened to their financial aid package or know where to find help, said Mer Curry, executive director of the Northern California College Promise Coalition.

“It’s inefficient to promote[students for]students, but it’s also unfair,” Curry said. “What we saw with the students is that they felt lucky and privileged to be in a program or have someone explain to them what the problem was so they could even go through a process of advocating or asking for help .”

Cal State Student Association President Krishan Malhotra said he received no explanation from his university’s financial aid office when he lost $5,500 in aid after receiving a stipend to work in student administration — money he is counting on left to pay for digital textbooks.

“I’m pretty good at keeping an eye on my money,” Malhotra said, “but when you have a million things to do, when you have a full-time job, when you take 18, 15 units, some students have families or dependents, and it’s like that busy that you can definitely miss it.”

Malhotra called the talk about crowding out grants “long overdue.”

The new law, passed by the Legislature in August and signed by Gov. Gavin Newsom, will allow the most vulnerable students, who can secure additional funding for post-secondary education, to have more freedom in how their funds are used.

The Cal State Student Association worked with advocacy groups to pass the law, and California’s community college system signed its support. Scholarship providers, frustrated that their funds weren’t always reaching the students who needed them, also got involved.

“Scholarships play an essential role, not only in increasing access, but also in reducing student loan debt,” said Mike Nylund, president and CEO of Scholarship America, a Minneapolis-based nonprofit that helps students find and Administration of scholarship funds helps. “This new law will ensure the students most in need don’t lose their critical private scholarship funds.”

Tangalakis said the new rules could create confusion at first but ultimately result in some schools reprioritizing aid policies to include scholarships.

“Students will benefit from more consistent treatment of scholarship funds and fewer adjustments to their institutional funding,” she said.

The ban on crowding out grants, however, leaves out some students: those who don’t have enough income to qualify for Pell Grants or the California Dream Act but may still have financial needs.

“The bill has limitations. It doesn’t apply to everyone,” said Sbeydeh Viveros-Walton, director of higher education at Public Advocates, a nonprofit law firm that has supported the bill. And students still need to be briefed on the issue so they can monitor their financial aid packages and ensure colleges are complying, she said. “The burden of fixing this still rests with the students.”

With the bill set to begin protecting low-income students from the 2023-24 academic year, its sponsors are keen to ensure these students are educated and prepared.

“I think the next thing to focus on is implementation,” Samaniego said. “To find out if those bills and those efforts are actually reaching the students they’re supposed to be reaching.”

What questions do you have about Southern California?

Leave a Comment