Scholarship design: How should the scholarship be structured?

A core element of a Promise program is the funding it provides for postsecondary education, especially important in an era where the price of college has been rising. The Promise model departs from the typical college scholarship in several ways: Promise scholarships are, for the most part, based on residency and are need-blind whereas the largest source of student financial aid is need-based, awarded primarily through the federal Pell grant. Promise scholarships are generally easy to access and are available to all students who meet established criteria, whereas many other scholarships are limited in number and accessed through a competitive application process.

Most Promise programs address only the direct costs of college—tuition and mandatory fees—and not all cover these in their entirety. Some programs commit to covering tuition and fees at eligible institutions, whatever that may be. Others provide a flat grant to be used toward these costs. A few allocate additional resources to covering other costs such as housing, transportation, and books. Economists point out that the largest cost of college for most students is the loss of time they could have spent earning income (the “opportunity cost” of college). Promise programs help make college more attractive and feasible by providing resources to replace this lost income.

There are three main approaches for the timing of the application of scholarship funds to students’ tuition bills. First-dollar>First-dollar scholarships are the most expensive because they apply the scholarship dollars before eligible federal and state grant aid are applied. This means that the Promise program is paying for tuition (and often mandatory fees) for each Promise program recipient. This is an expensive way to structure a Promise program and rare in the Promise universe, but it has important equity benefits, directing the largest amount of funding to those students most in need.¹ In a last-dollar design, which is dominant in the field, Promise scholarship dollars are applied after federal and sometimes state grant aid. This makes the program less expensive because some students may not receive any Promise scholarship dollars if federal or state grant aid fully covers their tuition bill. Middle-dollar designs are becoming a more popular approach, in part to ensure that low-income students receive new resources through a Promise scholarship. They guarantee funding for all students regardless of financial need by offering either a minimum scholarship amount or stipend to cover books and other educational expenses.

Promise programs can help overcome two other problems with existing financial aid systems. Aid triggered by a student’s Free Application for Federal Student Aid (FAFSA) filing comes very late in the process, since students do not file their FAFSA until they are high school seniors. The FAFSA form is also notoriously long and complex and has proven to be a barrier in college attendance.² One of the most important contributions of Promise programs is to provide an early message about college affordability, conveying to eligible students that college is affordable. This makes FAFSA completion just one step along the path to college rather than a formidable barrier. If FAFSA completion is a requirement for receiving a Promise scholarship, stakeholders need to ensure that ample resources are in place to help students and families complete this task. Community partners and hands-on assistance—often working through high schools, which is where the students are—are critical elements of an effective FAFSA completion strategy.

For last-dollar programs that cover only the two-year sector, stakeholders should consider providing supplemental grants to students who receive no funding through the Promise program (i.e., whose Pell grants are covering their tuition). These can be used to help cover some costs of attendance (e.g., transportation, books). This model is sometimes called a “middle-dollar” scholarship.

The spread of Promise programs has raised questions about scholarship award displacement—that is, whether the availability of a Promise scholarship leads institutions to “displace” or withdraw aid they have already awarded to students. Displacement is a widespread practice that is gaining greater scrutiny,³ and some states have enacted laws to make it illegal.⁴ Promise programs have found it helpful to negotiate directly with the financial aid offices of the colleges that receive their students to ensure agreement that a Promise scholarship will add to rather than replace existing aid.