I don't know Stanford's policy, but this story always sticks with me:
http://alumni.stanford.edu/get/page/maga...e_id=34625
We honored Joe Kay's scholarship despite his stroke near the end of high school. He hadn't even stepped on campus yet. But I don't know if we converted it to a non-athlete scholarship or what the rules on that are. Scholarships are a limited resource. I wonder how flexible the NCAA is in allowing you to convert athletes to non-athletic scholarship and not count towards your limit (or trigger Title IX issues.)
The practice of over-signing and yanking scholarships seems horribly unethical. On the other hand, scholarships are very expensive and limited, and if a student is no longer able or willing to perform, it makes sense that they should be subject to the same constraints that the rest of the student population faces. Lots of scholarships are performance based. If you don't maintain your GPA, you lose your scholarship. Should athletics be different?