A Perspective on College Scholarships

This nation has a long tradition of providing access to higher education to students who are academically qualified. Financial aid in the form of scholarships has been essential in assuring that access.
Three decades ago, scholarship funds came largely from the federal and state governments. In the last 10 years, colleges and universities, both private and public, have “recycled” their own tuition dollars into financial aid in what some have called a high-tuition/high-aid policy.
Such a policy can make good sense for the individual institution and for society. At both public and private institutions with reasonable endowments, tuition revenue covers less than the full cost of education. In effect, even a full-pay student receives a scholarship equivalent to the difference between the per-student cost of education and tuition. The belief that wealthier families should receive less of a subsidy so that greater subsidies can be provided to needy students is both fair and consistent with higher education’s strong commitment to broad access.
This fairness principle is achieved only if the financial aid is based on need. In the last few years, an increasing number of colleges and universities have commenced what strikes me as both unfair and a dangerous practice: using financial aid to attract the more academically qualified students, including many from affluent families who can well afford the tuition. These awards are called “merit scholarships”. 
Tuition discounts vary widely as colleges strive to increase their enrollments and thereby increase their marginal revenue. A college may adjust tuition discounts based on the perceived desirability of the student. The applicant with a 4.0 high school GPA or the student body president, can hold out for a larger discount on tuition than the applicant with a 3.5 GPA or the high school yearbook editor.
The most academically competitive colleges and universities resist this move to tuition discounting. They operate at full capacity. The teaching enterprise and student services would surely suffer if funds were shifted from them to finance merit scholarships.