Two types of scholarships

Crikey today draws my attention to SMH reports of a battle between UNSW and Sydney University proffering merit scholarships. Apparently both institutions already offer $10,000 per year to those who get a UAI of 99.9 or over, and UNSW is now offering $4000 to everyone who comes dux of their school.

When it comes to scholarships, it’s worth remembering that there are two types.

  1. Merit-based scholarships are given to students with good academic skills. Universities generally do this because they want to buy peer effects. In other words, they’re willing to offer student A a discount because it will improve the quality of the learning process for students B and C.
  2. Needs-based scholarships are given to students from poor families or minorities. The rationale is generally that students from disadvantaged backgrounds have had a harder time on the road to university. Among minorities, scholarships may create more role models for the next generation.

Australia has lots of merit scholarship, and hardly any need scholarships. By contrast, places like Harvard have lots of need-based scholarships and hardly any merit-based scholarships. Malcolm Turnbull’s son Alex probably paid full fees, since his dad is reasonably well off. But if your family income is US$40,000 or less, Harvard will give you a free ride. When you hear “scholarship” in Australia, think merit-based. When you hear “scholarship” in the US, think needs-based.

I’m comfortable with Australian universities spending their money on merit scholarships if they want to buy more peer effects, but I’d feel better about it if there was also some money being put on the table for poor kids.

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20 Responses to Two types of scholarships

  1. Andrew Norton says:

    Compared to the US, Australia has few scholarships of any kind. But there are ‘access’ scholarships (see this scheme at the U of M) and all the undergraduate Commonwealth scholarships are aimed at disadvantaged students.

    Apart from the non-availability of US-level philanthropic funds, two other factors affect scholarships in Australia. Tuition scholarships are less necessary because in Australia the cost is typically lower (though this is less true than in the past) and the income-contigent loans scheme largely eliminates the risk of default on student loans. Universities also have to be very careful with providing income support, since this can end benefitting the government rather than the student, because it affects Youth Allowance eligibility or levels.

    I wouldn’t prevent merit scholarships, but I don’t like them. I suspect they only rarely change university choices in the Australian context, and so a lot of very scarce money is spent achieving little or nothing.

    And you don’t have to be a lefty to think that giving another reward to people who have already won the lottery of life isn’t a great idea.

  2. Stephen L says:

    While I agree that merit based scholorships are not a great use of money, the idea of giving them to the dux of a school does seem to me an improvement over basing it on UAI alone.

    After all, while the dux will probably more often than not come from one of the more privalidged backgrounds within that school community, it is still the case that the students getting the top marks at state schools in disadvantaged areas are much more likely to actually need the money than someone getting a UAI of 99.8 who is statistically likely to be at a privalidged school and from a wealthy background.

  3. Fred Argy says:

    Andrew and Andrew, I share your caution about merit-based sholarships. Universities are unlikely to go into needs-based scholarships in a big way but I believe the Federal Government should do more to assist access by less well-off kids to tertiary institutions access (including to vocational education).

  4. Sukrit says:

    “By contrast, places like Harvard have lots of need-based scholarships and hardly any merit-based scholarships.”

    I’m not sure, but don’t you have to be pretty darn smart to get accepted into Harvard in the first place? Once you get in, after acing your SATs or GMAT/GRE, then it becomes in Harvard’s interests to finance your study.

    In Australia ‘need’ seems to cancel out merit (see your post suggesting lower ENTER scores for poorer/disadvantaged students and also the special entry schemes some universities run).That, of course, completely ignores the root cause of the ‘need’. But it’s probably the best that can be managed if entry requirements to courses reflect the operation of the quota system rather than what universities deem ‘merit’. In Harvard though, I suspect merit gets looked at first, and need comes afterwards.

    And why not? Smart students probably play some role in attracting smart professors. Smart professors get Nobel prizes. All-round smartness is what makes a university great. 🙂

  5. Part of the curent kerfuffle in outer Melbourne is sports based scholarships. [The purpose is to buy winners, just like merit based scholarships.] They have been around, low profile perhaps, for decades.

  6. Christine says:

    Well, at least it’s not Australian governments (as such) offering merit scholarships, unlike the US HOPE scholarships. Plus, if I recall the Australian tax system correctly, no ridiculous tax credits for tuition fees that only benefit people with enough income to pay taxes. There’s been a whole lot of concern in the US recently that there’s been a move away from needs-based to merit-based scholarships.

    I do worry that merit scholarships in predominantly public systems is that the universities are effectively playing with someone else’s money to get a private benefit. This would not apply to Harvard to the same extent. (BTW – is Harvard the best comparison? I gather they’ve actually got pretty good needs-based support relative to most other universities?) Haven’t really figured this out, yet, but it may deserve some reflection.

    Sport-based scholarships are an abomination, unless they’re to the AIS.

    On Andrew N’s point about fees being lower – I wonder if that’s actually true? Clearly compared with the private unis in the US, but most students attend state universities. I think it’s now the case that tuition fees in Ontario are about the same or (I think) a bit higher than the average in most states of the US – and they’re just over $5000 a year or so.

  7. Peter says:

    Andrew —

    I had never heard before the purpose you state for merit-scholarships — ie, to ensure the student body includes very bright students in order that these students improve the quality of the education of the less bright. It is not obvious to me such inter-student transfer of ability does happen, nor even how it could happen in mathematical subjects. Bright math students are streamed in most places, and are generally encouraged not to waste their time helping anyone unable to help themselves.

    If indeed this is the purpose of merit scholarships, then I find this is very ironic. One reason for needs-based scholarships at Ivy League Universities (and at prestigious private high schools) in the USA is to improve the quality of education for the RICH students. The idea is that the sons and daughters of the American elite can be only bettered by being exposed to the children of the poor and of ethnic minorities, since the former will have to lead and manage the latter after graduation. The poor are there, in other words, to help rich students gain a more-rounded, and hence better-quality, education.

