The Disappearance of Financial Aid: how Stanford consumes outside scholarships when need-based aid doesn’t fulfill student needs

Nov. 20, 2019, 4:40 p.m.

Students like Jewel Matanane ’23 once believed wholeheartedly in what Stanford’s Financial Aid Office proudly claims: that they ensure “your family’s economic circumstances will not prevent you from being able to enroll at Stanford.” Like so many others, she found that one of Stanford’s greatest draws was in the hundreds of millions of dollars in financial aid given out to 70% of the student body. And like many American college students concerned about how she and her family would pay for college, she applied to outside scholarships and was fortunate enough to earn enough money to cover what Stanford had estimated her entire family’s contribution would be.

It was only at Admit Weekend when she found out that what her parents were expected to contribute, in spite of the money she had already won from scholarships, would not be changing at all. 

“During Admit Weekend, I went to one of the seminars and they told us that it [her scholarship money] only goes to student contribution,” she said. “So then I found out that my parents have to pay $5,600 even though I have over $10,000 in scholarships that can cover everything. It was pretty frustrating.”

Matanane’s story echoes the experiences of many Stanford students who have been surprised and frustrated to find that the money they earned from outside scholarships cannot be applied to their parent contribution. Outside scholarships cannot be used to lower a student’s parent contribution, according to Stanford’s financial aid office. Outside scholarships can be used to decrease their calculated student contribution — which is generally around $5,000. Any award money in excess of the student contribution is taken away from the financial aid award Stanford initially granted.

The policy is not entirely the University’s decision: for federal grants for student aid, Stanford is bound by federal laws in distributing them. These laws, explained in the Federal Student Aid Handbook, specifically prohibit “over-awarding,” which prevents external scholarship money from decreasing the calculated parent contribution to a student receiving any money from a federal aid grant. Both the Pell Grant and the Supplemental Education Opportunity Grant (SEOG) are examples of federal aid grants, and each one is handled differently by the University. The Pell Grant is awarded on an individual basis to students who qualify according to data inputted through FAFSA, while the SEOG is awarded to the university as a sort of lump-sum.

Stanford does not separate lump-sum grants such as the SEOG from other sources of financial aid — such as donations from individuals or corporations — meaning the whole financial aid pool must follow federal regulations. State-awarded grants, such as the Cal Grant, are also subject to comparable policies regarding over-awarding.

“[The SEOG] is money given to the University to choose to spend in the way that we think is best, as long as we follow the regulations that the federal government gives us, as opposed to the Pell grant that students can take with them and go wherever they want,” Cooper said.

  The same is true of Harvard, Berkeley and other universities that receive federal grants for student financial aid.

“We are certainly not alone in this policy,” said Karen Cooper, associate dean and director of financial aid at Stanford. “Virtually every university, public or private, in the U.S. who is awarding federal student aid has these kinds of restrictions.”

“Our financial aid program is need-based, so if a student has a resource that is meeting that need, then we can use our funds to give it to somebody who also has need,” Cooper added.

But because Stanford commits to meeting every student’s full financial need, there is no room for this scholarship money to be added to other students’ aid packages. These funds are instead used to lessen Stanford’s contribution to a larger financial aid pool. 

The financial aid that is awarded by the University to students each year comes in part from “unrestricted funds,” Cooper said. This is a section of the University budget that is allocated for use in a variety of programs, including financial aid.

“We have funds that have been around for a long time that have been gifted to us by our donors, but that doesn’t cover our full budget,” Cooper added.

Because of this, the University calculates how many unrestricted funds need to be contributed to the financial aid pool throughout the year. When this excess outside award money from students replaces Stanford’s contribution of unrestricted funds dollar-for-dollar, scholarship funds are essentially subsumed by the University budget rather than being contained within the financial aid pool.

“It’s not that we are adjusting an award saying, ‘Oh, we found more money so we’re going to give you more money,’” Cooper said. “We have a commitment to meet the full need of everybody, so it allows us to maybe use less of the unrestricted funds that can go to other things. This might mean the budget office can say, ‘Oh, actually we do have money for that project because financial aid didn’t use it all.’”

Many students, including those on need-based financial aid, are often surprised to discover this policy exists, though information regarding outside awards is made accessible to students on the financial aid website.  

“I think it’s important to be as clear upfront as we can be to help students understand what all is involved when they get outside scholarships, so people shouldn’t be surprised,” Cooper said. “The information is on the website pretty easy to find and obvious.”

Some of those affected by this policy argue that since they earn scholarship money by their own initiative and merit, the money should be used at their discretion.

“I get a scholarship, it’s my money, so then I should be able to use it towards all of my financials here,” Matanane said. “It makes me mad because when you get scholarships, it’s supposed to pay for you, and then just to learn that I can’t use my own scholarships to pay for Stanford doesn’t really make sense to me at all.”

Matanane applied to outside scholarships because she did not want to have to work a job during the academic year and to cover the $5,600 her parents owed. When she discovered that her scholarship money would not cover her parents’ responsibility, her parents sold their car to help cover their part.

“It puts a lot of pressure on the parents especially if they thought everything would have been paid off,” Matanane said.

Cooper mentioned that students can ask scholarship organizations to delay sending the check until later years, saying that “spreading scholarships out over the four years so you can maximize the benefit is absolutely fine with us.” 

