Federal regulations play a key role in UMN scholarship distribution

Following regulations by the Higher Education Act of 1965, universities re-distribute scholarship dollars to avoid over-awarding students.

Bella Dally-Steele

Not all incoming University of Minnesota students know where their federal aid will end up this fall.

For students who receive need-based financial aid, federal regulations require universities adjust their financial aid packages when they report extra scholarships to ensure aid isn’t over-awarded.

This process cuts an amount equivalent to those scholarships from a student’s federal aid and redistributes it to others in need. Although the students still receive their scholarships, their total financial assistance remains the same.

The federal aid package adjustment process, which applies to all universities that offer federal aid, is meant to ensure as many students as possible receive aid, said Michelle Curtis, student services manager in the University’s Office of Student Finance.

Though the process isn’t meant to penalize students, some do feel slighted when they learn about it, Curtis said.

“I just know that for a lot of students it’s frustrating when they go out to apply for scholarships … and they think it’s going to be extra money,” Curtis said. “When in reality, if they’ve … been awarded up to the max … it’s just replacing the type of money they get.”

University role in adjusting aid

Like all universities who offer federal aid, the University is bound by the Higher Education Act of 1965, which dictates students can’t receive more aid than the Free Application for Federal Student Aid, or FAFSA, determines they need.

Universities get to individually decide what type of federal aid – like grants, scholarships and loans – to subtract first from the student’s aid package when they report scholarship dollars.

Universities typically choose to redistribute loans first because students benefit more from keeping grants and scholarships, said Karla Weber, communications manager at the University of Wisconsin-Madison’s Office of Student Financial Aid.

The University of Minnesota follows this process of cutting loans before grants and scholarships, said Nate Rosckes, scholarship manager in OSF.

Students usually learn about the adjustment process during meetings with a One Stop Student Services counselor, or from the automatic notifications they receive along with their scholarships, Rosckes said.

Curtis said some students at the University are upset by the aid package adjustment process because they aren’t familiar with it.

A University transfer student, who chose to remain unnamed for this story because her financial aid situation is currently being processed, said she didn’t report grants she received at her former university.

At the time, she said she didn’t know the aid package adjustment policy existed.

Because she deposited the grant money she received directly into her student account rather than reporting it, the student said her federal aid was never redistributed.

Incoming freshmen and first-generation college students like herself are particularly susceptible to misunderstanding the University’s aid adjustment process, she said.

“You don’t know what you have to do or don’t have to do,” she said. “I don’t have somebody helping me fill out financial aid, so if I’m getting state grant extra money, I’m not expecting to have it come out of aid. … Most people don’t know that.”

Understanding the process

Because the process is “controversial,” transparency is key when it comes to aid adjustment policies, said Assistant Vice President of Admissions and Financial Aid at Macalester College Brian Lindeman.

“It’s not necessarily an intuitive policy,” Lindeman said. “So we want to be up front. We’d rather have students know [early on] rather than in July. … It is a fairly controversial policy.”

Macalester, which also offers federal financial aid, keeps a page on its website that explains how various scholarships affect need-based aid funded by the college and federal government.

At the University of Minnesota, the aid adjustment policy is advertised on at least five pages of the University website, as well as in the award notifications and e-business agreements students receive with their scholarships, Curtis said.

However, some students aren’t aware of the policy until they report their scholarships and realize their tuition charges stay the same.

“It can be a shock to students. I don’t doubt that they’ve been unaware of what they’ve been … told [about the policy],” Curtis said. “There’s a lot going on for students, but at the same time this is how you’re funding your education.”

The U.S.Department of Education reviews the federal aid adjustment policy annually and tweaks it to reflect new program and scholarship offerings, Curtis said. If students don’t like the process, they should tell their representatives, she said.

Curtis said if students want the Department of Education to understand their student experience, they should ask for aid professionals such as herself to be consulted during the review process.

“We should be included because we understand the processes, we understand the real world application of the rules they’re making – and how it affects students,” Curtis said.