Question About Academic Scholarships

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Megamill
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Question About Academic Scholarships

Post by Megamill » Thu Oct 24, 2019 8:34 am

Probably a dumb question, but when an incoming freshman is awarded a generous scholarship based on ACT score and HS GPA, does the university actually get that scholarship money or is it a "discount"? So does the school make more $ off the kids who are paying full tuition than the kids that are awarded scholarships?

Rus In Urbe
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Re: Question About Academic Scholarships

Post by Rus In Urbe » Thu Oct 24, 2019 8:38 am

Unless an outside funder is involved (ie. a philanthropist who donates money specifically for these scholarships, which are usually named) or government money is involved in a specific program (like PELL grants), this is a discount from the full-pay tuition. If there is no funder name or government program name attached, if the scholarship comes directly from the university alone, then yes, it is in essence a tuition discount.

And yes, if that is the case, universities make more money from tuition paid by students who are not on a (discount) scholarship. But these scholarships are given to reward academic excellence and to attract the best class of students.
I'd like to live as a poor man with lots of money. ~Pablo Picasso

Admiral
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Re: Question About Academic Scholarships

Post by Admiral » Thu Oct 24, 2019 8:43 am

Assuming it is an internal scholarship/grant (from the school itself) the tuition is simply lowered for that student, and made up in the school's budget with other funds. Families whom the school deems able to pay full freight pay that, assuming no other grants or scholarship funds. FWIW the actual "rack rate" (published tuition) is not paid by a large proportion of incoming students.

If you're interested in how tuition and financial aid works, here's a very good article:

https://www.nytimes.com/interactive/201 ... tough.html

Topic Author
Megamill
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Re: Question About Academic Scholarships

Post by Megamill » Thu Oct 24, 2019 9:18 am

Thank you both for the info and the link to that NYT article: "What College Admissions
Offices Really Want
Elite schools say they’re looking for academic excellence and diversity.
But their thirst for tuition revenue means that wealth trumps all."


This is what I suspected but must have not used good search words to find any meaningful info before posting this here.

So aren't the endowment funds of colleges that are able to award "generous" scholarships funded by outside (usually alumni) sources? Wouldn't that mean that the colleges get reimbursed dollar for dollar out of the endowment fund for each scholarship that is awarded?

DoTheMath
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Re: Question About Academic Scholarships

Post by DoTheMath » Thu Oct 24, 2019 9:20 am

It depends, but from what I've seen as faculty, I expect in most cases the university actually receives the money (at least in the sense you probably mean). University budgets are incredibly complicated and siloed in many different ways. It would take forensic accountants to sort out what happens in any given case. But here's what I've seen:

Obviously if the scholarship is from an outside source then they pay the money to the university, so I'm assuming you mean a scholarship offered by the university itself. In this case the money is usually from an endowment, university affiliated foundation, or from a donor of some sort.

That is, the University may have $20 million, say, to give out in scholarships this year. A large fraction of that is from dedicated scholarship funds (endowment, donations, etc.) and one way or another it will all end up going into the university's coffers by way of student scholarships. If both the number of students accepted and the tuition are flat, then the total revenue from tuition also won't change (and the $20 million will be part of it). Giving fewer scholarships would mean that money stays in the scholarship accounts. The university is no better off by getting the money through tuition. As is probably clear, most scholarship funds were going to go to *some* student at that university so it is a little bit of moving money from one pocket to another (say from a university affiliated foundation who can only give to the university to the university).

My university has closed budget holes in the past by accepting more students than they originally planned for a given year. They know it doesn't matter if those new students are offered scholarships or not because in aggregate the formula revenue = tuition x (number of students) applies. Of course there is variance because a university scholarship may go unused if a student gets a better outside scholarship, the student doesn't come at the last minute, etc.

In the main a scholarship go into the budget as tuition no different than any other tuition dollar. In particular, scholarships aren't ordinarily coming *from* the University's own budget. In particular, they aren't coming from other students' tuition. There are definitely exceptions to this, but this would be much less common.

