The last thing people care about in a period of economic doldrums is the long term- the unemployed aren’t going to care about GDP in 2030. This mindset has hurt education- the ultimate investment in future economic growth- as billions of dollars in state funding are pulled from schools and universities nationwide. Nowhere is this more evident than California’s higher education system, where 1.4 billion dollars are being pulled to combat what appears to be the state’s third straight budget crisis.

With services cuts and budget hikes already implemented, university administrators may have to resort to a desperate measure to balance their budgets- limiting financial aid. To any university, especially a system as dedicated to educational equality as the California public university system, it would represent a doomsday scenario all would hope to avoid. In addition, at a time where skilled, educated workers are needed more than ever to fill economic and technical challenges, we can ill afford a shortage of college graduates. However, there may be a way to kill two birds with one stone- incentivize and partially privatize financial aid to create a hybrid financial aid-merit scholarship grant.

The basic model of this grant is to create career-specific financial aid that is partially funded by private companies in those careers. Let’s take a hypothetical financial aid package as an example. 20% of the grant is funded by Kaiser Permanente, and it is offered to students in need on the condition that they major in biology or chemistry in the hopes of attending medical school. It will be competing with other financial aid packages in careers such as law or business, funded by a law firm or consumer products company. Students can choose among these privately subsidized financial aid packages depending on their career interest or the more traditional, 100% university-funded public grant. Sponsoring companies are selected at the university’s discretion to fulfill each institution’s interest and mission. Essentially, it’s the university endowment system tailored to students.

This model solves some of the biggest problems facing financial aid right now. It creates a new source of funding for students in need, and allows the university to focus its funds on maintaining or improving the quality of its teaching and escape the quality-accessibility trade-off. However, I will admit there are a few drawbacks to the system. Private funding is not exactly known to be stable: companies might not view this as a very reliable opportunity for investment, and many factors affect their generosity in giving. In addition, private and societal interest for students’ majors may not be aligned as the companies willing to shell out the most dough may not be the ones that contribute the most to what the economy needs. If we’re not careful, we’ll be unleashing a lot more lawyers than the more needed doctors.  Finally, there’s a concern that higher education will degenerate from a holistic, liberal arts education into pre-professional training.

This new model is a radical departure from the norm of funding students’ education. Instead of companies donating to fund university research, they’re essentially investing in an increased applicant pool for their positions down the road. They’ve always provided scholarships, but such a public-private hybrid grant would be the first systematic attempt to draw private funding for financial aid. Considering the lack of both university funding and skilled college graduates, this proposal is my two cents to solve two solutions.


(Photo: rynosoft)