Holiday Presents, Bah, Humbug! (There’s a Better Alternative)

By Marty Nemko | Source | October 26, 2009

Exchanging presents at Christmas (oops, also Hanukkah, Kwanzaa, Ramadan, and Winter Solstice) is a practice that is ripe for replacement, at least for those of us who already have too much stuff.

Instead of giving more stuff to clutter your recipients' lives or for them to have to shlep back because it doesn't fit or they hate it, why not, in the recipient's name, give a donation to the charity of your choice?

The charity I'm currently hot on is SmileTrain. Millions of kids in developing nations have cleft palates. That makes them not only very unattractive, shunned by children and later by adults, but often unable to speak comprehensibly. Yet a simple one-hour surgery can render the child completely normal and able to live up to his or her potential. SmileTrain, which focuses on rural India, has already performed 500,000 such surgeries but millions more kids need it.

I must admit to a particular appreciation of Indians, indeed all Asians, because they are an impressive people: Despite being as visibly different from white Americans as any minority and other immigrants, they, even as new immigrants, have low crime rates and instead, in greater proportions than the general population, become top contributors to society, for example, as physicians, successful businesspeople, and innovators in Silicon Valley's high-tech and biotech worlds. So when we cure an Asian child's cleft palate, it strikes me that we are likely to be unleashing especially good potential that otherwise would go for naught.

Of course, you may have another charity that you're more inclined to donate to but there is one charity I believe is a poor choice: a college scholarship fund. Such donations are likely to provide little help per charitable dollar invested.

Let me explain why. Donating to a scholarship rarely does what most donors think it does: enable a student to attend college who otherwise couldn't. Instead, what usually happens is that your donation is used to tweak an already admitted student's financial aid package.

If the student is lucky, your donation is used to convert some portion of the student's government-paid student loan into grant. In that case, you are essentially opting to pay additional tax--you've chosen to pay the loan subsidy that the government otherwise would have paid. Thanks to you, the government keeps the money. That's very different from what scholarship fund solicitors imply: that you're enabling a student to attend college who otherwise couldn't.

If the student "recipient" is not lucky, your donation is used to replace the scholarship the college would otherwise have given the student to induce him or her to choose that college. The college figures, "Good! S/he got the money from someone else, so we can keep the dough in our coffers!" The student doesn't get an additional dime.

Even if your donation is given to a student before choosing a college, funding a scholarship is a poor use of your charity dollars. The student, knowing s/he has a chunk of other people's money to use to pay college tuition, is thus disincented to look for a cost-effective college. If it was his own money, s/he might, for example, wisely conclude that a good public university is a prudent choice, perhaps even a very-low-cost community college for the first two years. But if the student has your money to spend on tuition, s/he's likely to give less weight to cost-effectiveness in choosing a college.

Of course, the most important argument against funding a scholarship as your charity of choice is that, for example, a $250 donation to pay for a child to have a cleft palate fixed will likely do far greater good.