These scholarships are funded by the lottery
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S.C. Education Lottery
Read more in this series about the South Carolina education lottery
William Nguyen is doing everything right.
He got into the University of South Carolina’s pre-pharmacy program. His high school test scores earned him a $5,000 lottery-funded scholarship. And he travels back home to Greenwood once a month to work weekends at Chili’s Bar & Grill to help pay for his education, his father Tai Nguyen said.
Nevertheless, William has racked up $20,000 in student loan debt — and he’s only three months into his freshman year.
“He’s been working since he was 15 ... The burden is mainly on him,” William’s father Tai said. “Intellectually, he understands the debt, but I don’t think he or anyone else that age is ready for that kind of liability.”
When state voters approved the South Carolina Education Lottery in 2000, they were promised scholarships to cover tuition for both the state’s brightest students heading to top-tier universities and students wanting to learn trades at the state’s technical colleges. Underprivileged students would have a real chance of attending four-year schools and B-average students would pay only hundreds — a couple thousand, tops — to attend flagship schools like USC and Clemson.
“As a result of our growing economy, the ability to trim some waste out of government and with a new statewide lottery, we will make South Carolina schools some of the best in the world,” said then-gubernatorial candidate Jim Hodges in 1998, whose pro-lottery stance helped him win the governorship that year.
But 18 years after voters approved a state-run lottery, that vision has failed to bear fruit. Tuition at S.C. schools is at an all-time high. Default rates are above the national average. And South Carolinians are struggling with some of the highest student-tuition burdens in the country, with borrowers owing an average of $30,300.
It’s not for lack of money. The lottery has raised $5 billion since 2002, shattering the expectations of even the most optimistic lottery advocates. But instead of using that money to boost education spending overall, as state law requires, lawmakers have cut higher education funding by $4 billion and replaced it with lottery funding — the lion’s share of which goes to scholarships for high-achieving students, according to a recent report from the Legislative Audit Council.
As a result, tuition at both two-year and four-year colleges has more than doubled since 2000, according to inflation-adjusted data from the Commission on Higher Education. In 2017, annual tuition at the average four-year school in S.C. cost $11,956, according to the data.
“The lottery has done everything and more that was promised,” Hodges said in a recent interview. “It (just) can’t keep up with the cuts that have occurred in the Legislature.”
This has driven college tuition up. Colleges, much like businesses, set tuition prices based on revenue minus expenses. When the Legislature cuts higher education funding, expenses go up while revenue stays the same. And the way a student gets tuition money — whether from student loans, personal savings or a lottery scholarship — does nothing to change a college’s revenue or expenses, said Clemson University spokesman Joe Galbraith.
“Clemson’s very appreciative of the support it receives from the state,” Galbraith said. “At the same time, state support and tuition increases are closely linked.”
Funding cuts have wreaked havoc on state-supported colleges and universities. For example, in fiscal year 2004, state dollars made up 24 percent of the University of South Carolina’s revenue, according to the earliest available budget. This fiscal year, state appropriations make up just 11 percent of the school’s budget, according to financial reports and historical budget documents.
“Without question, the lottery scholarship program has been hugely beneficial to in-state students and their families,” said USC spokesman Jeff Stensland in a statement. “But as we’ve said before, scholarships are not equivalent to direct funding of public institutions. ... Those (funding) cuts have certainly contributed to tuition increases.”
After lottery scholarships became available in 2002, tuition at four-year colleges in S.C. increased at their fastest rates since 1987. Some lawmakers have argued colleges took advantage of the lottery scholarship as a way to increase tuition. However, per-student funding at colleges decreased at roughly the same rate, according to the legislative audit.
“One doesn’t need a lottery to fund higher education,” said Raymond Sauer, a Clemson University professor of economics. “What the lottery did was enable them (legislators) to shift funds around and use funds for things other than education.”
When South Carolina started awarding $2,000 LIFE scholarships in 1998, tuition cost an average of $3,400 at four-year schools, according to Commission on Higher Education data. This left qualifying students with a $1,400 annual tuition bill.
Today, the LIFE scholarship is worth $5,000, but the 2017 average tuition at S.C. four-year schools was $11,955, leaving qualifying students with a $6,700 annual tuition bill, which doesn’t include the rising cost of room and board, data show.
