Ed Donors Take Note: Scholarships Have to Amount to More Than Just Feel-Good Stories

Every year brings a new flurry of headlines about standout high school seniors receiving tens of thousands — or sometimes even millions — of dollars in scholarships. Given that I am the CEO of the nation’s largest private scholarship provider, one might assume such stories warm my heart. They do not.

As wonderful as it is for students to see all their hard work and determination pay off, our fascination with these narratives only helps hide an uncomfortable truth: Scholarships actually deepen and exacerbate inequity in higher education. That’s because the vast majority of scholarship recipients are students who don’t benefit all that much from the extra support. Too often, the funding goes to learners who might deserve the recognition scholarships provide, but who do not have the crucial financial need scholarships can help address. Meanwhile, learners who do need financial assistance are left with few avenues to adequately fund their education.

With college decision season underway, it’s time to reimagine how we distribute scholarships to students. More specifically, providers have to stop thinking of their scholarships as opportunities for a feel-good story and instead view them as a key strategy for economic mobility.

The research is clear. Awarding financial aid based on need has a big impact, acting, as one study last year put it, as a “great intergenerational economic equalizer.” The study found that students from the lowest-income families who received need-based aid and enrolled in college earned more than their family income even if they did not end up earning a degree. Students from the lowest-income families who received need-based aid and did complete a bachelor’s degree program earned more than twice as much as their family income.

Research also shows that scholarships drive completion for historically underserved students, Pell-eligible students and continuing-generation learners. The impact scholarships have on non-first-generation learners and non-Pell-eligible students, however, is negligible. And yet those students are precisely who receive the lion’s share of scholarships in this country. A full quarter of annual grant money at private colleges and universities is awarded without any consideration of family income. At public research universities and land-grant institutions, $1 out of every $3 spent on financial aid goes toward students who do not have financial need.

This discrepancy is not limited to aid awarded by colleges. Private scholarships also largely flow toward wealthier students, thanks in large part to their focus on merit rather than need. In fact, families from the top income quartile receive more than double the private scholarship aid as families in the lowest quartile.

Philanthropy is part of the problem. But it can also take the lead in creating the solution.

Consider the work of the Susan Thompson Buffett Foundation, which awards scholarships to students who demonstrate financial need. While academic merit is considered, only those with a Student Aid Index (SAI) below $10,000 are eligible. The foundation also provides academic and social resources through the Thompson Scholars Learning Community. This combination of financial aid and student support has helped over 15,000 learners make their way to and through college since 2008. A study on the impact of the Susan Thompson Buffett Foundation’s scholarship aid as well as a study on its learning community resources confirm the importance of both financial aid and support for historically underserved students.

This is not just a feel-good story. It’s a tangible step toward driving economic opportunity for people who would not have been able to access it otherwise.

I myself am one of those people. Growing up in a small town in the Midwest in the late 1980s, I didn’t think college would necessarily even be an option. It was only with the support of a private scholarship program that I ended up pursuing postsecondary education at all. When I received that scholarship, my outlook completely changed. For the first time, someone other than my parents seemed to believe in me. It was a level of affirmation that had a monumental impact and set me on the trajectory that has brought me to my current role. More than three decades on, I can say the scholarship not only defined my life, but also saved it.

Too many students in my situation never experience the powerful financial and emotional benefits such support can provide. Investing in those students’ futures should be a critical part of any strategy to build a stronger and more resilient economy from the local to the national level.

Let’s start thinking more deeply about how and why we award scholarships. Scholarships are not simply prizes to be won or fodder for human interest stories. They are a critical tool for promoting economic mobility, and they should be designed and distributed with that idea at the forefront. That’s the necessary first step toward realizing the potential of scholarships to build a stronger and more diverse workforce, strengthen entire communities, and help individual students thrive in college and beyond.

Mike Nylund is the President and CEO of Scholarship America, an organization that distributed over $300 million in 2023 in scholarship aid. Previously, Nylund served as the Director of Financial Aid at Capella University.

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