“Most of the scholarships you apply to won’t let you do that,” Matanane said. “So they send it this year, and at that point I shouldn’t have even applied [for the scholarship].”

“I know some scholarships send the check to you personally, but if they send the check to Stanford, there’s nothing you can do about the money,” she said. “They just take it, basically.”

Students are required to report all outside scholarships they recieve to the financial aid office.

Matanane managed to apply her scholarship money towards a new laptop through a computer expense form the financial aid office offers. Students can find the form on the financial aid website and, if the scholarship organization allows it, buy a new computer up to $2,500 using their excess scholarship money. Cooper cited this as a way for students to see their excess scholarship money used, though Matanane also criticized the financial aid office for not making this more widely known. 

“Most students don’t even know about this…it is interesting because they don’t advertise that,” she said. “And it’s the only way that students can use their excess scholarship money.”

When asked how students can help their parents with the parent contribution portion of paying for Stanford, Cooper responded that student loans can help cover the parent contribution. 

“Federal rules around the student loan program allow you to borrow up to the cost of attendance, as long as there is no other financial aid covering that,” Cooper said. 

Isabella De Vlieger ’23, a first-generation student who had her excess scholarship money displaced, applied for and won multiple outside scholarships to pay for her room and board fees.

“The plan was that we weren’t going to take a loan, but then when my scholarship money wasn’t able to be applied, we did have to take a loan. It was very frustrating,” De Vlieger said. 

“The process [of getting a loan] was really complicated and stressful for my parents especially because neither of them went to college and I’m the oldest child,” De Vlieger said. “We had just bought a house and that affected a lot of our eligibility, so there were a lot of things to take into consideration that we didn’t think that we would have to, so it was definitely a burden. And because I have a younger sibling entering college, she’ll be a freshman when I’m a senior, so especially at that point it [her financial situation] will become more strenuous.”

De Vlieger also attempted to use some of her scholarship money towards a new laptop and believes the financial aid office could do a better job in not just clarifying alternative ways for students to use their scholarship money, but also understanding students’ financial situations. 

“I feel like this policy indicates that there is more of a systemic misunderstanding of why students apply for scholarships and how just because you receive a scholarship doesn’t mean that you now need less financial aid,” De Vlieger said. 

Cooper also explained that “even though we have replaced that student responsibility with outside scholarships doesn’t mean they can’t still work on campus. It sure helps parents a lot not to have to feel like they need to pay for weekend activities or personal activities that the student can cover through work.”

Lucille Bresette ’22 is one student who has explored this path. Bresette works around 80 hours a week in the summer and 15 hours a week during the school year in order to alleviate her family’s financial burden. In addition to the income from her on and off campus jobs, Bresette applied to and won outside scholarship grants in excess of her calculated student contribution prior to learning that these excess rewards decrease her financial aid grant.

“I am willing to work hard to pay for my education, but working hard should include using your merit to qualify for outside scholarships, and it’s frustrating when that’s taken away,” Bresette said.

The policy has also, in the eyes of some students, diminished the value of applying to outside scholarships in excess of the student contribution amount. For Bresette, these excess scholarships could better be awarded to other students who actually see the benefit of the grant.

“I went back and evaluated my scholarships I have coming in from my hometown, and I emailed all the scholarships that gave me money past my student contribution. I declined the scholarships and told them to give it to someone else,” Bresette said. “Once I have guaranteed scholarships, I won’t be trying to get scholarships in excess of my student contribution because I know it won’t be worth it.”

De Vlieger agreed, saying she is less motivated to apply for scholarships because “subtracting scholarships from the grant is like losing the money.” 

“If another student could receive that award and actually use it, I wouldn’t want to take that prize away from them,” she said.

Some states have begun to address student dissent regarding scholarship displacement. In 2017, the state of Maryland passed legislation outlawing this practice at public universities with the support of Central Scholarship, a nonprofit organization that awards scholarships to students attending Maryland universities, and a white paper published by the National Scholarship Providers Association. The law “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,” reported the Baltimore Sun.

“Consider that unlike Stanford, a lot of universities don’t support 100% of every student’s financial need. This [federal guidelines on over-awarding] is an overarching law that applies to Stanford even though Stanford covers all students’ needs. This seems like a problem,” said Jonathan Flat ’22.

From the perspective of the financial aid office, Stanford’s scholarship displacement policy is ultimately beneficial to the student body. They are able to reallocate portions of the budget to be used at the benefit of the entire school through the extra funds from students’ outside awards.

“We are treating everyone the same. And I think it’s important to treat people consistently,” Cooper said. “Our goal is, and what the university has committed to, is meeting the full need of everybody who has been admitted.”

From the perspective of some students, however, this policy is anything but fair. 

“Most of the students that are applying for scholarship are the ones that need financial aid the most,” De Vlieger said. “This policy is only hurting the people that Stanford claims they want to help with financial aid policy.”

Contact Sean Lee at seanklee ‘at’ and Justin Chang at jchang38 ‘at’

Sean Lee '22 is the desk editor for the University News beat. He is interested in studying Political Science, History, International Relations, the humanities and the intersections between the humanities and STEM. An avid boba connoisseur and adventure seeker, he proudly hails from Arcadia, Los Angeles, California. Contact him at seanklee 'at'

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