Let me start off by saying that I know a lot of people with scholarships. They study hard and receive much better grades than I do. Consequently, their school is paid for thanks to these fine academic instruments. Does anyone lose? Let’s take a look at this question from an economic perspective.
For the sake of simplicity, I will only analyze “academic” scholarships; those scholarships which have been acquired as a result of excellent academic performance rather than special interest scholarships which are awarded for a number of different reasons, academic or otherwise. Like all good economic questions, we must start by considering and weighing the opportunity costs associated with any given decision. Now, In this case, the opportunity cost of obtaining a scholarship lies in the hours that are spent studying in order to maintain the suitably high GPA that is requisite to continually remain eligible to receive the scholarship.
We can determine the basic economic value of those study hours by dividing the value of the scholarship by the quantity of hours spent studying in order to obtain it. Suppose a student has a $2,000 scholarship (the cost of full-time tuition for one semester at BYU) and studies for twenty hours per week in order to remain eligible for the scholarship. A typical semester lasts around three and a half months, or fourteen weeks. Fourteen weeks multiplied by twenty hours yields a total of two hundred and forty study hours. Thus a student studies 240 hours in order to earn $2,000, effectively.
In the strictest sense, the student is “earning” $8.33 per hour spent studying. Thus, it is economically rational for this student to maintain the scholarship only if his next best alternative use for that time pays him less than $8.33 per hour, ceteris paribus.
Note that this model assumes that the student intends to enter the job market after graduating from college. Additional complexities will apply if the student intends to attend graduate school and needs a high GPA in order to satisfy the entry requirements associated with such an endeavor.
April 7th, 2008 at 10:18 pm
You seem to be using the assumption that the options are scholarship or no school at all.
Let’s consider, purely for the sake of argument that a degree is important regardless of whether or not you have a scholarship.
If it takes an average of 15 hours per week to maintain acceptably passing (but not scholarship worthy) grades. Then the economics of the situation hinge on those 5 weekly hours of extra study. The ROI on those 5 hours is nearly $4,000 a semester. Since after losing the $2000 scholarship, the $2,000 tuition fees would have to come out of pocket.
Following a similar formula the value of those extra 5 hours per week sum to over $57.14 per hour.