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Paying for College

Should a Rich Kid Accept a College Scholarship?

Should colleges offer scholarships to wealthy students in the first place? Knight Kiplinger tackles the ethics of financial aid.

I recently heard that a cousin's son is attending our state university free, with a state-funded scholarship for brilliant students. His parents are millionaires and could easily pay the boy's college expenses themselves.

Do you think it's ethical for a college to offer such a scholarship to a student who doesn't need financial help? And should a wealthy family accept it?

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Those are tough questions, and ones we won't settle here. The vast majority of colleges offer a variety of scholarships, and they do so without regard to an applicant's financial need. Today only the most hyper-selective colleges, such as those in the Ivy League, base their financial aid solely on need.

Many colleges give tuition breaks to exceptional athletes, band musicians, debaters and other applicants who have special attributes the schools are seeking in their student body. I don't see anything unethical about this, as long as the students meet the college's admission standards (which, sadly, athletes sometimes don't).

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Colleges often use no-need financial aid to lure the most academically gifted applicants. If that is done to enhance the intellectual caliber of the student body, fine. If it's being done primarily to improve the college's ranking in popular magazines, that's a little questionable.

Critics charge that these merit grants divert money from needy students and that they are disproportionately awarded to applicants whose parents can afford to live in the best school districts and enrich their children's lives with lessons in music, sports and other extracurricular activities. This is true, which is why I believe that most college financial aid should be based on need.

I would hope that a wealthy family whose child has earned a merit scholarship would consider repaying that amount -- and perhaps even more -- through tax-deductible donations to the college. (By the way, I benefited from a merit scholarship myself almost 40 years ago, and I've been taking my own advice ever since.)

Have a money-and-ethics question you'd like answered in this column? write to editor in chief Knight Kiplinger at ethics@kiplinger.com.