In an article earlier this week in the Wall Street Journal, it was revealed that hundreds of colleges and universities are using scholarships and merit based financial aid as tool to attract students to their programs. At Tulane University in New Orleans, 39% of undergraduates secured scholarships without showing the need for financial aid. At George Washington University, nearly 50% of undergraduates received its prestigious “Presidential Academic Scholarship”. At Cornell College, an astounding 99% of students received merit scholarships.

While this practice seems harmless at first glance and if anything, benefits incoming students and their parents at a time of increasing tuition rates and college debt, the colleges and universities are actually counting on human emotional aspect of wanting a good deal rather than pay full fare.

Just as a consumer feels better about buying a $100 pair of jeans at a 50% discount rather than pay for a pair that is originally listed for $50, these colleges figured they would raise their tuition rates arbitrarily and then provide a substantial discount to make it look like the student is not only exceptional enough to be admitted but is also deserving of a scholarship that knocks off 40% of the published tuition rate.

Future Wealth’s View

The fact is that colleges now have econometric models that let them predict how many students will come if they provide scholarships and these models are so precise that it even lets colleges arrive at the exact number to discount to lure a young man from the South with average grades.

For those who have  little kids and the prospect of saving for their college is a primary goal, this effort to ensnare students and parents alike by using questionable methods by the very universities that are expected to educate and prepare children to a successful career, is disturbing to say the least.

In the movie – “Wall Street”, Gordan Gecko famously said “Greed is good”. We are all used to witnessing avaricious behavior from businesses in all corners, but when we see it from academic institutions, it makes us pause. On the bright side, while there is no guarantees that the amount we are putting away in our children’s college fund will suffice to cover their tuition costs at a four year college or university, we can be guaranteed that they will receive a scholarship.