The pursuit of college scholarships is a rite of passage in American culture. For the better part of a century, nearly all students who pursued higher education have grasped for — if not always gotten — financial assistance as they attempted to better themselves through the university system.

It’s a touchstone referenced in film and television, from The Breakfast Club to Beverly Hills 90210 to Election.

Tom Wolfe’s 2004 novel I Am Charlotte Simmons details the journey of a young woman from an impoverished background as she navigates college life after winning a full scholarship to a prestigious university.

And the Civil Right-era memoir Coming of Age in Mississippi chronicles Anne Moody’s experiences attending a historically black college on a basketball scholarship.

Coming of age in the 20th and 21st centuries as a member of the middle and lower classes frequently involves the quest for a leg up into the next stage of life: the “college experience.”

This is not a new phenomenon, though. The provision of financial aid in the form of grants and scholarships has a storied history reaching back to ancient Greece. The basis of these scholarships has fluctuated over time, from need to merit and back again.

Support for the exorbitant expense of pursuing a degree is perhaps more crucial than ever before. With the exception of a tiny proportion of the student population, most will need to go into significant debt in order to underwrite the credentials that they hope will offer them financial advantage in later life.

Even small awards in the hundreds of dollars are nothing to sniff at. Scholarships help students reduce their student loan debt burden and to enroll at more-expensive colleges. With enrollment figures continuing to rise, competition is increasingly ruthless.

Entering into the equation are a morass of government programs and regulations, private funding, and social factors, all of which combine to determine which students are worthy of winning a scholarship.

In order to understand the origins of this competitive marketplace — one that ought not to exist according to proponents of free higher education — it is helpful to go back to the beginning.

Did you know that scholarships are taxable? Use our Scholarship Tax Calculator to figure out the taxable amount of your scholarships and calculate how much you’ll have to pay in taxes. Amounts used to pay for tuition and textbooks may be tax-free, but amounts used to pay for living expenses are taxable. 

 

Financial Aid in the Ancient World

Ancient Greece boasted a flourishing, if inconsistent, higher education system. While nothing like the sophisticated, corporatized universities of today, the academies and less-formal educational seminars held at gymnasiums served as vibrant centers of learning.

Most instructors worked for pay, including Socrates, though he and other philosophers expressed objections to paying for learning. Some believed education should be subsidized by the state.

In fact, this rarely happened on a large scale. Still, because education was held in such high esteem by the Greeks, occasional acts of philanthropy leveled the playing field for small numbers of students.

Alexander the Great endowed a school overseen by Aristotle, and philosopher Antisthenes founded a school for illegitimate children. Pliny the Younger financed a school in his hometown of Comum. However, these ad hoc subsidies never coalesced into a cohesive system.

Higher education was thus largely restricted to the upper classes, who could afford private tutelage.

Education was further privatized in ancient Rome, with most education occurring in the home at the hand of the parents. Only the very wealthy went on to study such subjects as philosophy. Occasionally, disadvantaged students were sponsored by wealthy patrons, but this was far from the rule.

Financial Aid in Medieval and Renaissance Europe

Students without the funds to pay for school saw a slight improvement of their lot in the Middle Ages.

At the University of Bologna (est. 1088), the first of its kind, students from different countries eventually formed organizations known as “nations.” This concept soon spread through the incipient European university system.

These organizations sometimes granted loans and scholarships to fellow countrymen. Eventually, loan chests were established. Often endowed, these chests allowed students unable to pay their full college costs to deposit collateral items in exchange for loans.

The first such chest was established in 1240 at Oxford. While this is considered an early system of student loans, and indeed largely functioned as a lending apparatus, endowed chests also sometimes served as a source of charity to needy students.

While most students were supported by their families, sometimes wealthy individuals would fund the education of promising but less-fortunate candidates. Food, clothing and one-time stipends were sometimes contributed to assist the needy.

In 1253, the French king’s chaplain, Robert de Sorbon, formed the Maison de Sorbonne as a theological college for poor students. These sorts of private contributions formed the basis of free or low-cost universities open to even the least-advantaged members of society for centuries to come.

