Actual post from Dec. 15 from one of the streams. This is a real topic. As far as promoting women and minorities even if their qualifications are not as good as the white male scientists, I am all for it. We need diversity at the lab and if that is what it takes, so be it. Quit your whining. Look around the lab, what do you see? White male geezers. How many African Americans do you see at the lab? Virtually none. LLNL is one of the MOST undiverse places you will see. Face it folks, LLNL is an institution of white male privilege and they don't want to give up their privileged positions. California, a state of majority Hispanics has the "crown jewel" LLNL nestled in the middle of it with very FEW Hispanics at all!
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The poster got all sorts of things wrong, with one being that the bulk of the students who apply are not 2nd-year graduate students; that would, in fact, be the lowest fraction. It is seniors in college, which is the highest fraction. The other claim is that you are already supposed to already be in a group, which is not true. Also, the reasoning on why the person did not apply their senior year of college for the first-year but waited for the 2nd-year graduate school year makes no sense at all.
It cannot be the "whole generation of graduate students" by definition, since 50% of physics Ph.D.s are international students who are not eligible for the NSF fellowships in the first place. In fact, if you do the math, this would affect at most 1/12 of physics grad students.
In the old days, NSF fellows it was only for college seniors, but some issues arose that made it make sense to be eligible for graduate students. You had people accepted to say, UCLA or Stony Brook, and rejected from Harvard. People would commit to the lower-ranked school, but then in April, when the NSF fellows were announced, the elite schools would contact people who won and say, "We will now accept you." This led to a huge asymmetry in the NSF students, particularly in physics, where the vast majority of NSF fellows ended up going to a select few elite schools, which also meant certain research areas got more narrow. This effect took off once the internet got going because schools could check online who got one. You can go to the Physics GRE homepage and see people talking about this over the years. I have heard it argued that this is one of the reasons so many people got Ph.D.s in string theory, even though there was not that much funding in it, since it is basically done only at the top schools, and you get lots of free NSF-funded grad students in the few schools where string theory is done.
To get around this effect, the NSF said, "OK, you can be in the 1st or 2nd year of grad school, so you are already at UCLA or Stony Brook."
If you win the fellowship in your 1st year of graduate school, it starts in your 2nd year, and it gives you 3 years of funding, so you graduate in 5 years, which is considered ideal. The original idea for the NSF was that you get it in the first 3 years of grad school so you can get right to research or get some classes out of the way, and you can graduate in a reasonable time period, ideally in 5 years.
With people applying in the second year, that means you get the grant starting in your 3rd year. The grant is for 3 years, so that means you are committed to 6 years in graduate school no matter what. This would actually increase the time spent in grad school. Suppose you could graduate in 5 years, but you have one more year left on your NSF fellowship. I guarantee you that the professor is not going to let you graduate in 5 years.
Another reason for the NSF grants starting at the beginning of college or the beginning of the 2nd year is to allow the student to pick the research field they want, rather than ones where there is already funding, so you can do more risky, emerging fields like in theory, cosmology, astro, and with speculative projects, rather than joining already well-funded and safe research areas. By the time you are in your 3rd year of graduate school, you are almost certainly already in a group and already funded, so the NSF grant is not going to add anything for the student, but just means the professor can take your former funding and add another student, such as an international student, so you are just adding to already well-funded projects.
I still find it odd that they allowed 2nd year grad students to apply for this since I know this was not the case back in 90s. I think most 2nd year graduate students are already in group being paid or partially paid.