Higher Education Strategy Associates

Tag Archives: Merit Scholarships

September 22

Twenty Years Ago Sunday

Five years ago I wrote the following blog, under the headline “fifteen years ago today”.  I think it’s worth running again (with a couple of minor alterations).

On September 24th, 1997, Jean Chrétien rose in the House of Commons to present his reply to the Speech from the Throne. About half-way in, he noted casually that there would likely be a financial surplus that year (a miracle, considering where we’d been in 1995). And he was planning to blow it on something called “Millennium Scholarships.”

Until that exact moment, his caucus had been in the dark about the idea. Indeed, cabinet had been in the dark until the day before. So, too, had the Privy Council Office – Chrétien had deliberately kept them out of the loop because he knew they’d hate it on section 93 grounds and try to top him.

The way the project was pursued in the run-up to the 1998 budget didn’t do the Foundation any favours. There were two basic problems. The first was that it wasn’t clear for months whether these were going to be merit scholarships or need-based grants (in French, the word “bourse” covers both). The public servants at HRDC and Paul Martin wanted it to be about need because they saw the political hay people were making about increasing student debt (note: unlike today, this was a time when debt actually was increasing quite rapidly); Pierre Pettigrew and the Finance mandarins wanted it to be about merit, but for different reasons. Pettigrew has his eye on Quebec and its not unreasonable complaint that the feds were duplicating a provincial program and thought a more merit-based program would take the edge off that argument.  Finance, I think, wanted merit because the top folks there wanted a culture shift in Canada to promote merit (they were also pretty much all Queen’s grads, as far as I could tell, which may or may not explain the fixation).

In the end, 95% was distributed “primarily” on the basis of need, while 5% went to merit. This mix was about right; broad fears of rising tuition and debt required a policy response that emphasized need. Conversely, had more been allocated to merit, the Excellence Awards the Foundation eventually developed would have been devalued – part of what made them special was the fact that they weren’t available to the tens of thousands of students originally envisaged.

The second problem was that no one in Ottawa – including HRDC – really understood how student aid worked. The result was a commitment to give the Foundation’s need-based aid to students with “the highest need” – that is, to exactly the students who already received grants from the provinces. The result was that Millennium awards ended up saving provincial aid programs a bucket-load of money. The Foundation did its best to get provinces to re-invest that money in things that would benefit students. Apart from in Nova Scotia it was reasonably successful though it didn’t always seem that way to the students who were bursary recipients. With some justification, those students were sometimes disappointed; Eddie Goldenberg, the Prime Minister’s Senior Political Advisor whose views on fed-prov relations were…well, let’s just say they lacked subtlety…was apoplectic.

This isn’t the place to recount the Foundation’s history (for that, I recommend Silver Donald Cameron’s book A Million Futures). All you really need to know is that for ten years, the Foundation ran a national social program that wasn’t based in Ottawa and wasn’t one-size fits all. It ran a merit program that was much more than just money-for-marks, and was rigorous about using empirical research to improve our understanding of how to improve access to higher education. It was just a different way of doing student aid.

Now, I’m biased, of course.  I worked at the Foundation.  I met my wife there.  Had Chrietien not risen in the House that day, my daughter literally would not exist and the world would be deprived of its smartest and most beautiful 8 year-old ballet dancer/sumo enthusiast.  But even if none of that were true, I’d still stand by my final comment from five years ago:

The Foundation was created on the back of a cocktail napkin, and suffered from a profoundly goofy governance structure. But within the boundaries of that cocktail napkin, a lot of neat stuff happened. And even though some of what was best about the Foundation has been taken up by the federal government since its demise, the country’s still worse off now that the Foundation’s gone.

September 25

Ending the Merit Scholarship Arms Race

Here’s a way the new Ontario Minister of Training Colleges and Universities, Reza Moridi, could do everyone an enormous service, and win political capital at the same time: force institutions to cut back radically on automatic merit-based entrance scholarships.

Here’s the background: at some point in the 1990s, Canadian institutions hooked onto the idea of giving out entrance awards as a way of managing enrolment.  It was a nice trick to help lock students in early in the admissions process – you register with me by a certain date, and I give you $1,000 (or whatever).  To keep costs down, “merit” was redefined as being exclusively in terms of high school grades and awarded according to a grid – $1,000 if you had over a 90, $750 if you had an 85, etc.   These were dubbed “Automatic Academic” awards by Franca Gucciardi in her 2004 paper Recognizing Excellence.

In the aughts, institutions in Ontario started getting truly stupid about this “merit” money, and an arms race broke out.  Here’s roughly how it worked: one year, school X would decide it was going to try to steal some smart science and engineering students from school Y, and would raise its offer to students with grades over 85% from (say) $1,500 to $2,000.  This worked, and school Y would see its yields go down.  But the following year, school Y would decide to up its offer by $1000, and the pendulum would swing back!  And so on, and so forth.  By 2007, Ontario institutions were handing out something on the order of $70 million in this fashion, and there is every reason to think this amount has increased since then.

There is no durable way an institution can get out in front of the pack in such an arms race – others would always match the awards, and an equilibrium would be restored.  All institutions are making themselves worse off because their net tuitions are all declining, yet no one can disengage because they are afraid they would lose share to others.  And into the deal we get a complete devaluation of the word “merit” because institutions are giving these awards to about 70% of incoming freshmen.

