The $7 Billion Dollar Elephant in the College Affordability Room
Tobe Bott-Lyons & Sam Ritter
Spring is limbo season for high school seniors hoping to go to college. Nails are gnawed and nerves are frayed as anxious students, families, and college counselors wait to hear back about admissions and financial aid decisions. In hopes of ensuring that college will be affordable once those decisions do arrive, many students spend this time applying for private scholarships.
Looking back, the Spring of 2024 was particularly stressful for college applicants (and their families and counselors) with FAFSA-induced delays and the ambiguous shape of post-affirmative action admissions decisions and processes. Colleges continued to re-reconsider the role of standardized testing, and deadlines for deposits and housing were changing every week. At the end of the school year, FAFSA completion was down over 10 percent over the previous year, with ongoing reverberations still shaking out through the system. Low-income and first-generation college students were the hardest hit by this instability. Without serious concerted effort, many of these issues will continue to grow unabated in coming admission seasons.
Over the last decade, as the complexity of college affordability has increased, the number of private scholarships has exploded. Nationwide, over 7 billion dollars in private scholarships are awarded every year to nearly 2 million undergraduates. This massive investment has the potential to truly transform the lives of scholarship recipients and to drive fundamental change in our education systems. Too often, however, this money just reinforces the existing inequalities in access to higher education. The average private scholarship in America is a $4,000 merit scholarship awarded to a student with little or no financial need and who is more likely to have a parent who has a college degree than to be a first-generation college student.
While this average scholarship is a nice boon for parents facing soaring college costs, it’s hardly the door to social mobility we imagine scholarships to be. The reality is that, far from filling the financial gaps for students and families, scholarships rarely have a significant impact on a student’s ability to afford college. In practice, most scholarship programs award small-dollar sums to students who can already afford their college educations. The result is token financial assistance to students that often serves to publicize the names of donors and sponsors but rarely impacts the trajectory of the students they aim to support.
Of course, there are a small number of scholarships that both truly target the students who need them most and truly create high quality affordable options for students. These scholarships that meet the most financial need support only a very small number of students and have become so intensely competitive that only those with impeccable transcripts and extraordinary luck can hope to earn one. There were over 6,000 students selected for the Questbridge scholarship last year, and their average GPA was 3.92. For other scholarships, it is often even more academically competitive. What this intense selectivity comes down to is this: just 1.5 percent of private scholarship recipients receive enough funding to cover 100 percent of their college costs.
In fact, many scholarship recipients will never even see the money they have been awarded. Award displacement, the practice of using private scholarships to reduce a college’s institutional aid award rather than adding it to a student’s overall financial aid package, has become a real problem. For example, if a student receives $2,500 from private scholarships, most colleges will reduce the school-awarded merit scholarship a student receives by that same amount, thereby saving the college money without lessening the amount owed to the school by the student and their family. In essence, this results in a donation to a college that is passed through in the name of a student.
As the botched roll-out of FAFSA last year clearly demonstrated, closer regulatory and legislative attention on college affordability is essential. In fairness, Federal Student Aid did have a much smoother FAFSA roll out this year, and we have already seen simplification be a significant improvement for those families and students who are able to complete the form. To take the next step toward genuine college affordability, further systemic changes are required. In our work, we have seen private scholarships and offices of admission and financial aid work together to reduce displacement and help students afford college. With better coordination, this could be part of the solution to college affordability.
Ultimately though, awarding $4,000 to an honor student is a reward for a job well done in high school, but too often not a meaningful step toward helping someone earn a degree. We see this everyday: our students in New Mexico will receive a small private scholarship and never see the money. Their families will continue to take extra shifts at work, and the students will borrow more to cover the portion of their college expenses that well-meaning donors were intending to alleviate. That is why, over the last ten years, the Davis New Mexico Scholarship has worked hard to demonstrate that bringing together colleges, high schools, and community based organizations is the best way to leverage private philanthropy to increase college access and graduation rates for first-generation students.
Given that the financial aid system in America relies on a multi-billion dollar annual influx of private money, private scholarships have an increasingly key role to play in college attainment. The end goal of most scholarships is to move the needle on college access and genuinely help students in need earn a degree. Colleges, private scholarships and philanthropists, and policy-makers must come together to make this possibility a reality.
Tobe Cullen Bott-Lyons is the founding director of Upward Bound Española at Northern New Mexico College and a Research Professor (Youth + Community Praxis Lab) in the NNMC Department of Arts & Human Sciences Arts.
Sam Ritter is the Director of the Davis New Mexico Scholarship, the largest private scholarship in the state. To date, the Davis New Mexico Scholarship, which was founded by philanthropist Andrew Davis, has awarded over $50 million in scholarships to nearly 300 first-generation college students from New Mexico, and continues to explore how it can better use its scholarship dollars to support college access statewide.
