One of the most fulfilling things we can do, as humans, is to give to others. If you’ve been feeling the urge to give back to your community and to the world, have you thought about establishing a scholarship fund to support others in furthering their education?
You don’t have to be a mega-billionaire to help others with their education expenses. In this article, we’ll tell you all you need to know about how to start a scholarship fund.
As you’ll see, starting a scholarship fund is fairly simple and is a meaningful way to help others. You can be as creative or traditional as you want in creating your fund.
You can offer your support to any population you want (as long as you’re not discriminatory), and you can decide how much each recipient will get and what the money can be used for.
What Is a Scholarship Fund?
A scholarship fund is an amount of money that is set aside to help a student cover his or her education expenses. When you’re thinking about how to start a scholarship fund, this is one of the decisions you’ll need to make. Who are you trying to serve with your fund?
Generally, a scholarship is a monetary grant that a student applies for. The application can be electronic or old-school paper. The applicant needs to be part of the defined charitable group that you designate in your scholarship policy.
A scholarship can cover any part of the education expenses that the founder (you) decides. For example, some scholarships cover part or all of the tuition expenses. Others cover the cost of books, materials, or housing. When you think about the recipients of your scholarship, what are their greatest needs?
We usually think of scholarships as assistance for post-secondary education: college or trade school. But as you explore how to start a scholarship fund, you may think of other education levels.
Would you like to help students and their families with the expenses of a local private elementary or high school or boarding school? There are even scholarships available for preschools which help needy families pay those costs.
Can Anyone Start a Scholarship Fund?
“I’m not some billionaire who can just give out tuition money! Tuition is expensive. I want to give back, but I don’t have a huge budget. I want to know how to start a scholarship fund without breaking the bank.”
First of all, most scholarships only cover a portion of a student’s total expenses. You don’t have to have enough funding for all the annual costs of school. There are many ways to help needy students that don’t involve giving thousands of dollars.
You can see that you can create a scholarship fund for any part of the educational expenses that inspire you. While you’re considering how to start a scholarship fund, you can think as small and simple or as big and grand as you want: and as your budget allows. You can always start small and grow your giving capacity over the years.
Second, you don’t have to provide all the funding yourself. A scholarship fund is a nonprofit entity that can take tax-deductible contributions from others. You can explore a wide variety of fundraising ideas that will secure the funding for your scholarships for years and decades to come.
The simple answer is, yes.
Anyone can start a scholarship fund.
How to Start a Scholarship Fund
There are many things to consider as you begin thinking about how to start a scholarship fund.
Name Your Fund
It may sound overly simplistic, but you’ll want to give your name some consideration. You can, of course, name your fund after someone you want to honor, a parent, or another loved one. It is perfectly fine also if you want to name your fund after yourself.
You, after all, are the one who is creating improved possibilities for others. Or you can opt for a more descriptive name, which describes your intended recipients.
If your scholarships are intended for students in a specific geographic area, you can use the name of the city, county, or state in your fund’s name.
Decide on Your Recipients
Who are your aiming to help? It is important to be as specific as possible in this decision as you consider all aspects of how to start a scholarship fund.
Your recipients, for IRS purposes, must be able to be considered a charitable class. This may mean a minority group, like students from a specific ethnic background, or from a specific socio-economic status. But you cannot be discriminatory in awarding your scholarships.
Your pool of applicants needs to be large enough that your funds can be seen as being of benefit to the greater community.
Under no circumstances can your scholarship benefit only a specific person or family. And you should not have such a restricted applicant pool that you would be able to identify every possible applicant beforehand.
You can focus your fund towards a specific academic level (college freshmen, Ph.D. students, preschoolers) or a specific school, city, state, or county.
Or you can choose an area of study (biology majors, art school students, or engineering students), or you can focus on family or cultural background of your recipients (Eastern European, second-generation immigrants). There are scholarships available for many charitable classes.
Here are some examples:
Decide the Criteria for Acceptance
Chances are, with school expenses being what they are, you will have many applicants for your scholarship funds. Think this through now as you consider all the ins and outs of how to start a scholarship fund.
How will you select your recipients? Your scholarship fund should have clear rules and policies about who gets selected and how the selection process occurs. These rules and policies must be easily accessed by prospective applicants, for example, on your website.
It’s a good idea to have at least some objective criteria as a threshold for acceptance. This may be a grade point average or an annual family income. You can conduct interviews of applicants or require an essay or other personal statement. Or you can challenge your applicants with a particular project.
You’ll need to come up with a fair way to judge the submissions. A rating scale or rubric will help ensure the selection process is fair. It is also a good idea to assess any written or creative submissions blindly, without the judges knowing the identity of the applicant.
Consider creating an evaluation committee to oversee the judging of submissions and applications, so that it is not just one person who decides. The appearance of fairness is important in promoting your scholarships to schools and applicants.
Create Your Application Process
Your applicants will want to know what is expected. And they will want the process to be as simple and streamlined as possible. Create clear policies.
Some scholarships are still using a hard copy application process, but most are now conducted online. This makes things simpler both for the applicant and the administrators.
Set your deadline for applications. Most scholarships have spring deadlines, but you can set yours up any way you want.
Funding and Administering Your Scholarship Fund
This may not be the most fun and creative aspect of starting your fund, but it is necessary nonetheless.
Where Is the Money Going to Come From?
You can, of course, supply all the funds for your scholarships yourself. If you are the sole source of funding, you just need to file the paperwork with the IRS and deposit your capital in an interest-bearing investment.
You’ll then use the accrued interest to fund your scholarships. For about $10,000 you can create a solid fund. But most funds are created as nonprofit entities which solicit contributions from donors. If this is the case for you, you’ll have a little more paperwork to do.
You’ll need to register your fund with the IRS and apply for recognition as a not-for-profit, tax-exempt entity. Then you’ll need to decide where to invest your capital, so that it will accrue interest that will pay for the administration of the fund and the scholarships themselves.
And you’ll need to begin soliciting donations for your fund. You can approach individuals, corporations, or other tax-exempt organizations like churches for donations. You can also hold fundraising events online or in your community.
Once you decide on who is going to receive your scholarship, you’ll need to keep track of the award and make sure it gets to the right person or school. This sometimes requires some follow-up; some recipients have applied to many sources of funding and may need to be reminded of your award.
But beyond tracking the money, you’ll also need to make sure you’re in compliance with the IRS and any local, state, or federal agencies that pertain to your particular type of fund.
You’ll also need to monitor the investments that you’ve made to grow your capital and create the interest that funds the awards.
There are companies that do the administrative work for you, and as you consider all aspects of how to start a scholarship fund, you may want to investigate them. Hiring out the admin work can make the whole process a lot easier.
Promote Your Scholarship
Now you’re ready for the world to know about your scholarship. How are you going to attract the right applicants?
If your scholarship is regional, you can begin by sharing your vision with local government and community organizations. If you are targeting a specific school, they can help you get the word out. Ask for help from professional organizations who might eventually serve your recipients after they graduate.
Make sure you have budgeted for any advertisement online, in print, or on radio or television that you want to do.
If your scholarship fund is well-administered, you’ll soon have no lack of applicants. There will always be students looking for help in funding their education.
We applaud you for your inspiration to give back to your community, especially by supporting students in funding their education.
Yes, you can be that support by learning all you can about how to start a scholarship fund. We hope we have answered all your questions and inspired you to move forward with this noble and generous goal.