Religious orders and organizations also funded educational institutions, with the goal of reinforcing their values among the populace. Subsidizing willing students was worth the cost to them if it resulted in a cohort willing to spread the word of God as they interpreted it.

As the educational system evolved, it became more commonplace for financial need to be taken into account on an organizational level. By 1425, the University of Paris prorated its weekly room and board according to the ability of students to pay.

At some institutions, the level of service provided correlated to the financial status of attendees — wealthier students, for example, might have nicer accommodations and meals.

Early forms of what we now know as work-study programs emerged as well. Students obtained educational services by performing manual labor and rendering other services to the colleges they attended. One such beneficiary was scientist Isaac Newton, who in 1661 entered Cambridge as a sizar, a category of student who received aid in exchange for service.

With some degrees taking more than a decade to complete, support was crucial to all but the wealthiest students. Few were able to obtain it.

Financial Aid in America, from Colonization to the Civil War

The first university founded in colonial America was New College, in 1636. Three years later, a private endowment from minister John Harvard provided the newly established university the wherewithal to create a campus and hire a faculty. Renamed in his honor, Harvard provided the template for the proliferation of schools soon to come.

Many were funded by private contributions and indeed this ethos was the basis for much of the early framework for higher education in the new territories of North America.

Seven years after Harvard was founded, Ann Radcliffe Mowlson, the widow of a wealthy merchant, left the university £100 in her will, stipulating that it be used to set up a scholarship fund. Perhaps unsurprisingly, the first award went to the son of a Harvard trustee in 1643. The scholarship was merged with other funding in 1713 and did not become an individual scholarship again until 1893.

Similarly, a supposedly need-based scholarship went to Samuel Mather, son of successful minister Cotton Mather in 1723 — suggesting the tensions between need, merit and social status that persist in the awarding of scholarships today.

Harvard’s early students were supported by donations of “college corn” from the colony between 1645 and 1655, testifying to the consensus that an educated populace was important to the success of the colonial enterprise.

Many also did work in exchange for an education. This system led to a more representative student body. By the 1670s, at least a third of the Harvard student body came from working-class backgrounds.

And as further institutions were erected, including Brown University, Columbia University, Dartmouth College, the College of William and Mary, Princeton University, Rutgers University and Yale University, many private citizens followed Radcliffe’s example and established scholarships.

Universities were founded by many of the various Protestant denominations flourishing in America at the time and, in keeping with the Protestant ethos, they were financially supported by wealthy adherents.

As the American Revolution unfolded in the 18th century, funds previously used to support education were diverted to the independence effort. Still, the education of the populace remained on the minds of the Founding Fathers.

In the 1770s and 1780s, Thomas Jefferson several times proposed his “Bill for the General Diffusion of Knowledge,” which would have subsidized education for Virginia students, but it never passed.

In 1815, a group of Congregationalists founded the American Education Society, the first large-scale financial aid organization in the United States. Initially providing scholarships to aspiring ministers, it quickly became a lending agency and ultimately failed due to delinquency.

During this period, while aid was certainly necessary for some students, it was not the pervasive issue it is today. Only around 2% of young men went to college during the early 19th century. Most were educated at home or at best, completed primary school. Women received some instruction as well but rarely pursued higher education, though that started to change by the middle of the century.

While tuition was often low or free, living expenses were high and thus scholarships remained necessary for low- and middle-class students.

During the 1830s a new breed of school emerged: the manual labor college. Building on the programs present at such institutions as Harvard, these institutions were based entirely on a work-study concept. Students completed building and maintenance tasks in exchange for schooling.

Though most persisted for only a decade or so, some still exist today, among them Knox College.

Work colleges are a modern variation on manual labor colleges, where all students are required to work and the work is integrated into the educational program.

As Western expansion increased, the need for new universities increased with it. Over 200 were formed between 1800 and 1850. Some 14% of students received scholarships by 1870.

