To an economist the case does not seem as clear as it does to most of the college administrators. Certain questions must be answered. One is: does the granting of additional scholarships mean an increase in numbers? It may, for example, mean merely that the scholarship student squeezes out another student who might have come to college. In that case, there is no additional cost. There is, indeed, a gain, because the college may now either make its own scholarship money go further or use it for general purposes. For all institutions the effects will probably be a rise of students as the number of scholarships increase, but not to the same extent for all institutions.
Perhaps more important, the comparison should be not of tuition received for additional students with average costs but rather with additional costs per student associated with expansion.34 Where tuition is high in relation to costs and where excess capacity exists, there is a strong possibility that the college will not lose from external scholarships. But if, as is likely for many institutions, increased enrollments are accompanied by a rise of costs in excess of tuition (and often in excess of average costs), the university should be compensated for any rise of enrollment associated with scholarship programs.
This chapter is devoted largely to showing that scholarship money is not used in the most effective manner. It is evident, for example, that only a relatively small proportion of those receiving scholarships would not have gone to college without them. This does not mean, however, that the scholarship does little good. Again, high-income groups probably receive relatively too many scholarships, even though a strong case can be made out for large increases in number of recipients and stipends. Frequently the value of scholarships is reduced because of restrictions put upon their use: they do not then go to the best qualified. Attempts are being made to tailor the scholarships to needs. Still another problem is the failure of tests, which contribute to the choices made, to be infallible. Again, for the college, the scholarship may often be costly rather than the reverse. These considerations raise questions not so much about the wisdom of large scholarship programs, but rather of how they might be much more effective than they are today.