Senate Bill No. 1112 aims to prohibit higher education institutions in the state from reducing a student's financial aid package due to the receipt of scholarships from private or public sources. The bill allows for reductions only under specific circumstances: if the total financial aid from all sources meets or exceeds the student's cost of attendance, or if the reduction is necessary to comply with financial aid restrictions set by athletic associations, such as the NCAA. This legislation introduces new regulations regarding scholarship displacement, a practice where institutions decrease their financial aid in response to outside scholarships, which is currently unregulated by state law.

The bill is set to take effect on July 1, 2025, and it may incur minimal costs for higher education institutions starting in fiscal year 2026, as they may need to increase the total amount of financial aid offered to comply with the new prohibition on scholarship displacement. The institutions typically budget for financial aid based on anticipated tuition revenue, and the bill could limit their ability to save on financial aid costs when outside scholarships are awarded. Overall, the legislation seeks to ensure that students can benefit fully from external scholarships without facing reductions in their institutional financial aid.