I empathize. A couple of thoughts here:
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You let him live his life junior year and he saw the effects on his GPA. Perhaps that was enough of a lesson.
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You and your spouse, as well as your son, might want to think about what the effects/consequences are if your kid ends up being a 3.0 GPA vs. 3.5 GPA kid vs. a 4.0 kind of GPA kid. At what point do you think the outcomes are going to differ? At what point does he care about the differences in outcomes? At what point (or $ amount) do you and your spouse care?
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You might have some kind of a GPA requirement for him to keep his family scholarship, with a one-semester probation period if he fails to meet that GPA (elaborated a bit in this post, with a follow-up on the GPA a few posts later) if you think he might need some guardrails in place to keep him motivated.
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You might require, or strongly urge, him to live in an honors dorm/floor or LLC for his first year. Additionally/alternatively, not allow him to rush his freshman year, if that was something of interest (unless, perhaps, the fraternity’s average GPA was higher than the school’s GPA, or higher than a certain level).
I suspect you and your spouse have already thought about this, but I just want to put it out there in case you haven’t. I would give very strong consideration as to what kind of a budget your family intends to pay for college/postsecondary interests for ALL of your kids. Every family is different, but I will say that I’ve seen cases where the oldest kid attended a college that cost the family a lot of money, and then the younger kids had significantly smaller budgets and it caused a lot of family friction. Just want to put this on your radar.
Also, I empathize abut kids who take things for granted that you never would have. You and your spouse might want to discuss how your kid will get spending money in college. Perhaps they need to use their summer employment money or work part-time in college. I know there are studies that show that students who work 8-12 hours a week or similar end up having higher GPAs because they have to be more cognizant of time management and getting their schoolwork done appropriately. Alternatively/additionally, maybe the family scholarship has a stipend amount that varies based upon the GPA.
You seem very thoughtful about this process and I suspect that all will turn out well. Looking forward to seeing how the college application and decision process goes for your family!