Merit Scholarships: Rob from the Poor, Give to the Rich?

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Michigan Lt. Gov. John Cherry proposed refunding the recently eliminated Michigan Promise scholarship program through a tax on bottled water companies. Cherry said a tax of 10 cents a bottle could generate $118 million per year.

But University of Michigan President Mary Sue Coleman essentially rejected the idea: “Financial aid in the state of Michigan should be need-based,” Coleman said. “The Promise scholarships are not need-based.”

Coleman has a point. Donald E. Heller at the University of Michigan demonstrated that about one-quarter of students in Michigan’s richest communities qualified for Michigan Promise scholarships. But only six percent of students who lived in the state’s poorest regions qualified.

The scholarship had a very limited effect on increasing the rate of college attendance in the state. Most poor kids didn’t qualify for the scholarship; most kids who did qualify would have gone to college even without it. As Heller explained, merit scholarships “channel money away from students who need the financial assistance to enable them to attend college, and award it to students who are likely to attend college without the financial help.”

The Michigan program, however, was not nearly as odd as the scholarship situations in some states. Both Georgia’s HOPE Scholarship and West Virginia’s PROMISE Scholarship, for example, are funded by state lotteries. People who play the lottery tend to be low income and uneducated. Essentially the scholarships represent an indirect transfer of money from the states’ poor to the states’ rich.

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Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer