Next week faculty at the University of California will weigh in on whether to drop the SAT as a requirement for admission due to concern that the test is biased. Their recommendation prompts another question with a potentially bigger impact for students and their families: Should schools continue to use SAT scores to award scholarships?

Colleges and universities give out about $30 billion a year in merit aid, which is often based on a student’s SAT or ACT. An additional $2 billion in merit aid distributed by states hinges...