Merit Scholarships, Threat or Menace?

This will probably cause some eye-rolling on the part of my local readers, but there's an interesting article in Inside Higher Ed on the real effect of merit scholarships, which is the term of art for "money given to students for reasons other than financial need." This is a hot topic, as the article notes:

The rapid growth in merit scholarships has been controversial: Many institutions (public and private) say that the awards allow them to better shape their classes and to attract talented applicants who might otherwise go elsewhere. Yields -- the percentage of accepted applicants who enroll -- go up. Critics have said that merit scholarships may help institutions, but don't truly help students (most recipients of merit scholarships have many options) or broad social needs in higher education (the merit awards divert attention and funds from the needs of low-income students). Amid this debate, many institutions are standing by their merit scholarships, while others are scaling them back or abandoning them.

As you might well imagine, hard data on the topic are kind of difficult to find. The article reports on a new study by an economist at the University of Richmond, who actually attempted a controlled study of the effect of merit scholarships at an unnamed institution that may or may not almost rhyme with "Pitchman":

In his study, [Associate Professor James] Monks took advantage of the decision of a private university to undertake a true experiment with merit scholarships. This university decided to offer $7,000 renewable merit scholarships (about 17 percent of tuition, room and board and fees) to 230 of its top rated applicants. But rather than offer the grants to those at the very top, the institution offered them completely at random to a subset of a larger group of applicants who had been identified as being at the top of the pool of those admitted. The pool excluded those who were receiving any need-based financial aid or other merit scholarships. There were 319 admitted applicants who were thus judged equally desirable as the first group, but who by random choice received nothing extra from the university.

The results? 7.1 percent of those offered scholarships accepted the offer and enrolled, while only 3.2 percent of those who didn't get money enrolled. That's a factor of two, and the article calls it statistically significant, so the argument is over, right?

Sadly, in academia, no argument is ever really over, as the effect can be downplayed by noting that even 7.2 percent is a small yield, and it might not be worth the money (not quite $120,000 in this case) to get 16 or 17 top students (amusingly, 7.1% of 230 is not an integer, so something is wonky with the numbers). There was also an attempt made to compare to the previous year (the scholarship offers exactly balanced a tuition increase, so the students getting merit aid were paying the same price as the no-merit-aid cohort the year before), which found a yield of 5.2 percent for similar students. I'm kind of dubious about the comparison-- there are too many other factors that vary from year to year for this to be a clear test-- but it does suggest something of the natural range of variability of the yield, and that it might be difficult to sort out from the merit money.

It is, however, nice to have some data, however incomplete.

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I can see where if you had two pretty equal schools and one gave you more money it might make a difference, but if one is just far and away your favorite you're going to go there. That's what happened to me, and I didn't even consider going to the school that gave me more money over the one that I really wanted.

I guess that it's no worse than the athletic scholarships (mentioned in passing in the article) although I guess that it's a bit easier to assess the financial benefits to the institution in terms of producing better teams.

I was surprised to discover, when I came to the US, how many of the scholarships were needs-based rather than merit-based. I can see the point of both, but it has to be hard to judge some of the other effects of merit-based scholarships, such as how they increase the reputation of the institution.

Merit based scholarships were one of the main reasons why I chose my Uni.

I could either go to a name-brand college and graduate with tens of thousands of dollars worth of debt... Or I could go to a non-name-brand school that was offering me enough merit-based scholarships to cover room, board, books, beer, and gas for four years.

At the same time, not all of my classmates who received similar packages were able to keep them all four/five years. Thats something else to take into consideration, I think, with merit-based scholarships. Everyone knows a 'smart' high school kid can fail miserably in college.

The reason I was surprised at how many needs-based scholarships there were, incidentally, is just because in the UK, when I was an undergrad, the means-based stuff was a government job. Poorer families got a maintenance grant from the government (I was the recipient of one of those) and tuition fees were covered for every British student for a three or four year bachelor's degree. That changed later, so that maintenance grants were replaced with loans and eventually a smallish fraction of the tuition fees were payable by the student.

SCHOLARSHIP. A school recruiting for any reason other than objective qualification (diversity comes to mind) will become what it purchases (a slum comes to mind).

The City College of New York and New York University had an astounding record of generating Nobel Laureates from lumpen proletariate inputs - 13 total. NYC schools became diverse in response to social advocacy ("Community" threats). Their diplomas are today worth their weight in toilet paper. Hunter College outputs degreed waitresses.

My situation was similar to ERV's. I wound up going to what might be considered an "off-brand" school, at least relative to some of the others I applied to (including the one I now work for).

However, with my choices seemingly limited to (a) go into debt, (b) go into hock to one of the armed services via ROTC, or (c) take the money and run I naturally took (c), figuring that the name on the diploma wouldn't matter so much as to be fatal. (Since I wasn't going pre-law or pre-med, I figured the odds were better.)

