Utilizing Debt Instruments in Lieu of Scholarships

By July 31, 2018 September 10th, 2018 Student Debt, The Pragmatist

I recently had the pleasure of being invited to the unveiling ceremony at my university for a variety of new scholarships.  Many of these scholarships had pseudo strings attached such as “intended for individual who works in ___ field” or “to support an individual who resides in ____ community.”  Perhaps it is the cynic in me, but I realized that these conditions were completely irrelevant in terms of contract enforceability. Because hiring a lawyer is ridiculously expensive, it is more expensive to enforce the conditions of the scholarship than the scholarship itself.  While some organizations may take on that cost simply to make an example of the breaching party, most trustees will eat the loss as a cost of doing business and not wish to take away the support of the next awardee simply to pursue the individual who failed to live up to their promises.

After shaking off that notion as ridiculous, I remembered my friend from college who upon admission was inducted into this special group at the university based upon his admission essay, which was entirely fabricated.  The simple fact of the matter is that the manner in which most scholarships are set up does not protect the donors from individuals who write targeted grant letters for the sole purpose of obtaining the support. The shift in intent may not even be malicious.  The individual may have truly believed that they would live up to the requirements of the scholarship, but upon entering the real world, for one reason or another, had a change of heart.

Personally, I find this unequal balance of power to be unnerving, especially as the individuals contributing arguably more to the transaction have the least amount of decision making power.  Individuals providing their capital for scholarships have worked hard for their money, and they are entitled to receive exactly what was bargained for in distributing their assets. This is why I find Third Estate Ventures’ approach to the scholarship model so appealing.

Rather than extracting empty promises, Third Estate utilizes a debt instrument as their contract document and, whenever possible, chooses to deal in student debt.  Third Estate’s use of student debt is important because it is extremely difficult to discharge. All of which is music to my ears.


Sincerely yours,

The Pragmatist

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