In light of the increased breadth of the country, the 1862 Morrill Act granted land to the new territories for the erection of postsecondary institutions that focused on agricultural and mechanical degrees, using funds from the sale of federal lands.

In addition to financing the construction of these schools and additions to existing schools, some of the funds were diverted to provide free education or scholarships to students in need. A second piece of legislation in 1890 brought further federal financial aid to these schools, with the express purpose of funding scholarships.

The later part of the 19th century and the early part of the 20th saw a flowering of additional public and financial support for college education. As a result, it is known as the “Age of the University.” The Association of American Universities, founded in 1900, and other organizations, began to standardize practices.

This same period also saw the rise of athletic scholarships. As college athletics became more popular, colleges increasingly put funds toward the recruitment of talented athletes. Some of these “scholarships” essentially consisted of exorbitant gifts on top of such practical concerns as free tuition and room and board.

This form of financial aid, while far more regulated today, remains a point of contention.

The Evolution of Scholarships in the 20th Century

By 1900, the number of young people enrolled in college had doubled from the dawn of the previous century, but still only reached around 4%.

Enrollments picked up in the 1920s and some 20% of college-age students had matriculated by the end of the decade. This trend continued to accelerate slightly in the next decade, despite the onset of the Great Depression and the resultant loss of private support and rise in tuition.

The next real adjustment to how financial support was doled out came with the arrival of the National Youth Administration (NYA) in 1935. A part of Franklin Delano Roosevelt’s New Deal, the program signified an increasing government role in supporting the education of American citizens.

In addition to providing over $600,000 in scholarships, the NYA also funded work-study programs for undergraduate and graduate students. It operated until 1943.

In 1944, an entirely new framework was established with the passage of the Servicemen’s Readjustment Act, also known as the G.I. Bill. The program provided educational funding for thousands of soldiers returning from overseas combat in World War II.

That year, the United Negro College Fund (UNCF) was also established. It provided financial support to historically black colleges and universities and to financially struggling black students.

As a result, education became accessible to a massive swathe of the population that had been previously excluded. College enrollment more than doubled over the next decade, to 2.45 million students. This surge created unique pressures for institutions accustomed to far smaller numbers of students.

Among the results was greater centralization and standardization of student aid procedures and the rise of a new class of administrators to oversee them. New exams for eligibility were devised and competition increased as this system expanded.

One notable consequence of this growing bureaucratization was tighter regulation of athletic scholarships. The National Collegiate Athletic Association (NCAA) rejiggered regulations throughout the 1950s, notably allowing for the use of scholarships as a recruiting enticement in 1952.

While such indulgences were formalized, regulations were tightened in other ways. Restrictions on how and when scholarships could be ended were put in place, minimum grade point averages were instituted, and monies received were restricted to basic educational expenses — at least officially.

In 1954, the Internal Revenue Service (IRS) code was amended to make all scholarships officially tax free.

They remained untaxable until 1980, when the Internal Revenue Code was amended to make some forms of scholarship money, notably funds derived from teaching or research services that was part of a grant or scholarship, taxable income. Further revision in 1986 made it so living and travel expenses could be taxed as well.

Also in 1954, the non-profit College Board (founded in 1899) initiated its College Scholarship Service (CSS). Using a standardized system, the service correlated qualified students in need to available slots at member universities.

These types of practices led to later allegations of price fixing among Ivy League universities, along with the Massachusetts Institute of Technology (MIT), in 1992. Investigators found that the so-called Overlap Group had colluded to offer students in financial need a uniform array of assistance, thus avoiding competition. The U.S. District Court in Philadelphia found that MIT had violated anti-trust laws, but this decision was reversed upon appeal.

The Justice Department subsequently reached a settlement with MIT which allows colleges that provide full need-based aid to all admitted students to agree to award financial aid only on the basis of demonstrated financial need. The colleges are also allowed to share general principles concerning need-based financial aid. The settlement was later encoded in Section 568 of the Improving America’s Schools Act of 1994.