This is a classic collective action problem.  And collective action problems have solutions: imposed government rule-making.  In this case, the Government of Ontario should restrict the ability of universities to give away money based on grades alone to, say, 1% of what they take in via tuition.  If they want to run more complicated merit schemes – things that take into account service, innovation, and what have you – great.  Let ‘em knock themselves out (they won’t of course, because those take actual effort to organize, but whatever).  Or, if they want to give out more money based on need, that’d be OK too.  Just end the insanity around academic awards.

You think universities would oppose this on grounds of competitiveness or institutional autonomy?  Think again.  They’d love for someone to get them out of this arms race, because they’re clearly incapable of doing it themselves.  And of course the Ontario Undergraduate Student Alliance has already called for essentially the same thing, so the student constituency is already covered off.

So, how about it Dr. Moridi? Are you up for a quick win?  Just end the merit arms race.

May 30

The Economics of Merit Scholarships

There is a wonderful moment in Philip Delves Broughton’s Ahead of the Curve in which he describes a fight between a student and an administrator at Harvard Business School.  During the altercation, the student asks why he is being jerked-around, since, after all, he is “the customer”.  To this, the administrator calmly replies: “no you’re not, you’re the product”.

For serious institutions, this is exactly right.  People judge a school based on its alumni and their accomplishments.  Students are just inputs in the making of alumni.  And since the easiest way to improve your outputs is to improve your inputs, it’s usually worth paying for better raw materials.  So the way to think about undergraduate merit scholarships is as an institutional attempt to purchase better inputs.

Think about it: what would it be worth to new-ish universities (say, MacEwan or Mount Royal) to have one of their students win a Rhodes Scholarship?  What benefit would they get in terms of recruiting and reputation for something like that?  My guess would be easily half a million or so.  So if you were President of one of those schools, and you could somehow forsee which teenagers were most likely to become Rhodes scholars, what would you stump up to convince such a student to attend your institution?  $100,000?  $200,000?

That sounds like a ridiculous question because we’re conditioned to think about the size of institutional scholarships as being a function of tuition (or, in the case of truly exceptional scholarships, like McGill’s Greville-Smiths, a function of tuition plus cost of living).  Yet we have no problem thinking about merit awards much larger than tuition at the graduate level; so why are squeamish about it for undergraduate students?

I think one reason is that people see too much waste in the current scholarships.  The number of genuinely outstanding people who could shift an institution’s reputation is pretty small; yet, on average, Canadian institutions pass out entrance awards to nearly two-thirds of their entering students in sums so small one wonders what possible purpose they could be achieving.  Fewer, bigger scholarships – or an outright diversion of money from merit to need – might bring greater results, but people are wary about potentially handing even more money to a system which, at present, achieves very little.

It would be interesting if one Canadian institution broke from the herd and started paying for talent as if it mattered, instead of dropping seven figures a year on masses of one-time $1000 and $1500 scholarships.  Among other things, we might just find out just how many great alumni it takes to shift public perception of an institution.  My guess is it’s fewer than you’d think – which is precisely why this is worth a try.

January 25

The Uselessness of Automatic Entrance Scholarships

A couple of weeks ago, HEQCO released The Impact of Scholarships and Bursaries on Persistence and Academic Success in Universityin which Martin Dooley, Abigail Payne, and Leslie Robb examined the effects of university merit scholarships in terms of grades, persistence, and degree completion.  The paper’s technical analysis was excellent, but the policy analysis wasn’t as sharp as it could have been.

Most scholarships these days can be described as “automatic” awards – if you have an 80% average in high school, you get $1,000; 85% you get $2,000, etc.  From an economists’ perspective this is pure gold, because these arbitrary fixed points (“discontinuities”) permit some very interesting analysis.  People on either side of the discontinuity are almost identical (e.g. someone with a 79.9% average vs. someone with an 80.1%), but get different financial benefits.  By following the groups on either side of the discontinuity, and adding a little regression analysis, it’s possible to test the pure effect of the financial intervention.

The paper concludes that the effects of giving already high-achieving kids money in the form of automatic scholarships is essentially nil.  No surprise there, though it’s nice to see it quantified: students who come in with an 80% average, or higher, are likely to complete school in any case.  If they do run into trouble, money’s probably not the issue.

So far, so good.  But the authors then went on to observe that the rationale behind these scholarships is to allow each institution to secure its share of “good” students, which is to the benefit of individual institutions, but not the system as whole (take away the scholarships and these students would still all be in the system, just distributed differently).  So, they ask, what’s the public benefit of these scholarships?

This is partly fair, but also a little simplistic.  First, scholarships are often funded from private endowments, so the “public money” argument doesn’t always wash.  Second, Ontario universities aren’t UQs – they’re given substantial autonomy precisely because they’re meant to compete with one another.  Go too far down the “system perspective” route and you start heading into absurdities.    For instance, from a system perspective, there’s no difference where monographs actually reside, so why not dismantle the Robarts library and re-distribute its books elsewhere?

A stronger case against these automatic scholarships is that they’re ineffective on their own terms.  They don’t actually persuade “good” students to move: institutions match each others’ awards so as to restore the equilibrium.  It’s a pointless arms race.

Besides, why are institutions competing on price, rather than quality, anyway?  My advice to Ontario institutions is this: take advantage of the introduced 30% tuition reduction program to “re-evaluate” your scholarships, and then quietly re-invest the money to improve teaching and services.