ETA: As Admiral writes, the tuition is made up with "other funds". This is true in that these funds go into the university's budget and usually come from, say, a university affiliated foundation, so a scholarship isn't a "loss" to the university's bottom line. To the university's budget, a full rate student and a scholarship student generate the same amount of tuition. Of course, in many ways it is also a 4D shell game so the distinctions are mostly academic.
“I am losing precious days. I am degenerating into a machine for making money. I am learning nothing in this trivial world of men. I must break away and get out into the mountains...” -- John Muir

DoTheMath
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Location: The Plains

Re: Question About Academic Scholarships

Post by DoTheMath » Thu Oct 24, 2019 9:21 am

Megamill wrote:
Thu Oct 24, 2019 9:18 am
Thank you both for the info and the link to that NYT article: "What College Admissions
Offices Really Want
Elite schools say they’re looking for academic excellence and diversity.
But their thirst for tuition revenue means that wealth trumps all."


This is what I suspected but must have not used good search words to find any meaningful info before posting this here.

So aren't the endowment funds of colleges that are able to award "generous" scholarships funded by outside (usually alumni) sources? Wouldn't that mean that the colleges get reimbursed dollar for dollar out of the endowment fund for each scholarship that is awarded?
That's correct. That's the short of my long reply. There are exceptions, but by and large it's as you describe.
“I am losing precious days. I am degenerating into a machine for making money. I am learning nothing in this trivial world of men. I must break away and get out into the mountains...” -- John Muir

Admiral
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Re: Question About Academic Scholarships

Post by Admiral » Thu Oct 24, 2019 9:24 am

Megamill wrote:
Thu Oct 24, 2019 9:18 am
Thank you both for the info and the link to that NYT article: "What College Admissions
Offices Really Want
Elite schools say they’re looking for academic excellence and diversity.
But their thirst for tuition revenue means that wealth trumps all."


This is what I suspected but must have not used good search words to find any meaningful info before posting this here.

So aren't the endowment funds of colleges that are able to award "generous" scholarships funded by outside (usually alumni) sources? Wouldn't that mean that the colleges get reimbursed dollar for dollar out of the endowment fund for each scholarship that is awarded?
I'm not certain what you're asking, or why you're asking it. Can you explain what you're getting at?

But for some context, most schools have modest endowments. The endowment draw of schools with significant endowments is used for many things: grants, operating expenses, construction, hiring faculty, et cetera. There is no "reimbursement." Like all large orgs, schools have complex budgets with many expenses and many sources of income. Some schools (like Trinity, in the article I posted) rely almost exclusively on tuition dollars for operations. Others (Harvard, Princeton, Yale, those with many billions in endowment) rely partially on tuition, but not exclusively.

welldone
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Re: Question About Academic Scholarships

Post by welldone » Thu Oct 24, 2019 9:32 am

Colleges aren't a monolith, so your question in large part cannot be answered accurately if you are asking for a generalized answer. Some colleges have endowed scholarships (the endowment would pay the money being offered to students receiving that scholarship), some schools offer named scholarships that are not endowed specifically (those might be better called tuition discounts in terms of understanding what is happening but that money comes from money set aside to offer 'scholarships'), and some colleges use their [general] school endowments to offer only need based aid (often call academic grants or scholarships...but are need based, not based on GPA or standardized test scores).

Most schools will also explain that tuition does not fully cover the cost of attendance. I think many people would be surprised at how expensive it is to maintain a physical campus...when schools explain that the cost of running a school far exceeds the amount of money they receive from money paid by students - this is often what is being talked about. School endowments are in place to help the school function and be able to be maintained - so the smaller the endowment the less money often available for scholarships (as the school needs to make sure the school can physically exist and be staffed before it can offer money to students).

Plenty of families do in fact pay 'rack rates', especially at the elite schools (schools like Princeton have somewhere between 40-60% of their students who do pay full freight). If you don't want to pay full freight at school, you need to craft your college list to target merit scholarship and/or need based aid (if you qualify). Also, realize that at plenty of schools, "aid" is fully in the form of loans (which are considered 'aid' and need to be paid back).

