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 a scholarship from any source, whether public or private. The only exceptions to this rule are if the student's total financial aid exceeds their cost of attendance, as defined by federal law, or if the reduction is necessary to comply with financial aid restrictions imposed by athletic associations, such as the NCAA. This legislation introduces new legal language that explicitly prohibits scholarship displacement, which is the practice of reducing financial aid in response to outside scholarships.

The bill is set to take effect on July 1, 2025, and it is expected to have a minimal fiscal impact on higher education institutions, as they may incur costs if they choose to increase the total amount of financial aid offered due to the prohibition on scholarship displacement. Currently, there are no state laws governing how institutions manage scholarship displacement, leaving it to the institutions to establish their own policies. The bill also requires institutions to disclose their scholarship displacement policies to students and the Higher Education and Employment Advancement Committee.