Scholarships 👨‍🎓📚

Why do scholarships exist? More specifically, merit-based scholarships for tertiary education—that is, why students are willing and able to accept such scholarships and why organisations are willing and able to offer them. 

The more enticing a scholarship is to a recipient, the less appealing it is to provide, and vice versa. Prevailing scholarships exist within a range where it is attractive to both sides.  

If we concern ourselves only with the pecuniary elements of the deal, scholarships would not make sense. Both the receiving and providing parties incur an additional cost by committing to each other before the recipient has finished his/her tertiary education, when they were free to do so only after. The provider can simply add what the value of the scholarship would have been as wages to attract prospective talent without having to make a prolonged commitment. The recipient can benefit from the increased wages without having to broaden her commitment. Providing a scholarship also disincentivises effort thereafter in constructing a stellar applicant profile.  

But scholarships do not exist in that form, so patently there are non-monetary aspects which comprise the considerations behind scholarships, on both sides of the deal. 

Societies’ members are socialised to believe that scholarships are distinguished honours. Hence students benefit from scholarships via the associated prestige. Undeniably, there is significant utility to be gained from making your parents happy and oneself assured due to one’s status as a scholar. This produces a positive feedback loop. Good students obtain scholarships, enhancing its socialising effects, which then motivates better students to obtain scholarships…

There is also the comfort or avoidance of discomfort of being job-secure years before entering the workforce. Alternatively, a passion for the scholarship’s area of work drives students to bind themselves early so they attain the feeling of accomplishment of being in a field they enjoy earlier on in their lives. All else held equal, present consumption (of positive feelings) is always preferred to future consumption (of positive feelings). 

We can generalise into 2 kinds of scholarships—one conferred by educational institutions, and one provided by employers such as the government service or corporations. An obvious but insufficient grounds as to why they provide scholarships is that these organisations want to help students. It is a valid reason, but weak on its own as it must be economically justifiable too. 

It is easy to understand schools’ willingness and ability to offer scholarships. It attracts good students, improving the quality of the student body and hence the reputation and prestige of the school. And the marginal cost of an additional student is low.

A common reason given for why employers provide scholarships is so that they create a pipeline of talent. I am skeptical of this explanation and dismiss it entirely. A scholarship does nothing in this respect besides move the selection upstream to the point where prospective employees are still students. Providing scholarships can even be viewed as an inferior measure if the sole objective of the organisation were to forge a talent stream. There are years of lag between the implementation of an education fund and the beneficiaries starting to work full-time for the organisation. If you adjust your terms of employment instead, the talent you want start working for you much earlier.

Alternatively, employers may offer scholarships for Corporate Social Responsibility, promoting their brand image, recognition and perception by building positive publicity through the scholarship. For something that is a sure-fire way to boost public relations, it is cheap.

Moreover, employers want to filter for individuals who are more committed. Coveting a life-changing bond to a company for multiple of one’s best years is a good indication of a committed character. 

In addition, employers want to be able to be in close contact with their future talents from an earlier stage in order to better mould them into what they want. 

Conclusion

Students demand scholarships due to the good feelings accompanied by having one. Schools supply scholarships to promote their competitiveness at an economical expense. Other kinds of organisations offer scholarships for marketing, to extend the runway of development and to filter particular characteristics.