Still, the CSS was instrumental in establishing the mechanisms by which aid was allocated. In 1961, the service issued a statement of principles formalizing the notion that scholarships ought to be disbursed primarily on the basis of need.

Conversely, the National Merit Scholarship Corporation (NMSC) was founded in 1955 as a means of supporting students on the basis of talent. In response to concerns about the United States lagging behind the Soviet Union and other countries in scientific development, this program uses testing to identify academically advanced students, who then enter a scholarship competition.

In its first year of operation, 1956, the program awarded 555 scholarships nationally. In 2015, some 7,500 were awarded.

While such merit scholarship programs did attempt to reward students for their hard work and academic accomplishments, the federal focus remained on need-based aid in the 1960s.

The Economic Opportunity Act, Lyndon B. Johnson’s opening salvo in the War on Poverty, was passed in 1964. Similar to the New Deal, it inaugurated a suite of programs intended to address income inequality, among them a job corps and a program to improve basic literacy among older learners.

Its most notable implication for student aid was the formal instantiation of a system that has been a constant throughout the history of higher education: the work-study program. Called the College Work-Study Program (now the Federal Work-Study Program), this new arrangement allowed needy students nationwide to work part-time in exchange for an education.

That same year, the Civil Rights Act was passed in an attempt to codify the rights of black Americans, whose path out of slavery and into full participation in American society had been obstructed by racist policies and practices. In an effort to bolster the legislation, the NMSC established the National Achievement Scholarship Program.

This program aimed to provide financial support to promising black students. Over the life of the program, some 34,000 scholarships were awarded. It merged with the UNCF in 2016.

Even more substantial revisions of financial aid policy occurred in 1965 with the passage of the Higher Education Act (HEA). In addition to establishing a system of federally-backed student loans, the original basis of the loan system still used today, the act also put into place the Educational Opportunity Grant (EOG) Program. These grants provided relatively small stipends to students in need of assistance.

The initial amount was the lesser of $800 or half of all assistance otherwise received.

These grants were the precursors to what we now know as Federal Pell Grants. The successive reauthorizations of the HEA in the ensuing decades tuned the standards and methods used to allocate these funds.

The 1972 reauthorization refined the grant program into the Basic Educational Opportunity Grant (BEOG), which provided baseline funding up to $1,400 to students in need of support , and the Supplemental Educational Opportunity Grant (SEOG), intended to make up any shortfall for those in serious financial difficulty.

It also instituted the State Student Incentive Grant (SSIG) program, which matched federal funds to those provided by individual states.

In 1975, a National Task Force on Student Aid Problems convened with the intent of further refining the distribution of aid. Notably, it recommended a standardized form for all types of aid: federal, state, and private.

The burden on tax payers was relatively light compared to today, as only around 50% of students were attending college. Thus, much of their education was covered by available grant money. That soon changed as more students enrolled and costs began to climb.

By 1978, the Middle Income Student Assistance Act had expanded eligibility for both federal loans and grants to middle class students. Income criteria for these programs continue to fluctuate.

The 1980 reauthorization of the HEA renamed the BEOG as the Pell Grant, after Senator Claiborne Pell of Rhode Island. Pell was an early champion of grant funding and sponsored the statistical report upon which the program was based.

In the wake of these need-based adjustments, several merit-based initiatives emerged as well.

The National Graduate Fellowship Program (NGFP), approved in 1980 and later known as the Jacob K. Javits Fellowship, funded graduate students in the arts, humanities, and social sciences.

And in 1985, the Federal Merit Scholarship was introduced. Later named the Robert C. Byrd Honors Scholarship program, it provided $1,500 to outstanding students for use during their first academic year.

Both of these programs ended in 2011.

In 1992, further adjustments to the Higher Education Act resulted in the formulation of the Free Application for Federal Student Aid (FAFSA). This form merged the methodologies used to determine Pell Grant eligibility with those used for other programs. Thus, students could use a single form to apply for federal aid, both loans and grants.