Bucking the trend are the state’s 8,500 technical college students. Although they have seen tuition increase 234 percent since 2000, LIFE scholarships covered tuition and then some for recipients. Nearly 39,000 technical college students also received a total of $49 million in lottery-funded tuition assistance, records show.
“Basically, the amount of money that’s going into the lottery has caused two things. It’s caused tuition to go up and it’s caused the Legislature to decrease education funding,” said State Sen. Brad Hutto, D-Orangeburg, who sits on the Senate Education Committee.
‘Everything’s on the table’
The lottery isn’t likely to stay the way it is, at least not for long. A 2014 change in the high school grading scale meant an additional 25,500 S.C. students will qualify for lottery scholarships by 2020, costing an additional $88 million, according to data from the Commission on Higher Education.
If lottery revenues come up short, taxpayers will have to fill the gap. Lawmakers considered a push to overhaul the lottery system last year, but other issues, such as the state budget and rolling back SCE&G rates, crowded it out.
Under the current system, here is how much each lottery scholarship is worth and who qualifies:
- HOPE — $2,800 per year; 3.0 grade-point average (freshmen only).
- LIFE — $5,000 per year; 3.0 GPA, 1100 SAT score and top 30 percent of high school graduating class.
- Palmetto Fellows — $6,700 per year for freshmen and $7,500 for upperclassmen; 3.5 GPA, 1200 SAT, top six percent of class in either sophomore, junior or senior year (or 4.0 GPA and 1400 SAT score).
LIFE and Palmetto Fellows upperclassmen majoring in certain science and math-based fields can receive extra scholarship money, according to the Commission on Higher Education.
With a fresh legislative session approaching, bipartisan desire to change how higher education is funded and a new chairman of the Senate Education Committee, there is a real possibility of reforming the lottery scholarship program in the near future.
“I think there’s a good chance to make progress on it,” said Sen. Vincent Sheheen, a Kershaw Democrat who sits on the Senate Education Committee. “The program as it stands is not sustainable. It will swallow up too much lottery and general fund money.”
The Georgia Lottery, the system on which South Carolina’s is based, awards merit-based scholarship money per school and per credit hour, according to Georgia’s financial aid website.
In reforming the lottery scholarship program, S.C. legislators have considered increasing funding for need-based scholarships, providing extra scholarship money to education majors and changing the amount of lottery scholarship money freshmen receive compared to upperclassmen.
“I want to look at education as a whole,” said Sen. Harvey Peeler, R-Cherokee, the incoming chairman of the Senate Education Committee. “Everything’s on the table.”
Nabihah Kumte is the kind of student South Carolina wants to stay in-state for college.
An elite student in high school, Kumte finished among the top of her class at Spring Valley High School in Richland School District 2. That earned her the state’s top financial aid award, a $6,700 Palmetto Fellows scholarship.
“Honestly, if it wasn’t for the Palmetto Fellows, I would be paying a lot more out of pocket,” said Kumte, a pre-med major at the University of South Carolina who plans to attend medical school in fall 2019. “Fortunately, I have a lot of family support.”
Her freshman year, Kumte and other Palmetto Fellows students could expect to pay $4,782 out of pocket. Had the state kept tuition and scholarships at the 2000 rates, while increasing tuition only at the rate of inflation, college would have been cheaper for everyone, including Palmetto Fellows scholars. A student like Kumte would have paid only $565.
Only 6.2 percent of lottery scholarship recipients earn the Palmetto Fellows scholarships. For everyone else, college was even more expensive.
Had William Nguyen started college in 2002, a LIFE scholarship would have covered 92 percent of tuition and fees, but by 2015 it covered only 39 percent of tuition and fees, according to Commission on Higher Education data.
“While there is no doubt that lottery scholarships have benefited thousands of South Carolina students over the last 18 years, it is also true that the purchasing power of these scholarships has decreased substantially since the inception of the lottery,” Commission on Higher Education President and Executive Director Jeff Schilz said in a statement.
Sen. Sheheen, who said he was never in favor of the lottery, said he believes the lottery has failed.
“It was never going to improve student education,” Sheheen said. “It’s not good policy to base your budget on gambling. If you want something, as a society, you have to pay for it.”
Where is lottery money spent?
- College programs and scholarships: 81 percent
- K-12 education programs: 18 percent
- Other: 1 percent
Source: S.C. Education Lottery Commission