Why are scholarships essential in the present economy?

Do you know that every year hundreds of thousands of scholarships are disbursed by a huge number of federal agencies, non-governmental funding agencies, philanthropists, educational institutes and by corporate giants? The amount of money that goes into scholarships is astronomical, to say the least, and one might even wonder why.

Let us take a moment to understand why such scholarships are important from the economics perspective.
First of all, worldwide educational costs have risen quite dramatically. Research studies indicate that in the last fifteen years, public and private tuition fees for two-year and four-year programs have increased by at least 3% over inflation.

However, corresponding to such an increase in tuition fees, most people have not received a substantial increase in their income. With cost of living on the rise, income available for educational investments is surely less. Some studies specifically show that a large percent of the population is capable of only contributing enough to cover the cost of books and stationery over a four-year period.

Further, many countries, including America, are still recovering from the recession, hence, state funding for education has also decreased considerably. This, of course, varies from state to state in the country.

Another alarming fact is the tremendous increase in student debt, where the average student in the country acquires over USD 25,000 in student loans before he/she graduates. Add to this the increasing costs of on-campus accommodation, food, and other living essentials.

In each one of the above scenarios, it is quite obvious that there seems to be a huge and ever increasing gap between the disposable income of an average family and the soaring costs of receiving a quality education. While some struggle to make ends meet, and hence, by default, settle for semi-skilled and blue collar jobs, there are so many others who yearn for an education but are also stifled by the prospect of spending a lifetime in paying back student loans.

Given that this is the current financial scenario across the world, and also factoring in the obvious and ever increasing inflation in the cost of living, the establishment and disbursement of scholarships become quite essential to the economy.

Purely from the economic angle, without even considering other benefits of scholarships, the availability of such financial support to intelligent and deserving students facilitates an emergence of a highly skilled and employable workforce, who on their own time and manner, are capable of giving back not only to society but also to the economy of a nation.