PERSPECTIVE ON SCHOLARSHIPS : Why Squander Aid on Those Who Can Pay? : Tuition discounts should be based on need, not to ‘buy’ academic stars who might boost a college’s reputation.

This nation has a long tradition of providing access to higher education to students who are academically qualified. Financial aid in the form of scholarships has been essential in assuring that access.

Three decades ago, scholarship funds came largely from the federal and state governments. In the last 10 years, colleges and universities, both private and public, have “recycled” their own tuition dollars into financial aid in what some have called a high-tuition/high-aid policy.

Such a policy can make good sense for the individual institution and for society. At public institutions and at private institutions with reasonable endowments, tuition revenues cover less than the full cost of education. In effect, even a full-pay student receives a scholarship equivalent to the difference between the per-student cost of education and tuition. That wealthier families should receive less of a subsidy so that greater subsidies can be provided to needy students is both fair and consistent with higher education’s commitment to broad access.

This fairness principle is achieved only if the financial aid is based on need. In the last few years, an increasing number of colleges and universities have commenced what strikes me as both an unfair and a dangerous practice: using financial aid to attract the more academically qualified students, including many from affluent families who can well afford the tuition. These awards are called “merit scholarships.”

Tuition discounts vary widely as colleges strive to increase their enrollments and thereby increase their marginal revenue. A college may adjust tuition discounts based on the perceived desirability of the student. The applicant with a 4.0 high school GPA or the student body president, can hold out for a larger discount on tuition than the applicant with a 3.5 GPA or the high school yearbook editor.

The most academically competitive colleges and universities resist this move to tuition discounting. They operate at full capacity. The teaching enterprise and student services would surely suffer if funds were shifted from them to finance merit scholarships.

The awarding of merit scholarships is a dangerous practice for colleges and universities in other ways. For most colleges and universities, student financial aid is the fastest growing expense item. Each year, more colleges are less able to provide full financial aid support for all admitted students who are needy. Awarding merit scholarships exacerbates these problems.

Some higher education officials argue that merit scholarships and so-called need-based scholarships come from different pots of funds. The truth is that, for the vast majority of institutions, a dollar spent on merit scholarships is a dollar that otherwise could be invested in support of the economically deserving student. I have no doubt that awarding merit scholarships to students who aren’t needy is a major factor in rising tuitions.

Others suggest that if scholarships based on athletic prowess are appropriate, surely scholarships based upon academic prowess are still more appropriate. I think not. The system of college athletic scholarships is hardly one that we can be proud of; given widespread misuse and abuse and the dismal rate at which athletic scholarship winners earn degrees, the system provides no useful model. And for the most part, athletic scholarships are “full ride”: The tuition discount is 100%, not an amount linked to the relative ability of the athlete.

The tactic of discounting tuition is overpoweringly seductive to the college that seeks to upgrade the academic prowess of its student body and that in the absence of such discounting, would be underenrolled. If in the long term, competition requires all colleges to “buy” their best students with merit scholarships, higher education’s already formidable financial challenges may become overwhelming, particularly for the less well-endowed and underenrolled institutions.

How will administrators and governing boards respond to the chorus of criticism about excessive tuition increases, particularly when critics figure out that a major impetus for these increases is the subsidy inherent in merit scholarship programs? How effective will be our pleas to legislators for more generous funding of need-based scholarships when they realize that we are using our own resources to attract students who do not qualify for them?

The growing practice of granting merit scholarships is destructive to the country’s higher education system, and will, in the long run, reduce access for academically able but financially disadvantaged students. The nation can ill afford these social costs.