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What We Learned About Postsecondary Scholarships

Students in the U.S. pay some of the steepest fees for postsecondary education in the world and face more student loan debt than all other countries combined. Despite the cost, postsecondary degrees are seen as a silver bullet in the U.S., providing a path to higher wages, more fulfilling employment and better health. Many nonprofits offer scholarships so that students with financial need or other disadvantages can share in the benefits of postsecondary education. But, how do scholarships actually impact the long-term outcomes for students? The ImpactMatters team endeavored to review as many scholarship-granting nonprofits as we could to answer this question. We found enough data on 278 nonprofits, which spent a combined annual $622 million on their scholarship programs.

We set out to estimate the extent to which a scholarship increases a student’s likelihood of graduating from school and, in turn, the extent to which that student’s income increases as a result of graduating. [This is a simplification; for a detailed explanation, read our full methodology.] To do this, we started by comparing relevant details of the scholarship (e.g., how much money students are given, whether it’s awarded based on merit or need) against economic literature to estimate the effect a certain scholarship has on enrollment and graduation rates. This allowed us to estimate the number of students who graduated as a result of the scholarship — in other words, students who would not have graduated without a scholarship. We then used census data to estimate how much more they would earn as a result of having a degree. Because we consider their graduation to have been caused by the scholarship, we think of these new earnings the same way.

Finally, we compared this income boost to the cost of the scholarship program to determine cost-effectiveness. If a scholarship program boosted a person’s income by 85 cents for every dollar it spends, we consider it cost-effective. If it boosted income by $1.50 for every dollar it spends, we consider it highly cost-effective. 

Based on data published by the nonprofits, nonprofits earned the following star ratings:

Rating

Criteria

Number of nonprofits

5 stars

Program increases income for a scholarship recipient by more than $1.50 for every $1.00 spent.

139

4 stars

Program increases income for a scholarship recipient by between $0.85 and $1.50 for every $1.00 spent.

120

3 stars

Program increases income for a scholarship recipient by less than $0.85 for every $1.00 spent.

19

2 stars

Nonprofit does not publish impact information

0*

1 star

Nonprofit has potential governance or financial health issues

0


* We are temporarily withholding 2-star ratings to give nonprofits an opportunity to publish data

What we learned

1. Scholarships work

Ninety percent of the scholarships we analyzed met our threshold for cost-effectiveness. We can confidently say that scholarships are a good way to boost income. 

2. There’s a scholarship for everyone

Are you the child of a union engineer? A low-income student hoping to attend college in your home state? A woman who wants to pursue a career in law? There’s a scholarship for you. Across the nearly 300 scholarship programs we analyzed, no matter a student’s race, gender, income level or degree program of choice, there’s a scholarship for them. 

3. Scholarships report some of the best data to calculate impact

Scholarship programs are among the most transparent interventions we’ve analyzed. Why? Thanks in large part to requirements from the I.R.S., scholarship programs report thorough data, allowing us to evaluate so many of them. 

What we need to learn

1. Nobody really knows how the impact of a scholarship scales as its size increases

If scholarship A covers 20 percent of the costs of a college education and scholarship B covers 40 percent, are recipients of scholarship B twice as likely to graduate? We honestly don’t know; the research just isn’t there. To compensate for this gap, we came up with a solution to scale graduation effects based on the handful of studies we do have — you can read all the details in our full methodology—but this remains an outstanding question.

2. There’s no conclusive evidence that scholarships awarded solely based on merit have any effect on graduation and future earnings.

The best research we have posits the following: students who are qualified and motivated enough to receive a merit scholarship in the first place will go on to graduate with some postsecondary education regardless of whether they receive a scholarship. If the outcome for a person is the same regardless of whether they get a merit scholarship or not, it means that merit scholarships have no impact. (Note that here we are talking about scholarships that target students purely on the basis of merit; scholarships that are both merit and need based do have an effect on graduation rates.)

To be clear, “no conclusive evidence” that merit scholarships work is not that same as conclusive evidence that they don’t work. But in the absence of a firm answer, we went with the best available data and assumed merit scholarships have zero effect on a student’s likelihood of graduation. We don’t think that merit scholarships have no value; going through school on a merit scholarship could greatly reduce stress, for example.