Assembly Bill 486 aims to establish restrictions on the reduction of gift aid offered by institutions of higher education in Wisconsin when students receive private scholarships from Wisconsin-based entities. The bill defines "gift aid" as financial aid that does not require repayment, including grants and scholarships, and specifies that a "private scholarship" is one valued at $5,000 or less. Under the proposed legislation, institutions may only reduce a student's institutional gift aid if the total gift aid exceeds the student's financial need, and they must first alert the student about the possibility of reassessing their financial need. Additionally, reductions can occur if the institution must comply with financial aid restrictions from governing athletic associations or if they receive approval from the private scholarship provider.

The bill also mandates that institutions make a sincere effort to contact private scholarship providers to request changes in how the scholarship is applied to the student's cost of attendance, although compliance from the providers is not guaranteed. The legislation applies to the University of Wisconsin System, Wisconsin technical colleges, and private nonprofit institutions that are part of the Wisconsin Association of Independent Colleges and Universities. Overall, the bill seeks to protect students' financial aid packages from being diminished due to external scholarship awards, ensuring that students receive the full benefit of both institutional and private financial support.