Columbia, South Carolina – South Carolina’s higher education scholarship system is facing a sudden $25 million gap after state officials discovered that more money is needed to cover scholarships already awarded for the current school year.
The shortfall was identified this week by the South Carolina Commission on Higher Education, the agency responsible for distributing lottery-funded scholarship dollars to colleges.
Executive Director Jeff Perez said the issue became clear after colleges began sending invoices in April for scholarships that had already been credited to students’ tuition accounts.
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Students are not expected to feel the impact directly. Their awards for the fall and spring semesters have already been applied. Instead, the problem now falls on colleges, which must wait longer to receive money they are owed, and on state budget writers, who must find a way to close the gap.
“South Carolina students are using our scholarships like never before, but they’re actually using them more than anticipated,” Perez said, SC DAILY GAZETTE reported.
The state expected scholarship costs to total about $301.9 million this school year, close to the $302 million peak reported in 2021. The agency also had $2.6 million available as a cushion. But the actual cost rose to about $330 million, leaving the commission short.
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Perez said the agency is still working to understand what went wrong. One possible factor is enrollment growth. Another is expanded eligibility. In May 2024, lawmakers added education and accounting majors to the list of students who can receive extra scholarship dollars beyond the base award. State fiscal analysts had estimated that change would add about $8.2 million in scholarship demand.
More students may also be keeping the grades needed to maintain their awards from one semester to the next. Perez said 4,000 more South Carolinians earned scholarships this year than last year.
“Right now, we’re in analysis mode to try to identify what happened,” Perez said. “We need time to figure that out.”
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The timing complicates negotiations between the House and Senate over the state spending plan for the budget year that begins July 1. Under state law, if lottery profits are not enough to cover scholarships, the remaining cost must come from the general fund, meaning state tax collections.
The problem also raises fresh concerns about the accuracy of scholarship projections for next year’s LIFE, Palmetto Fellows and SC HOPE awards. Those three merit-based scholarships are available to eligible South Carolina students attending in-state colleges. Awards range from $2,800 for freshman-year HOPE scholarships to as much as $10,000 per year for certain students in fields such as math, science, education and accounting.
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The deficit is a sharp reversal from the agency’s recent past. Less than three years ago, officials were dealing with a $152 million surplus in scholarship money, also tied to flawed projections. A 2023 audit found that unspent lottery profits had built up for years, leading Inspector General Brian Lamkin to call the money “a missed opportunity.”
Perez, who became director in summer 2024, said the agency’s estimates had been “dead on” for the past two years. Why the system missed the mark this time remains unclear.
“This is a challenge for us, but if it means more students are getting a chance to get a college education because of scholarships, I embrace that challenge,” Perez said.
