I imagine that a lot of it was left to them by wealthy alumni with specific instructions on the types of scholarships that they wanted to fund with that money. If the gifts were just for general funding, it would have likely been spent already.
No, this would eliminate those programs, the bureaucracies associated with them, and just give people cash based on their income. Milton Friedman had proposed such a system in the 60s. A problem at the time was the concern that it would allow people in communes to mooch of the Govt.
The government site (http://pvwatts.nrel.gov/) estimated that the value of the energy produced at my house would be about $1600/yr, but of course it didn't say how much the system to generate that much power would actually cost. I'm guessing enough that the break even point would be 20+ years.:(