  8. Andrew Norton says:

    Peter – There is a reasonable amount of research on ‘peer effects’. I haven’t looked at it recently, but from memory some of the mechanisms suggested include students helping each other, weaker students working harder to keep up with stronger students, and creating stronger academic norms.

    I’m not sure that there is any irony in noting this rationale for ‘minority’ recruitment. Both policies are based on the idea that students affect each other, and in the latter case that university should be a rounding experience – which will benefit the poor kids as much if not more than the rich kids (but as the rich kids are paying the bills, they are the people who perhaps need most convincing on the arrangement).

    Australians forget that US residential universities and colleges are quite different from the commuter-based credential factories that government policy has created in Australia.

  9. Andrew Norton says:

    Christine – The College Board puts average US fees for a 4-year college for 2005-06 at US$5,491, which works out at A$7,188 at today’s conversion rates. The unweighted average maximum student contribution amount in Australia is $A6,147. The shorter on average Australian degrees would also be a big factor pushing down total costs, and the soft loan scheme a small factor. On the other hand, your chances of getting a scholarship, as noted above, are much higher in the US.

    I’d stand by my claim that uni education is ‘typically’ cheaper in Australia, though this is not always the case.

  10. Peter says:

    Thanks, Andrew (Norton). Points taken.

  11. Peter says:

    One impact of student fees and post-graduation taxes in the UK has been marked increases in the number of students having to find part-time employment, and in the average numbers of hours worked in such jobs. This has led, as one would expect, to marked decreases in time spent on social and club activities. “Credential factory” is a good description of the typical student experience of university life now.

    Who knows what the long-term impacts of this will be, but I cannot imagine society or business benefits from being led by a cadre of narrow-minded, technocratic savants, no matter how well they do on their exams. I seem to recall the US Defense Department being run by such a group in the 1960s under Robert MacNamara, and look what a mess they made of things.

  12. Andrew Norton says:

    Peter – I doubt increased work and work hours – which is very evident in Australia – has much to do with tuition costs, which have been entirely deferrable here. Rather, it is that the student lifestyle is more expensive than it used to be, with mobiles and computers just about essential, and (it seems from observation) much higher general lifestyle expectations than even when I was a student in the 1980s.

  13. Matt Cowgill says:

    I would also note that the eligibility criteria for Youth Allowance have been repeatedly tightened, and that the cost of rent (a significant component of many students’ expenditure) has skyrocketed in most Australian cities.

  14. Andrew Norton says:

    Matt – I agree, rent would be a factor for students living away from home. Curiously, however, Youth Allowance recipients are trending up despite stalling domestic enrolments.

  15. Claire says:


    “If indeed this is the purpose of merit scholarships, then I find this is very ironic. One reason for needs-based scholarships at Ivy League Universities (and at prestigious private high schools) in the USA is to improve the quality of education for the RICH students. The idea is that the sons and daughters of the American elite can be only bettered by being exposed to the children of the poor and of ethnic minorities, since the former will have to lead and manage the latter after graduation. The poor are there, in other words, to help rich students gain a more-rounded, and hence better-quality, education.”

    Yes, but another strong reason often given for affirmative action is there’s a sizable demographic of ivy-league educated minority students who go on to make a large impact in their communities, much more than the equivalent contribution that your average majority rich-kid student goes on to make (this is based on research from the Kennedy School). ie. it facilitates the careers of future minority leaders and gives them opportunities they might otherwise not have had, and also disproportionally benefits their communities.

  16. Robyn says:

    Peer assistance is perhaps the charitable view of merit scholarships. Pursuit of prestige might be another motive (in the US they publish where the top achievers go, and we generally sort prestige in Oz by cutoffs and high end demand), also they could be potential research students, and also they are more likely to succeed and would be more interesting, and possibly easier, to teach (I read that many lecturers complain about unenegaged students and nowadays money goes to teaching performance which includes things like retention).

  17. Christine says:

    Thanks for doing the legwork, Andrew.

    Work and tuition fees! I’ve actually done some research on that. US there seems little effect of fees on work, Canada seems to be a fair bit more, though it also seems to be that the relatively advantaged kids are teh ones that increase their work in response to increases in fees – possibly because they had more room to do so and don’t get as much financial aid. I don’t know if I buy the student lifestyle expectations argument for increased work hours. A high tech (computer/cellphone/iPod) lifestyle is much cheaper to maintain now than when I was a student – plus as an old prof of mine put it today, students on campus these days have more parents, on average (ie smaller family size means easier to spend lots on your kid’s mobile phone bills).

  18. Andrew Norton says:

    Christine – Maybe compared to when you were a student, but when I was a student computers were just starting to be used. Some people used them but there was no expectation. Nobody had heard of the internet or ipods. Mobile phones were unknown. A decent computer will still set you back a four figure sum, and young people I know seem to spend a fortune on mobiles. And it is the 1990s that saw the rise in student work.

    We should also note supply factors – there are huge numbers of jobs with flexible hours that did not exist in earlier times, so perhaps more people would have worked if they had been readily available.

  19. Christine says:

    Flexible hours is something to look at, thanks for the pointer.

    I didn’t put it properly, but my point about technology is partly that it was available only to the mega-rich, if at all – that when I look around and see all these students with mobile phones and whatnot my immediate reaction is to go with the ‘back in my day’ comparison, without thinking about the cost comparison. (I suspect my student days weren’t much different to yours, btw. Definitely no mobile phones or internets.)

  20. mansoor ali says:

    i am poor student so pls giove me schlorship

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