If the grade is calculated by simply averaging various grades, every student must be treated the same. If part of the grade is subjectively left to the teacher, and if the teacher feels the student has the ambition and ability to succeed in his continuing future academic studies, then these factors can be taken into account in your grading decision.
As far as sources, one need go no further than two verses in the Torah. The first states, “Neither shall you glorify a poor man in his lawsuit” (Ex. 23:3). Our Sages explain this as an instruction that a judge should not show favor to an impoverished litigant to find him innocent, due to his poverty, and free him from payment of an obligation he in fact owes.
The second verse teaches, “Distance yourself from a false matter” (Ex. 23:7). Although the Talmud permits lying for peace between people (Yevamot 65b), financial benefit is not included. Additionally, that is permitted only when others are not adversely affected. It can be assumed that even in a case in which only one student benefits, this would hurt the chances of other students who also want and need scholarships. Finally, you might not be doing the student a favor. If he fails out of college, he will have wasted valuable time and money.
May God give you the wisdom to make the correct decision and explain your decision to your student as necessary. I personally would suggest discussing this situation with the school’s principal to clarify the school’s policy and the policy of the regional Board of Education to ensure that everything is being done in a completely legal manner. “Kindness and truth shall not leave you; bind them upon your neck, inscribe them upon the tablet of your heart; and find favor and good understanding in the sight of God and man.” (Proverbs 3:3-4)
