I have studied in an Australian university and throughout my university studies, I declined all prizes awarded to me. It is not that I have had something against my university but it is due to my own ethical values. I believe that a true scholar should have no interest in fame and prizes and that is exactly the reason I declined all the prizes given to me so far (I want to remain a true scholar).
It's not that I see myself superior to others in any way; indeed, I always claimed to be the dumbest student in my university. If it takes someone 10 minutes to understand a math theorem, it would take me at least 3 hours to understand it properly. Some people unfortunately misinterpret my statement:
I believe that a true scholar should have no interest in fame and prizes and that is exactly the reason I declined all the prizes given to me so far (I want to remain a true scholar).
I did not mean in any way, that someone who accepts prizes is not a true scholar and if that is the message conveyed by my statement, then I apologize from the bottom of my heart. This statement only applies to me; if I accept prizes, then I think that I am better than others and because of this I decline prizes because I want to remain a true scholar. I do not want to feel superior to others. This will make me not work hard. Some people said that I am following Perelman's footsteps. I honestly do not even consider myself a successful student; how could I dare to compare myself to Perelman. I am only an ordinary dumb student.
I just received an email from the university that this July (my graduation ceremony), they will award the university medal to me. I am going to decline the university medal but I am not sure what is the best way to do this politely so that the academics at my university will not be offended.
Update: After discussing this with the dean of my faculty, I agreed to accept the university medal. It will be annotated in my academic transcript, record, and testamur. This helps my Phd admission chances in the top 10 universities (something I was told by academics at my university).
Answer
The discussion here about your question provides an interesting microcosm of the sort of responses you are likely to get to your decision to decline the medal from people at your university who learn about it. Already here we are seeing a lot of people who don't even know you telling you to reconsider your decision, implying that you have a moral duty to accept the medal as a service to the university and to the other students who ostensibly are meant to be inspired by your excellent academic performance (which seems like a very weak argument to me personally), and offering other kinds of unsolicited advice that doesn't answer the specific question you asked. I sense in these responses a fair amount of indignation and possibly offense, and I think it's interesting to try to understand what is causing it.
My feeling is that what's going on is that for most people it's hard and even offensive to see someone turning down a great honor or privilege that they themselves would be happy to have and maybe can only dream of achieving. It feels to people like a waste, like seeing something very valuable being casually thrown away, or like seeing a rich person lighting a cigar with a $100 bill. As much as people may be able to understand your reasoning at an intellectual level, at the emotional level it feels that not accepting the medal is an act of condescension on your part, as if you are saying that you are so much better than everyone else that you don't even need earthly benefits like awards or medals to feel superior.
With this analysis in mind, let me answer your question. If you have indeed decided not to accept the medal, there is nothing you can do other than to explain your decision and the reasoning for it to the people at your university as clearly as you can, just as you explained it here. You should fully expect that some of them will be offended, and some of them will try to convince you to change your mind and offer the same kind of advice and moralistic arguments that are being offered to you here. I don't think that can be avoided, but I don't necessarily think that it needs to be avoided either. I have great respect for people who follow their beliefs at the risk of being unpopular or angering others and would like to encourage you to ultimately do what you think is right, after carefully weighing all the relevant information. Good luck!
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