The fees to attend the University were not exceptionally high (at £12 a year in the first decade or so - about a seventh of a labourer's wage), and the University devoted £700 of its £9,000 endowment to annual scholarships which included two of £50 offered to the best students at the Matriculation and first and second year University examinations. There were also two £100 scholarships, tenable for two years, to enable the best of the final year students to study for a Master's degree. These were sufficient for the poorest student to study at the University; the difficulty lay in the cost of secondary schooling and the income foregone while students studied. As a consequence most students were the sons (and later daughters) of Melbourne's prosperous merchants, doctors, clergymen, lawyers, schoolmasters, government officials and the more successful tradesmen. Even for these groups, however, the education of large families could be a financial challenge, especially since the very wealthy often chose to send their sons back to Oxford or Cambridge. Scholarships and prizes could serve as important inducements for a young university to attract the talented students who would help build its reputation. From 1875 a small number of students were assisted by the Government to study for six years while they completed high school and a University degree.
From the very earliest days the University was the beneficiary of gifts and bequests to encourage scholarship and further study. The Vice-Chancellor, Sir Anthony Brownless offered the first for the best English Essay on the subject, 'The Past and Future of Australian Exploration'.
An early Law lecturer R.A. Billing offered a gold medal for the best student in his class from 1858 to 1874. It was returned with interest by the 1860 recipient, (Sir) Samuel Gillott, later Lord Mayor of Melbourne, who bequeathed £42,248 to the University for general purposes in 1922. Other valuable early scholarships were provided by H.T. Dwight, J. Hastie, J.D. Wyselaskie, W.T. Mollison and R. Dixson.
Most benefactors wished to encourage or develop some aspect of the University's work as well as support students, hence such gifts as those of Professor W.C. Kernot and Godfrey Howitt and David Syme to develop scientific and technical study and resources.
Later the University began to hold special appeals and actively seek the involvement of individuals such as James Cuming in new developments. The tradition of former graduates endowing scholarships and prizes remained strong until well into the twentieth century. Though the value of many of them has dwindled with the passage of time, the amounts provided in the period up to World War II represented a significant addition to the University's relatively meagre resources.
The encouragement of students to undertake research for higher degrees was even more critically dependent on scholarships, especially in the expensive laboratory-based courses. University and other scholarships, which included a number provided by the State Government from 1908, served to entice the best students who in turn usually provided the University with essential teaching support at little extra cost. Until 1946, anything beyond that required travel to overseas universities. Scholarships such as the 1851 London Exhibition from 1890, the Rhodes from 1904 and the Orient and P&O from 1908 allowed the talented few to study overseas before (mostly) returning to positions in Australia.
In Victoria the State Government did not begin to provide education beyond the leaving age of 14 until 1910. The number of high schools were small and the fees still something of a deterrent. The value of the 'free places' at the University failed to keep pace with the cost of living as the century progressed, though it was still possible even in the 1930s for poor but bright students to finance their way through University with the benefit of scholarships, prizes and 'exhibitions' (awards for e.g.. highest marks in a subject). In the wake of World War II governments at state and federal level saw a need to expand rapidly the proportion of the population with university education and the principal instrument for this was scholarships, while burgeoning industries introduced cadetships to attract and support talented students. With the abolition of fees for tertiary education in 1974, scholarships were confined to post-graduate study, and living allowances only to poorer students. More recently the wheel has almost turned full circle since the introduction of schemes (HECS) through which students pay part of the costs of their tuition through a compulsory loan scheme.