While there were efforts to increase grant funding, ultimately, borrowing limits were increased instead. Loans are less expensive to the federal government than grants. This emphasis on loans persists today, though Pell Grant spending remains a perennial subject of debate.

Private loans from religious, civic, and academic organizations, which long filled the gaps left by federal aid, increased in importance as debt began to soar and direct grant subsidies declined.

In 1995, FastWeb, the first free scholarship search service, was launched. Students could enter their criteria and qualifications and match with possible sources of financial support. The site now boasts some $3 billion in scholarships.

Scholarships in the 21st Century

With the Internet renaissance in scholarship availability came a host of scams that attempted to convince vulnerable students to pay fees and turn over credit card and bank account information in exchange for financial support that never materialized.

In 1996, the Federal Trade Commission (FTC) had pursued cases against companies engaged in these practices through Project ScholarScam and in 2000 the College Scholarship Fraud Prevention Act stiffened the penalties for those convicted.

While federal emphasis largely remained on student loans until the second decade of the century, in the 2005 Higher Education Reconciliation Act, two new awards were introduced.

The Academic Competitiveness Grant (ACG) and Science and Mathematics Access to Retain Talent (SMART) Grant provided funding to Pell Grant-eligible students pursuing science and mathematics degrees with the notion of improving global competitiveness in these fields. In addition to financial need, recipients were expected to exhibit academic excellence.

These programs were axed in 2011 along with the Javits and Byrd scholarships.

Legislators continued to fine-tune the federal formula as loan debt climbed. With the shift to direct lending by the government in 2010, additional money was freed up for Pell Grant funding.

Today, while most students will rely to some extent on borrowing to finance their educations, scholarships and grants remain an essential component of every aid package. A 2019 report from Sallie Mae found that 43% of the price of college was met with family savings, 33% with grant and scholarship aid (including funding from colleges and universities), and 24% with loans.

A combined $100 billion in grants and scholarships are disbursed each year from federal, state, college and private sources.

How the federal government apportions scholarship and grant aid is again in the news as the country moves toward the 2020 presidential election. Among the more-grandiose Democratic plans for free college and loan forgiveness, proposals to instead increase Pell Grant spending have again been raised, notably by candidates Amy Klobuchar, Pete Buttigieg and Joe Biden.

While the utopian visions of some of the other candidates hold undeniable appeal, it is probable that future generations of students will continue to rely to some extent on grant and scholarship aid.

(See here for a comprehensive list of scholarship statistics.)

Establishment of Major Scholarship Programs

 

Year

Program

2001

Davidson Fellows Scholarship

2000

Benjamin A. Gilman International Scholarships Program (U.S. Department of State)

1999

National Scholarship Providers Association (NSPA)

1999

Gates Millennium Scholars

1997

Jack Kent Cooke Foundation

1996

Udall Scholarships

1993

Segal AmeriCorps Education Awards

1986

Barry M. Goldwater Scholarship

1986

Coca-Cola Scholars Foundation (CCSF)

1985

Robert C. Byrd Honors Scholarship (Federal Merit Scholarship Program)

1983

British Chevening Scholarships

1980

Jacob K. Javits Fellowship (National Graduate Fellowship)

1975

Harry S Truman Memorial Scholarship

1975

Hispanic Scholarship Fund

1974

Luce Scholars

1972

Federal Pell Grant

1965

Federal Supplemental Educational Opportunity Grant

1964

ROTC Scholarships

1963

Winston Churchill Scholarship

1955

National Merit Scholarships

1953

Marshall Scholarships

1952

NSF Graduate Research Fellowship

1950

International Science and Engineering Fair (ISEF)

1947

Rotary Foundation Ambassadorial Scholarships

1946

Fulbright Scholarships

1945

National Honor Society Scholarship Program

1944

United Negro College Fund (UNCF)

1942

Westinghouse Science Talent Search (subsequently the Intel Science Talent Search and now the Regeneron Science Talent Search)

1937

Public Health Service Scholarships

1933

Elks National Foundation Most Valuable Student Scholarships

1902

Rhodes Scholarship