If that's the justification then just put that money in the school's general scholarship pool. There are lots of kids that need an education even though most couldn't run a 5.0 40 if their lives depended on it. Remember that the overwhelming majority of athletic departments run at a loss, thereby drawing money away from the general university budget that is used to educate students. Making athletic departments run leaner (which means more than a token cut in football) would probably mean more students being educated, not less.
I see no problem with cutting football scholarships. It will reallocate players just as prior cuts increased competitive balance. Teams will still be able to carry a full scholarship two-deep plus another complete set (essentially a three-deep) and some redshirts and walk-ons. I would probably draw the line in the 75-80 range, however, as the maximum that could be cut. Below that I fear that we'd start seeing a lot of freshmen forced into playing on the lines and an increase in injuries. That's where you see the biggest difference in major college football between a 22-23 year old man and an 18 year-old adolescent, even a really large adolescent.
That's 600 over 4 (or even 5 years), so the reduction would be 125-150 scholarships for each high school senior class. In the grand scheme of things that's a drop in the bucket compared to the impact being seen from cuts in many university budgets.
Reducing football scholarships from 85 to 80 is hardly a path to the Ivy League. College sports can be run much more efficiently and still provide the benefits so many want to see.
Kind of irrelevent because
it looks like it isn't happening, but your post doesn't make a ton of sense.
No one is putting a gun to anyone's head and forcing them to have a college football program, or to operate it at a loss for that matter. Why punish schools who have a good brand, or sell their third-tier rights effectively, or who market effectively in their communities?
Moreover, there is little evidence that reducing scholarships will make anything more competitive. Scholarhsips have been at 85 since 1992. Parity is far more recent, and it came about in tandem with more NFL prospects leaving after three years and the proliferation of innovative offensive systems. Artificially reducing the number of scholarship players by itself didn't accomplish much at all. Boise State, Texas Tech, Wisconsin- they've had success because they learned how to compete with bigger programs on the field without competing much head-to-head with the big boys on the recruiting trail. Oregon had an infusion of cash from private donors, mainly Phil Knight, plus an innovative offense. OK State's success is similar. Why reward mediocre coaches who can't figure out how to compete without artificially lowering scholarships for everyone else? Sounds like a welfare state to me. Not to mention that the need to compete on the field in ways other than "line 'em up and win in the trenches" (a losing proposition for smaller schools because the best trench players are still going to the big boys, and you can't readily hide deficiencies on your line) has spawned a lot of more interesting and exciting football. Competition breeds innovation. Rewarding mediocrity does not.
Furthermore, there's little to no evidence that parity is good for sports. People like to complain about dominant teams, but I didn't see the PGA complaining about their ratings when Tiger was dominant, or ESPN complaining about its women's basketball ratings when UConn is on, or the NBA crying about the artificially high ratings it received during the run of Michael Jordan's Bulls. Great teams draw fans to the sport. Having a bunch of flawed teams where "everyone has a chance to win" is dull.
Again, why are you assuming that scholarship cuts would result in a reallocation of funds to non-athletic scholarships? Why wouldn't schools just put those dollars towards facilities costs or simply reduce the university budget or just allocate that money to another important part of the state budget like $250K salaries for university police chiefs? And, more generally, why are we assuming that more people with college degrees is a good thing? Student-athletes enhance a university's branding. The average student with a diploma reduces the perception of the value of a college education in this country. I'd argue that fewer people need university educations, not more, if I'm being perfectly frank. These days, having a college degree has become the equivalent of having a high school degree a generation ago. How is this a good thing?
You're absolutely right- college sports can be run more effectively. Punishing kids who want to play is not the means to getting there. Let each university have the cojones to demand fiscal responsibility of its athletic department, and if they don't have the cajones to do that, the university can suffer the consequences.