We are able to attract many of our music majors because we offer larger merit/music scholarships than our competition. I've had many students tell me this baldly. I am concerned about how long the university decides it can afford to maintain a viable school of music at significant discount, but it is clear that we need this tuition discount to keep the school viable in the short term (maintaining the large ensembles, etc.).

There's no way that scholarships that small will make much of a difference I think.

Back in 1976 I graduated from high school. I did well in a mathematics contest that year and was offered a $12K merit scholarship ($3000 per year) to the nearby University of New Mexico. This would have put me through college all expenses paid.

Instead, I went to New Mexico Tech, as it had a mining engineering program. Of course I converted over to mathematics six months later anyway.

A result of my decision is that my parents had to pay half my college expenses, something I've always felt a little regretful about. I worked on campus averaging maybe $3.00 per hour for 10 hours or about $1500 per year. That left my parents with a bill of about $1500 per year. I graduated in three years, which meant my tuition costs were reduced 33% -- the university rebated your tuition over 18 hours if you passed the classes.

I have no doubt that if my parents had not been so supportive, I'd have gone to UNM. But the amount of the scholarships that they're talking about in the post is much less than what I turned down.

I understand that it is now common practice for students to go deeply into debt. In that sort of situation, paying 17% of expenses just isn't going to make a difference, as the student is going to end up "infintely deep" in debt no matter what they do.

What has changed since then is the ratio of minimum wage to college costs. NMT is still one of the cheapest decent colleges in the US at $8661 per year for "in state". Dorm costs add another $4000, and details probably another $3000. This works out to be $16,000 per year which is close to 40 hours at minimum wage, roughly twice the hours from 30 years ago.

By Carl Brannen (not verified) on 27 Mar 2007 #permalink

There's no way that scholarships that small will make much of a difference I think.

You might be surprised.
Keep in mind, these are people who otherwise wouldn't be getting any financial aid. $7,000 is a lot more than nothing, and the "hey, I got a special award!" feeling is a bonus factor.

"There's no way that scholarships that small will make much of a difference I think."

But they do. My youngest went to a small women's college in Virginia. They put her up for a weekend when she was looking at colleges and when I came to pick her up, she told me she wanted to go there, this was it, we needn't look further. Sticker price was somewhere between $25K and $30K per year (this was six years ago; she's now graduated). State U would have run $10K to $12K. Need-based aid might have cut the $25K to $24K :). But the offer of a merit scholarship, not very much larger than the $7K we're talking about, together with a couple of thousand from the state, cut the difference down. It was still more costly to send her to the women's college than the state U, but no longer ridiculously more. So I said yes.

Merit scholarships won't persuade someone to enroll who doesn't want to. But they can remove barriers for someone who does want to.

Caltech uses merit-based scholarships to (successfully) attract people who would otherwise like to go to, say, MIT, but instead pick Caltech because it's free. (Caltech's got a buttload of money, so their scholarships tend to be more in the "we'll pay for everything plus some" mode.) Their full-rides also tend to be (but are not always) for women (in an active attempt to try to balance the gender ratio without resorting to dirty affirmative action when actually doing admissions).

And the quoted "experiment" is interesting in that those not receiving need-based financial aid were excluded; by definition, these are the folks who don't need help paying for school, and so for whom a few extra thousand dollars won't be that big of a difference. (On the other hand, I can't easily come up with a better way to correct for that particular bias.)

Er—
Of course, I was also always taught that you should never pick where to go to college because of money; you should pick where to go based on where you'll be the happiest, grow and learn the most.

"I was also always taught that you should never pick where to go to college because of money"

Quite. I was taught that you should pick your college on the basis of it being at either Oxford or Cambridge :-)

Actually as government funding is decreased, Oxford and Cambridge are intensifying fundraising for scholarships. However I suspect that all such scholarships will be essentially "needs based" because the admission standard at Oxbridge is so insanely competitive that it is almost impossible to distinguish between accepted candidates on the basis of merit.

Mike: *shrug*. It varies from person to person, yes? And in my case, I believe it was the correct advice.

Besides, if the calculations behind "need based financial aid" actually, you know, worked, then money would never be an object ...

For a lot of people, they're quite justifiably concerned about money and not just the cost of the tuition and living expenses. What sort of job they are going to be able to get out of it and how much it pays are also issues, particularly for those that don't plan to go on and become academics, and which college you go to can affect that.

I would say that undergrads and parents should consider money amongst the other issues. Going to university isn't a metaphysical experience, it's a practical commitment in pursuit of longer-term aims (albeit aims that may be reordered or changed altogether as time progresses).