Scholarships? Aid? Let’s make a deal

US institutions, students and athletes must strike the right arrangements to stay afloat, says Alan Ryan

April 17, 2014

“March Madness” is the label attached to the National Collegiate Athletic Association’s basketball championship; it goes on for weeks, and ends in April. Madness is emphatically displayed by the fans who drive hundreds of miles to watch their local university’s team in action for 45 minutes, in a lesser form by the thousands of office workers who try to guess how the 68 teams will fare in each of the rounds that finally whittle them down to the final two.

This year, something probably better described as hopeless overoptimism was displayed by punters who entered their guesses for the prize of $1 billion (£600 million) offered by Quicken Loans for guessing the correct result for all 34 games. The prize was underwritten by Warren Buffett. He got a million bucks for his pains; Quicken Loans got the names and addresses of potential customers; and the punters got a one in 9.2 quintillion (a quintillion is 10 to the 18th power) chance at the money. Sadly, there were so many early upsets that there was no suspense, either for Buffett or the rest of us.

There is something unseemly about the stampede of gifted college players into the National Basketball Association after the conclusion of the spring championship

One of the madder aspects of the championship is that the players are supposedly “scholar athletes”: undergraduates, unpaid, getting an education that will stand them in good stead when their playing days are over. “Shamateurism” barely begins to describe it. The campaign to have “scholar athletes” recognised as what they are, university employees, just got an unexpected boost when the National Labor Relations Board ruled that students who played football for Northwestern University were employees, and had the right to form a union. Basketball throws up many fewer scandals than college football, but from an educational point of view there is something unseemly about the stampede of gifted players in their freshman or sophomore years into the National Basketball Association immediately after the conclusion of the spring championship.

From the point of view of students and their parents, financial madness follows hard on the heels of the letters of acceptance that high school seniors have been receiving from the universities and colleges to which they applied in the autumn. Much as in the UK, many families are unsure whether they can afford the bills for higher education; but, very differently from anything we see in the UK, not only does the cost of tuition, board and lodging, and other expenses vary enormously from one university to another, but the amount of help that universities and colleges can give incoming students varies hugely, as does the willingness of institutions to engage in a certain amount of bargaining over just what they will do for students they want.

Contrary to what one might suppose, athletics scholarships are not generous. An athlete from a hard-up background is likely to get a scholarship covering tuition and a large part of their living costs. But it comes with a downside, which is that if the athlete is sidelined by injury or booted off the squad for inadequate performance, he is likely to lose his scholarship as well. It is hardly surprising that someone who is good enough to get a contract worth several million dollars a year will abandon higher education as soon as he plausibly can.

For everyone else, what is on offer is a mixture of “merit” and “need” awards. In the Ivy League, there are no merit or athletics scholarships, although something like a quarter of admitted students are accepted with an “assist” from one of the athletics coaches; with an acceptance rate overall of something between one in 20 and one in 10 of applicants, the applicant’s merits speak for themselves.

What the Ivy League and comparable universities such as Stanford can offer are very generous “needs” awards, which take the form of grants rather than loans, an advantage that neither British nor most other American universities can readily match. If the downside of the US system is that you pay as you go, the upside is the amount of money that comes with no need for repayment.

Elsewhere, the next few weeks will see a quiet frenzy of pestering, cajoling and bargaining between financial aid offices, admitted students and their parents. For a university or college, there are delicate calculations, since generosity in waiving student fees may be rewarded by recruiting more intelligent, diligent or committed students, but at a price. The calculation has to measure success in filling spaces in lecture rooms and dormitories against the damage to the bottom line done by recruiting too many students who pay less than it costs to teach, house and feed them. The UK view that private US universities and colleges have enormous endowments is far from reality; beyond the top couple of dozen, they are deeply dependent on tuition income.

Of course, public universities are very different, since they are supported by the taxpayer; or rather, they were until recently. The combined effect of public resistance to taxation and the damage to public finances done by the Great Recession has been to reduce the taxpayer contribution, in many cases to as little as a third of what it used to be. Since public universities, with striking exceptions such as the University of Texas System, have little in the way of endowment to fall back on, it is in the public sector that tuition rises have been greatest over the past 10 years or so. “Out of state” tuition is now often as expensive as that of Ivy League universities, and the institutions themselves have far less money for scholarship assistance.

If there is one thing for which British parents, though not their university-bound children, may be grateful, it is that they are spared the financial March madness of their US counterparts bargaining with harassed financial aid officers. As to their children, who knows what their future will hold; or how many more of the Treasury’s calculations will turn out to be wholly at odds with reality.

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