Putting the Scholar Back in Scholarships

Editor’s note: A slightly shorter version of this article originally appeared in the Raleigh News & Observer’s opinion section on November 27, 2009.

You hear the phrase a lot these days: we must do such and such to be more competitive in the global economy. Indeed, it was one of the major themes of UNC system president Erskine Bowles’ inaugural address and is the very first priority listed in the UNC Tomorrow Commission report.

But talk of becoming more competitive rings hollow unless the spirit of competition is truly embraced. Becoming competitive means getting lean and mean by eliminating existing inefficiencies in our universities—this means making some hard choices.

One way to reintroduce the spirit of competition in the UNC system (and in the high schools as well) is to end need-based UNC scholarships that do not create incentives for high performance but instead subsidize mediocrity (or worse).

North Carolina now has a tremendous opportunity to do just that. This year, one of Bowles’ top priorities is to simplify the current system (or non-system) of state scholarships. The legislature is also looking closely at scholarships with the formation of the Joint Select Committee on State Funded Financial Aid.

A state scholarship is not an entitlement—it is a gift bestowed by the taxpayers of North Carolina. Fairness implies that the exchange goes both ways—if taxpayers must subsidize students, those student must have already demonstrated that they are deserving of such generosity. All young people have an equal opportunity to demonstrate their worthiness to receive a scholarship while in high school, but there is no right to a free higher education the way there is for K-12.

Yet many current UNC scholarship programs are based on need alone, providing free university educations to students who have not proven their ability to do college level work. And it shows. For instance, at UNC-Pembroke, the graduation rate for a four-year degree is only 34 percent after six years.

A high school graduate’s likelihood of success in college is predictable. It is fair to presume that the top quarter of admitted students (as determined by their high school grade point averages and SAT scores) graduate at a much higher rate than the average student. They are also much more likely to take demanding majors that lead to productive careers.

It is equally fair to presume that the bottom quarter of admitted students graduate at a much lower rate than the rest of school—possibly even in the single digits at schools with low completion rates. The interests of neither taxpayers nor these students are served by this cycle of failure.

And there are still many good students who could earn degrees in valuable majors who are not quite gifted enough for full merit scholarships. If they are middle class, they might have to struggle much more to pay for college than does somebody from a poor family who is not at all likely to graduate.

There is a straightforward way to make state scholarship programs more equitable while reintroducing the spirit of competition. To explain this concept requires a simple four-category model. It includes some high-achieving students with A- high school averages and 1200 SAT scores (math and reading). A second group consists of low-achieving students with C- grades and 750 SATs.

Some of each group belong to low-income families living on $37,000 per year; others come from middle-class families that are comfortable but have little to spare, perhaps with incomes around $65,000 per year.

To be fair to both students and taxpayers, low-achieving students from the middle class families should get the least financial aid. It also makes intuitive sense that high achieving students from low-income families should get the most, perhaps even full rides.

State aid for the other students should reflect the differences in potential achievement and differences in ability to pay. The low-achieving, low-income students are the least likely of all to graduate and give taxpayers a return on their investment. But they qualify for roughly enough in federal aid to pay for a community college education. So that’s what they should get. By going to community college, rather than entering—and likely failing—at a four-year school, they would save the state tens, if not hundreds of millions of dollars, annually. And if they earn their two-year degrees at the community colleges, they can advance into the high achieving, full scholarship category.

The high achieving middle class students are hardly the children of privilege, and are much more likely to reward the state for its generosity with high future incomes, so they deserve something, too. Since they do not qualify for much, if any, federal aid, they should therefore be given state-funded scholarships that would reduce their burden somewhat, but not entirely.

Of course, a real scholarship program would be more complex, with many more categories than these. But the principles remain the same: performance up, grants up; incomes up, grants down.

The current system does a poor job of creating incentives to achieve for many high school students who plan to go on to the university system immediately after graduation. They know that, if they achieve some bare minimum level of work to get accepted, they will get the necessary money from the state. Therefore, they don’t work to improve their class rank, their GPA, or their SAT scores (the way top students trying to get into the best schools and trying for merit scholarships do). Their slack habits then carry over into college, and they eventually drop out without significantly enhancing their skills—a net loss to both the student and the state’s taxpayers.

A mixed merit-need scholarship program would likely cause enrollments to drop at some campuses, and would face political opposition. But if we are to be competitive, taxpayers cannot be forced to endlessly subsidize students who do not graduate. And along with huge savings to taxpayers, this model provides students with perhaps the best bit of education possible—the idea that their compensation depends on how well they perform and how hard they work. Now that’s reintroducing competition!