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Wow, I didn't expect a school like Swarthmore that is already so competitive to get into to have an honors course track....
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For the most part, it's not really "competitive" to get into the Honors option. It's just a choice you make depending on the department and the curriculum you want to follow.
The Honors program is probably the biggest reason that Swarthmore developed a reputation for academic excellence. It was started in the 1920s by the President of the College who had been in charges of the Rhodes Scholar program in the United States.
The structure of the Swarthmore Honors program was for students to concentrate in a series of very small Honor Seminars -- just a few students and a Professor, meeting once a week.
Until just a few years ago Honors work wasn't even graded. You graduated with Honors, High Honors, or Highest Honors.
The endgame of the Honors track is usually a senior thesis or project. Then you are given written and oral exams in your field by a panel of outside professors and experts who come to Swarthmore from other colleges for a week in May to give exams to Honors students. These outside examiners determine honors, high honors, or highest honors.
The honors program is a very rigorous academic experience. In addition, you have had a hundred or more visiting examiners experiencing Swarthmore and Swarthmore students each year for the last eighty years and taking back positive impressions of Swarthmore's academics to their home universites and grad schools.