The law school world has been abuzz since an article in the Sunday NY Times, two weeks ago, exposed the practice of recruiting new law students with financial aid, but conditioning the continuation of scholarships on good grades. Students were said to overestimate their chances of obtaining these grades, and then struggling with the financial burden of law school. A “smoking gun” was the fact that, given law schools’ grading curves, a substantial percentage of scholarship recipients could not possibly obtain the required grades. The article probably overestimated the number of law schools with such policies, but the issue is interesting, and there certainly are law schools where every scholarship is conditional on future grades – that only half the class or less could obtain. Admissions deans around the country now report receiving inquiries from lawyers involved in the ABA and from other organizations looking to define new rules, or perhaps best practices.
There is no need to run through the obvious libertarian response that prospective students, and especially the subset offered scholarships, are smart consumers who can and do understand exactly what is being offered. After-the-fact disappointment should not always translate into before–the-fact-regulation, especially when it is perfectly rational for some or many students to accept the offers sent their way. Incidentally, or by way of disclosure, I am fortunate enough to be at a law school that does not put this pressure on scholarship recipients (more on that, and the claim of good fortune in a minute), so I have no direct reason to favor or disfavor the current practice.
There are, however, at least two points missing from the current news coverage. The first concerns the strategy of schools that engage in the criticized plan. Imagine an elite law school that offers $x/year for three years to an applicant, though the x will vary according to the student’s need and the school’s own calculation of its need and its competition. Schools are aware of the US News rankings and the impact of inducing high-number applicants to attend. Occasionally, schools offer $y for one year, figuring that summer jobs and other things might help pay for later years., but three-year scholarships are common at elite law schools. Loans are, of course, also in the picture. But what about a school, often not a super-elite and well-endowed one, that offers $x per year, conditional on a 3.2 GPA? Put bluntly, the student will lose the scholarship if the student is not near the top of the class. My interpretation of this strategy is that it does not so much set out to fool customers as it tries to deal with the problem of transfers. The strategy might as well be described as follows: We will discount your first year tuition by $x, and then if you earn good grades you will be tempted to transfer to a higher ranked school. (Some schools lose a significant percentage of their top students this way.) We want to keep you for your second and third years, and so we will offer you a scholarship to stay with us rather than to transfer away. But instead of being so crass, and waiting for you to threaten to transfer, we will save transaction costs for both of us, and promise a scholarship if you have the sort of grades that facilitates transferring. Put this way, I think the strategy much less likely to raise objections.
Second, this interpretation of what is going on in the market explains, if that is the right word, why the elite schools do not offer similar, contingent scholarships. It is not just that, if they did so, risk averse students would accept unconditional offers, which they could surely garner in the present competitive environment, but also that the elite schools are less fearful that a large number of students will transfer out after the first year. Note that the scholarship itself discourages transfers. A scholarship recipient who transfers from any school, but even an elite school, will lose the scholarship from the first school and be unlikely to gain a scholarship at the new school. This is because the student is “less valuable” to the second school inasmuch as the rankings do not incorporate information about the GPAs of incoming transfers. It is only those incoming, first year numbers that are oh-so-important. Regulators and well meaning organizations should probably stay clear of this subject, unless they are sure of what they are doing.
With regard to the first point, that conditional scholarships are a way to keep the high-grade students who'd otherwise be likely to transfer to higher-ranked schools, I don't think the fear of looking "crass" should prevent schools from being clearer that this is part of their interest. That is, the schools could be much more honest that the scholarship for the second and third years will be earned only by students who perform so well during their first year that they would be eligible to transfer to higher-ranked schools. Statistics on the percentage of first-year scholarship students who obtain second- and third-year scholarships would make the point nicely. While there may be no factual difference, there's a definite perceptual difference between "I have a scholarship for three years so long as I keep my grades up" and "I have a scholarship for *one* year and can earn a scholarship for the other two if I'm among the top third of my class."
Posted by: Pgofhsm | June 04, 2011 at 05:29 PM
Interesting thoughts here. One quick reaction is that a better strategy to keep high performing students from transferring would be to increase the amount of the scholarship for higher grades, rather than cut it for lower ones.
Using the current contingent scholarship as a means of keeping people could backfire as you create extra stress for the law students during their first year, which is bound to leave a bad taste in the mouth of even the top performers (which will in turn hurt your donations from both top and other performers).
This really seems more clearly linked to getting high potential applicants in the door in the first place. It also seems like a strategy you can't pursue for too long if you want to have any future donations.
Posted by: KBR3 | June 09, 2011 at 09:33 AM