Should donors give to students rather than schools?

by on July 16, 2008 at 5:03 am in Education | Permalink

Jonathan Bydlak seeks to match donors directly with students, rather than matching donors to universities.  Here is his group.  One advantage of the idea is greater competition:

…the current system ties the amount of accessible financial
aid to the schools that students attend, giving schools with more
resources a distinct advantage…students accepted to a Princeton or Harvard face virtually no
quality vs. price trade-off.

What this means for higher education as a whole is that the
current financial aid system, whereby alumni and other prominent donors
contribute to schools, rather than individuals, reinforces the
perceived status of those schools that are considered “top-tier.”

While demand for high quality higher education continues to increase
massively,
the supply of top-tier higher education has not changed much
at all (one need only look at the lack of variability in the U.S. News
rankings for proof of this point).  And as any Econ 101 student can
tell you, when demand far outstrips supply, costs are inevitably pushed
upward.

I like the idea but fear that institutions of higher learning can offer donors greater perks than can intermediaries that match donors to students.  Might it be possible to, say, offer donors the chance to support students through the Metropolitan Museum of Art, with the Met taking a lower cut than Harvard does, yet still handing out donor perks?

1 Anonymous July 16, 2008 at 5:36 am

But surely if my resume says I graduated from a top-tier university, then it’s in my selfish interest to reinforce the perceived status of that university, in order to maximize my future employment and networking prospects.

Also, despite the description given, donors can’t be matched directly with individual students by name (disallowed by IRS), but can specify categories. Small donations can only specify a broad category (say, athletes), while only large donations can get specific (cross-country runners with GPAs greater than 3.5, majoring in chemistry).

So this will lack the P2P aspect of kiva.org or zopa.com or prosper.com P2P lending, which might significantly diminish its appeal.

2 DRDR July 16, 2008 at 9:15 am

The cited article is missing a huge part of the story by ignoring the heterogeneity of students and the price discrimination on the part of the elite universities. Upper middle class and other richer families will pay a much higher price for Harvard, and there’s plenty of competition there.

Only the lower income families get to go to Harvard at a lower cost than a Tier II school. And with these families, there’s also the outside option — not going to college at all. And it may be true for these families that the outside option is more attractive than Tier II school for $20000, and that when Harvard awards these students a full ride, it’s creating a college dream that otherwise might not be there. Note this story makes a lot more sense if you think of students years away from college, who are deciding how to invest their time, whereas high school seniors have already made the decision between college and no college.

3 Billy July 16, 2008 at 10:18 am

But instead of graduating from a prestigious university you could claim acceptance of a prestigious grant and then (maybe) get accepted to a top tier school. Hasn’t Paul Romer advocated a similar idea?

4 guy in the veal calf office July 16, 2008 at 10:49 am

You’d have to change the law. Gifts to universities generally are deductible and to individuals are not. Even a gift to a university for Student Hodges is not deductible, its has to be a scholarship with generic requirements (so multiple students are eligible). Most people prefer making deductible gifts.

5 Michael F. Martin July 16, 2008 at 1:04 pm

Who’s better at identifying worthy students? If you think that school culture is going to determine who’s a good student, then giving money to schools is probably a good idea.

…but if you think that good students are good students regardless of the culture of their institution, then you might find a better way to donate to those students.

6 Jonathan Bydlak July 16, 2008 at 3:26 pm

Thanks everyone for the interesting comments. We’ve responded to Tyler over on our blog (http://discoverscholars.wordpress.com), and plan on addressing many of your remarks over the next couple of days.

A couple small things to clear up…

It’s true that donors cannot choose students directly because of IRS restrictions, but we think allowing donors to specify categories still manages to accomplish what matters most to donors — knowing that their money is being spent wisely, and going to something that is effective and valued. This way, the donations can also be tax deductible. We talk more about that here: http://www.discoverscholars.org/HowWillItWork.html.

We also should note that while our original plan was for donors’ ability to specify categories to change as a function of donation size, we’ve since nixed that idea (we’ll update the website accordingly).

And with respect to the P2P aspect of other sites… Even though donors won’t pick students directly, there are many other means for increasing the personal connection between donor(s) and student(s). Students will write short thank-you letters, for example, and donors will find out after the fact who their money funded.

7 aksrfjhdtg July 16, 2008 at 7:26 pm

@dr.taxsacto: wrong, wrong, wrong, wrong, wrong. many, many students pay full price. international students, out-of-state students, people who had bad grades in high school, older students returning to school after working, those convicted of drug offenses, and spoiled rich kids come immediately to mind.

8 mik July 16, 2008 at 10:19 pm

With most secretaries and most realtors having college degrees, if anything we have tremendous over-investment in higher education.

30% of students don’t belong there either because of lack of abilities or will and motivation.

Why throw more good money after bad?

9 buy isk January 1, 2009 at 7:20 pm

If you have to buy isk, please come to our company.

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