YESSHECANCAMPAIGN/ DISSCHOLARED FILES CONSUMER FINANCIAL PROTECTION BUREAU 553(E) RULEMAKING PETITION

The YesSheCanCampaign filed a 553(e) rulemaking petition to request that the Consumer Financial Protection Bureau promptly amend its regulations to prevent institutional loan lenders, private loan lenders, loan servicers, student loan tools, scholarship foundations, scholarship websites, and scholarship programs from perpetuating the student loan debt crisis through the practice of scholarship award displacement to their profit and benefit. 

Scholarship award displacement is when one form of student financial aid (i.e., federal scholarships, federal grants, state scholarships, state grants, external scholarships, military benefits, tuition waivers, and/or any other type of outside aid) replaces another form of student financial aid for example, an institutional scholarship or grant. The outside scholarship and grant can also impact a student’s federal loan and/or work-study package. Institutions are also practicing hidden scholarship award displacement, taking account of outside scholarships, grants, and aid while developing financial aid packages. This practice forces students to acquire additional student loan debt or drop out of their postsecondary institution. 100% of postsecondary institutions funded by the U.S. Department of Education practice scholarship award displacement in some form. 100% of students who receive financial aid are victims of scholarship award displacement.

Postsecondary institutions have misled students by advising them to apply for scholarships and grants while penalizing them and forcing those same students into student loan debt. These institutions have partnered with private loan lenders, servicers, tools, scholarship foundations, scholarship websites, and scholarship programs to lure more students into institutional, private, and federal loans after they have earned outside scholarships and grants. Postsecondary institutions have used scholarship award displacement practices to lure students into taking out their institutional loans. Postsecondary institutions have also disguised their private loan preferred lists within student loan tools. These student loan tools were created by a consortium of institutions and lenders.

Private loan lenders and servicers have taken advantage of the practice of scholarship award displacement by creating and acquiring scholarship programs, scholarship foundations, scholarship tools, and scholarship websites. Many private loan lenders have falsely advertised that scholarships will close the gap for students after financial aid. However, 100% of postsecondary institutions practice scholarship displacement in some form. In numerous instances, this situation leaves students with a gap. If they cannot cover the expenses, then the only options are to get an institutional loan, private loan, federal loan, or withdraw from their postsecondary institution. Additionally, scholarship foundations, scholarship websites, and scholarship programs have partnered with institutions, private loan lenders, student loan servicers, and private loan tools to profit off the practice of scholarship displacement by offering scholarships and misleading students about the practice of scholarship award displacement.

Institutional loan lenders, private loan lenders, loan servicers, student loan tools, scholarship foundations, scholarship websites, and scholarship programs 

are using scholarships, and the practice of scholarship displacement to lure students into additional student loan debt; this action is a direct violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which prohibits unfair and deceptive acts and practices. Scholarship award displacement is an unfair and deceptive act and practice. 

To learn more about our work to dismantle scholarship award displacement, please visit www.disscholared.org. 

A copy of the rulemaking petition can be requested by emailing disscholared@yesshecancampaign.org.