Posted by: Discover Scholars | May 22, 2008

Part II: The future of educational giving

This is Part II of a two-part post on the recent troubles in the securitized loan industry and how the situation relates to students who need help paying for college. Part I on Monday outlined the causes of the crisis and discussed some of its likely effects. Today we discuss why we believe that DiscoverScholars.org represents the future of financial aid and offers the best alternative for students who need financial assistance.

On Monday, we discussed the evidence for why the costs of acquiring aid from government or private loans are likely to increase in coming years. Of course, this is not a big deal if alternative means of funding exist to provide the aid that students demand.

As we discuss in the student financial aid section of our website, there are two additional means of funding for students (not including self- or family-financing): financial aid packages from colleges and scholarships from foundations.

Each alternative has its problems: At most schools, aid packages rarely offer students significant assistance. But there’s also little guarantee that money is distributed efficiently. How do schools determine how much money athletes get vs. talented violinists? What about students who want to study physics vs. those likely to study Russian literature? There’s little way to know, because college financial aid offices have little accountability to both students and donors alike.

Meanwhile, while scholarships from foundations may provide significant funding for some students, searching for relevant scholarships and applying to them takes a massive amount of time. And of course, there’s really no guarantee that foundations allocate money efficiently either.

In contrast, consider what we’re proposing with DiscoverScholars.org:

One application: No longer will students have to spend hours searching for relevant scholarships and then applying one-at-a-time.

“Leveragability”: Each donor who visits our website to make a donation represents a potential scholarship opportunity for students. That means DiscoverScholars.org will expose students to hundreds or even thousands of scholarships with their single application.

Currently, there is no other opportunity like what DiscoverScholars.org is offering students. But whether or not DiscoverScholars.org is successful, we believe that the market for educational financial aid will have no choice but to move towards the system that we are proposing.

With more people than ever contributing to charitable causes, the market for charitable giving in general is evolving in response to donors’ wishes. Transparency and increased donor choice, while still relatively new concepts in the nonprofit world, are quickly becoming the norm. The rapid growth of organizations like DonorsChoose.org and Kiva.org show revolutionary demand for increased donor choice, and other nonprofits will have little choice but to “jump on the bandwagon” or else risk being squeezed out by their “competitors.”

We believe that the sector of educational giving, and the area of financial aid more specifically, will be no different. Like any other purchase, givers to charity increasingly want to ensure that the “product they are buying” meets the specifications that they seek. Whereas many donors in the past were content to write a check to their alma mater in return for a tax deduction, today’s young philanthropists are demanding accountability and influence. They don’t just want to give; they want to know where their gifts are going and that they are actually “doing good.”

With student loans carrying higher interest rates, students looking for aid will need to rely on philanthropic donors. Luckily for students, huge demand to give to worthy causes exists. But it will only be captured by those organizations that offer donors what they want.

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Responses

  1. […] you know, we believe there is a fourth option that Fried overlooks: pioneering third-party organizations like DiscoverScholars.org that separate financial aid decisions from individual colleges.  By […]

  2. […] students through DiscoverScholars.org can be preferable to existing forms of tuition assistance. As we’ve explained in past posts, a significant advantage of DiscoverScholars.org is our emphasis on donor choice. That means that […]

  3. […] Answering Google’s questions succinctly was surely a challenge (most questions were limited to only 150 words!). Nonetheless, we we feel that our answers provide a great primer on what we’re trying to do, and why it holds the potential to revolutionize the future of educational giving. […]


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