Topic Author
Megamill
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Re: Question About Academic Scholarships

Post by Megamill » Thu Oct 24, 2019 9:49 am

I asked this question because in our case, I was blown away at how much DS will be awarded from a particular small private university close to home. Additionally, there is another award (renewable each year) that he can apply for and if he receives that, we would end up potentially paying only about 25% of the full tuition. Commuting rather than living on campus saves us a significant sum as well if you include meal plan. DH and I were just really (pleasantly) surprised at how generous this is so it got me thinking about how these small schools can afford to stay in business if they're offering these types of scholarships.

fourwheelcycle
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Re: Question About Academic Scholarships

Post by fourwheelcycle » Thu Oct 24, 2019 9:52 am

Megamill wrote:
Thu Oct 24, 2019 8:34 am
.... when an incoming freshman is awarded a generous scholarship based on ACT score and HS GPA, does the university actually get that scholarship money or is it a "discount"? So does the school make more $ off the kids who are paying full tuition than the kids that are awarded scholarships?
I was once on a plane where a man complained that he was paying full price to his son's college and he believed the college was making money from him to subsidize other students. He wished he could make the subsidy portion of his payment as a donation so he could claim a charity tax deduction. The other person in our row was a college administrator who said (1) very few not-for-profit colleges make any money from people who pay full price because even full list price typically does not cover a college's actual cost of operation, (2) if a student receives a scholarship from an outside agency or a "named" endowed fund the college does receive money from the outside agency or the endowed fund, but other financial aid awarded to students also represents an actual transfer of money from the college's general endowment to the college's operating expenses, which must be approved each year by a vote of the college's trustees, and (3) although some well-known colleges have huge endowments, many smaller, less well-known colleges are struggling and have difficulty providing sufficient financial aid even to students who clearly qualify for need-based aid.

welldone
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Re: Question About Academic Scholarships

Post by welldone » Thu Oct 24, 2019 10:02 am

Megamill wrote:
Thu Oct 24, 2019 9:49 am
I asked this question because in our case, I was blown away at how much DS will be awarded from a particular small private university close to home. Additionally, there is another award (renewable each year) that he can apply for and if he receives that, we would end up potentially paying only about 25% of the full tuition. Commuting rather than living on campus saves us a significant sum as well if you include meal plan. DH and I were just really (pleasantly) surprised at how generous this is so it got me thinking about how these small schools can afford to stay in business if they're offering these types of scholarships.
A couple of points (if you weren't aware):

1. Colleges like gender parity and small LAC (liberal arts colleges) often have fewer men applying so they want to attract as many men as possible to stay as close as possible to a 50/50 distribution on campus.

2. Colleges are often looking to increase their 'average' scores so will 'pay' (give scholarships) to students with test scores/GPAs that are above average (for that school)

3. You aren't realizing savings if your child commutes. It still costs money to feed/house them (and colleges really aren't profiting on their room/board models). It is just that you already have the money built into your budget so that cost is less visible to you.

Congratulations if your son chooses to go to the school close to home - it sounds like financially it is a very sound decision for your family. If you want to know how this particular school is able to offer the money it does - you should probably ask them because their methods/decisions may well be different than other schools. You can usually find endowment information and scholarship information on school websites and you can also check into the CDS of any particular school for more information about them.

Admiral
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Re: Question About Academic Scholarships

Post by Admiral » Thu Oct 24, 2019 10:11 am

Megamill wrote:
Thu Oct 24, 2019 9:49 am
I asked this question because in our case, I was blown away at how much DS will be awarded from a particular small private university close to home. Additionally, there is another award (renewable each year) that he can apply for and if he receives that, we would end up potentially paying only about 25% of the full tuition. Commuting rather than living on campus saves us a significant sum as well if you include meal plan. DH and I were just really (pleasantly) surprised at how generous this is so it got me thinking about how these small schools can afford to stay in business if they're offering these types of scholarships.
I would strongly encourage you and your son to make the decision for him live on campus (regardless of cost, which as another poster noted may not be that different). There are myriad reasons for this that I don't need to go into, but suffice it to say he will very likely have a richer experience away from home. Just my $.02, don't want to derail this thread.

Congrats on the acceptance.

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