National Merit Scholarships at The University of Oklahoma

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National Merit Scholarships at The University of
Oklahoma

• Lindsay Markham
• ECON 4353
• April 17, 2004

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Who Is Eligible to be a National Merit Scholar?

• High school juniors taking the PSAT/NMSQT are
  eligible
• Full time high school students planning to attend
  college in the fall
• Citizens of the U.S. or permanent residents
  seeking citizenship

National Merit Scholarship Corp.
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How Do You Become a Finalist?

• Of the 1.3 million entrants about 50,000 will
  qualify for either commended status or continue
  along as a semifinalist
• In September 16,000 will advance as a
  Semifinalist who then must complete the
  scholarship application
• Semifinalist recognition is based on the share of
  graduates from each state (USA Today, 2004)
• In February some 15,000 Semifinalists will be
  notified about their advancement to Finalist
  status

National Merit Scholarship Corp.
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How are the Winners Selected?

• The winners are selected based upon
• Schools curricula and grading system
• Two sets of test scores
• School recommendation
• Student activities and leadership
• Personal essay

National Merit Scholarship Corp.
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Types of Merit Awards

• In March 8,000 Finalist will be selected to
  receive a Merit Scholarship award
• National Merit 2,500 Scholarship
• Corporate-sponsored Merit Scholarship
• College-sponsored Merit Scholarship

National Merit Scholarship Corp.
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National Merit Scholarship Package at OU
Non-Residents Package
Residents Package

• Oklahoma Academic Scholars Program 22,000
• Non-Resident Tuition Waiver (100)
  30,000
• Resident Tuition Waiver
  10,000
• National Merit Cash Stipend
  3,000
• Total 65,000

• Oklahoma Academic Scholars Program 22,000
• Resident Tuition Waiver
  (100) 12,000
• National Merit Cash
  Stipend 3,000
• Total 37,000
  

www.go2.ou.edu
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OUs Scholarship Package

• Oklahoma Academic Scholars Program
• Must maintain 3.25 cum. GPA
• Full Time Student
• 2,750/semester for four years
• Tuition Waiver (Resident Non-resident)
• Must maintain 2.00 cum. GPA
• Full time Student
• Can be used for five years
• National Merit Cash Stipend
• Includes any award funded by National Merit
• Paid over four years

www.go2.ou.edu
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Merit Scholars at the University of Oklahoma

• The University of Oklahoma is among the top three
  public universities enrolling National Merit
  Scholars
• OU is able to offer as many scholarship packages
  as willing to attend

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Who Receives the Most Benefit?
Students Benefits
University's Benefits

• Accredits the university
• Attracts academically strong students

• Early enrollment
• Honors opportunities
• Scholarship package
• Cash stipend

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Economic Implications

• Positive Benefit Externality- the benefit to
  society exceeds the benefit to the individual
• Inframarginal Externality- as the number of
  scholars increases, the benefit decreases
• Incentive Incompatibility- the scholarship
  package might motivate students for the wrong
  reasons

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Externality of the National Merit Scholarship
Package

• The scholarship lowers the cost to the individual
• MPC decreases to MPC-scholarship
• The universitys benefit exceeds the students
  benefit
• MSB (university)gtMPB (student)
• Students might be choosing a school based solely
  on the scholarship rather than scholarship and
  academics

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Private Costs

• The costs that the individual incurs represents
  the private costs which included
• The actual cost of attending college which is
  offset by the scholarship
• The opportunity costs of not attending a more
  academically rigorous institution

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Social Costs

• The costs that the university incurs represent
  the social costs which include
• The cost of funding the scholarship
• The cost of devoting special attention to the
  national merit scholars
• Since OU is not as academically strong as some of
  the other universities, the scholarship package
  based on merit must be larger, thus higher costs1

1 What Colleges Contribute Institutional Aid
to Full-Time Undergraduates Attending 4-Year
Colleges and Universities National Center for
Education Statistics, Laura Horn and Katharin
Peter 2003
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Graphical Analysis of Positive Benefit Externality
MPC-Scholarship
P
MPC
MSC
C
pc
B
pb
A
pa
MSB
MPB
qc
Q
qa
qb
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Explanation of Positive Benefit Externality

• The students cost of attending OU falls by the
  amount of the scholarship
• The scholarship creates a positive externality
• Since the MSBgtMPB the scholarship increases the
  number of scholars enrolled

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Graphical Analysis of Positive Benefit Externality
P
MSC
Amount of subsidy (scholarship)
pa
ps
MSB
MPB
Q
qa
qs
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Externality Diagram Analysis

• MSBgtMPB because the benefit that OU receives is
  not included in the MPB
• The efficient level of output moves from qa to
  qs, where qsgtqa
• The subsidy (scholarship) increases the number of
  students receiving scholarships

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Inframarginal Analysis

• The benefit the first student provides exceeds
  that of each additional student
• As the number of National Merit Scholars
  increases at OU, the MSB falls
• The universitys open policy may draw too many
  National Merit Scholars

Holcombe Public Finance Government Revenues and
Expenditures in the United States Economy Chapter
4
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Graphical Analysis of Inframarginal Externality
MSB
P
MPC
MPC-Scholarship
ps
MPB
Q
qs
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Inframarginal Graphical Analysis

• Students consider their private cost as the cost
  less the scholarship
• The MSBgtMPB up to a point but the MSB falls as
  more National Merit students enroll
• The efficient level occurs at ps enrolling qs
  scholars

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Incentive Incompatibility

• In order to retain the scholarships, NMS must
  maintain a minimal performance (3.25)
• The large scholarship package may not draw the
  most academically motivated students
• The scholarship could entice students who are
  looking for a free ride instead of rising to
  their potential

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Incentive Incompatibility

• The 3.25 minimum GPA falls below the students
  historical potential, which can allow
  disincentive to reach their full capabilities
• The cash stipend can encourage students to attend
  OU to have more spending money rather than excel
  academically

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Incentive Incompatibility

• The scholarship package seeks to enroll
  intelligent and diverse students but it is not
  entirely meeting that goal
• Residents are given 100 waiver of all costs but
  non residents are given more money but it
  doesnt call 100 of their academic costs
  (resident tuition is not fully waived)
• Non-residents have more costs to consider when
  choosing a college, thus should receive a larger
  scholarship to provide more diversity

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Conclusions

• The large scholarship package creates a positive
  benefit externality
• The benefit provided to the university falls as
  the number of National Merit Scholars enrolled
  rises
• The program may not be accomplishing the goal of
  enrolling the most academically motivated
  students at OU