U.S. Department of Education Student Debt Relief Proposed Hardship Rule Must Consider Scholarship Displacement

Author: Zaniya L.

Photo Credits: Canva Stock Photos

Today, the U.S. Department of Education released a draft proposal to provide student debt relief for borrowers who have experienced hardships. The draft proposal outlines criteria that the Department of Education can use to determine when borrowers are experiencing hardship and can provide automatic student debt relief to the borrowers. Although the draft proposal is a step in the right direction, some of the criteria do not consider scholarship displacement. Scholarship displacement is a predatory and brutal practice that penalizes students who earn outside scholarships, grants, and aid, forcing students to acquire additional debt or drop out of their postsecondary institution. 

One of the proposals considers the receipt of a Pell Grant and other information from the FAFSA form. Although this is a good suggestion, the proposal criteria must consider scholarship displacement. 100% of postsecondary institutions practice scholarship award displacement, and many do this by eliminating a student's Pell Grant after receipt of an outside scholarship, grant, or aid; therefore, a student who is eligible to receive a Pell Grant does not receive it because of their postsecondary institution outside scholarship, grant, and aid policy. 

Therefore, the favorable approach is to expand this factor by including the following: 

Receipt of outside scholarships, grants, and aid, including federal grants, federal scholarships, state grants, state scholarships, military benefits, outside scholarships, external scholarships, private scholarships, and any outside aid. 

By implementing the proposed changes, the U.S. Department of Education can provide assistance to borrowers facing hardship and those subjected to predatory practices such as scholarship award displacement. 

About the Author: Zaniya L

Zaniya L, serves as the Founder/CEO and Executive Director of YesSheCanCampaign/DISSCHOLARED. A third-year law student, her areas of concentration include civil rights, consumer protection, scholarship protection, scholarship displacement, sports law, business law, technology law, data privacy, public service, and intellectual property.