Overall Vote Recommendation

Neutral

Principle Criteria

Free Enterprise

Property Rights

Personal Responsibility

Limited Government

Individual Liberty

Digest

SB 2995 seeks to address the issue of "financial aid displacement," a practice where students’ institutional or state financial aid is reduced or eliminated when they receive private scholarships or other forms of "gift aid" that do not require repayment. This phenomenon can unintentionally penalize students for securing outside funding, reducing the net financial benefit of such scholarships and undermining efforts to support college affordability.

To counter this, SB 2995 adds Section 56.0094 to Subchapter A, Chapter 56 of the Texas Education Code. The legislation requires the Texas Higher Education Coordinating Board (THECB) to develop a standardized “financial aid displacement advisory” for use by public colleges and universities. This advisory must include a clearly worded notice—written in at least 14-point font and bordered for emphasis—warning students that financial aid may be reduced due to receipt of private scholarships. It must also explain common reasons for displacement, as identified by THECB.

Additionally, each public institution of higher education is required to include this advisory, either directly or via hyperlink, within its admissions application materials. Institutions must also provide prospective students with plain-language guidance about how to apply for aid, important deadlines, and recommendations on how to maximize and preserve gift aid. They must designate a contact person or office that students can reach out to for support on this issue.

The bill applies beginning with the 2025–2026 academic year and requires THECB to adopt rules for implementation. It aims to improve transparency, protect students from unanticipated financial setbacks, and ensure that private scholarships genuinely support educational advancement without reducing access to other forms of aid.

The originally filed version of SB 2995 and the Committee Substitute both seek to address financial aid displacement, but they differ significantly in their structure, requirements, and scope of institutional responsibility.

The original version of the bill placed a stronger emphasis on post-award transparency and data reporting. It required institutions of higher education to notify students within 30 days of any financial aid reduction due to displacement. Additionally, institutions were mandated to send a detailed financial aid reduction notice explaining the specific aid affected, the amount reduced, and the reason for the change. The bill also required each institution to report annually to the Texas Higher Education Coordinating Board (THECB) on the frequency and reasons for aid displacement, with data broken down by race and sex. In turn, THECB was to compile and publish a statewide report on these trends.

By contrast, the Committee Substitute shifts the focus to preemptive consumer education. It eliminates the reporting requirements and post-displacement notice provisions from the original bill. Instead, it tasks THECB with developing a financial aid displacement advisory, which institutions must include or link to in their admissions application materials. This advisory must contain a standardized disclosure and recommendations for maximizing gift aid. Furthermore, institutions are required to provide plain-language explanations, including deadlines and contact information for aid counseling. The substitute bill, therefore, centers on proactive student guidance rather than institutional accountability or after-the-fact notifications.

In summary, the original bill emphasized institutional transparency and state-level oversight, requiring detailed tracking and notification after aid displacement occurs. The substitute bill, however, reflects a more student-centered, preventative approach, focusing on education and disclosure before enrollment, with fewer administrative burdens on institutions. Both share the same intent—mitigating the negative impacts of aid displacement—but approach the solution through distinctly different policy mechanisms.

Author

Royce West

Contact the Author

Sen. Royce West

Capitol Phone:

(512) 463-0123

Capitol Office:

CAP 1E.5

E-Mail:

[email protected]

Visit Official Website

Fiscal Notes

According to the Legislative Budget Board (LBB), SB 2995 is not expected to have a significant fiscal impact on the State of Texas. The Texas Higher Education Coordinating Board (THECB), which is tasked with developing and disseminating the financial aid displacement advisory and rulemaking, is expected to absorb any associated administrative or implementation costs within its existing budget and staffing capacity.

Similarly, no significant fiscal implications are anticipated for local governmental entities, including public institutions of higher education. These institutions will be required to update their admissions application materials and provide financial aid guidance and contact information, but such tasks are considered to fall within the normal scope of administrative operations for college admissions and financial aid offices.

In summary, the bill’s requirements for developing educational advisories and improving student-facing communication on financial aid policies are deemed manageable within current agency and institutional resources. Therefore, SB 2995 is structured to improve transparency and student outcomes without necessitating new state appropriations or imposing burdensome costs on local governments.

Vote Recommendation Notes

SB 2995 addresses an important and often overlooked issue in higher education—financial aid displacement—by requiring greater transparency for students receiving both institutional and private scholarships. The bill mandates that the Texas Higher Education Coordinating Board (THECB) develop a standardized advisory notice that public institutions must provide to prospective students during the admissions process. This notice must include a clearly worded explanation of financial aid displacement, common reasons it occurs, and additional guidance on how students can navigate the financial aid process to avoid unintended consequences.

The intent behind the bill is commendable. First-generation students and those from low-income backgrounds are particularly vulnerable to confusion around how financial aid is awarded and adjusted. By equipping them with clear, early-stage information, the bill supports informed decision-making and could reduce the financial uncertainty students face when accepting private scholarships. It promotes personal responsibility and transparency without creating new spending obligations, as confirmed by the fiscal note indicating that the bill imposes no significant cost to the state or institutions.

However, the bill stops short of reforming or prohibiting the underlying practice of financial aid displacement itself. It merely improves notification procedures. Institutions may continue to reduce state-funded aid when private scholarships are received, as allowed under current law. The legislation also lacks enforcement mechanisms or requirements for institutional accountability beyond issuing the advisory. For stakeholders looking for substantive reform that directly protects students' total financial aid packages, this may be seen as an incremental change rather than a solution.

For these reasons, Texas Policy Research remains NEUTRAL on SB 2995.

Individual Liberty: The bill enhances individual liberty by promoting transparency and informed consent in the college financial aid process. When students are unaware that receiving a private scholarship might lead to reductions in their institutional or state financial aid, their autonomy is compromised. The bill seeks to correct this by requiring schools to give applicants a clear advisory notice explaining financial aid displacement and how to avoid it. This empowers students to make better decisions about financing their education.
Personal Responsibility: By providing students with tools to understand and anticipate changes to their aid packages, the bill reinforces the principle that individuals should take ownership of their decisions. Clear, plain-language information about how financial aid works allows students to proactively manage deadlines, avoid pitfalls, and seek help when necessary. The bill essentially equips students to take greater responsibility for navigating a complex aid system.
Free Enterprise: While the bill doesn’t directly affect the private sector, it could have a subtle positive effect on private scholarship providers. Currently, some of their contributions are offset by reductions in other aid, reducing their intended benefit. By discouraging or at least spotlighting this effect, the bill could indirectly encourage more charitable giving, making private philanthropy more effective. However, the bill does not restrict institutions’ discretion over financial aid policy, so the market implications remain limited.
Private Property Rights: The bill does not address ownership or control over property, nor does it affect any rights related to land, physical goods, or intellectual property.
Limited Government: The bill expands state oversight by requiring the Texas Higher Education Coordinating Board to create a standardized advisory and imposes a new disclosure requirement on public colleges and universities. While this is a light regulatory touch, it does increase the state’s role in university communication practices. Still, the bill avoids mandates on institutional aid policies and imposes no cost burden, as confirmed in the fiscal note. From a limited government perspective, it walks a fine line: it expands guidance but avoids overreach.

View Bill Text and Status