What Is an Endowed Scholarship?

Many companies and non-profit organizations create a scholarship fund. They do this to help students afford the high of college tuition.

When starting a scholarship fund, there are many things to take into consideration. You must choose between creating a regular scholarship fund or an endowed scholarship.

If you decide to fund a regular scholarship, it is pretty straight forward. You decide the amount of money you would like to donate.  All the money you donate goes directly to funding the scholarship for students.

An endowed scholarship works differently and is a bit more complex.

What Is an Endowed Scholarship?

If you would like to create a fund that will provide scholarships to students for years, an endowed scholarship can be a great option. An endowed scholarship requires you to donate a large amount of money. If this is something you’re able to do, your money will help a greater number of students.

When you give an endowed fund, the university doesn’t use your actual money to award students with scholarships. Instead, your money is invested. The interest earned from your invested money is used to fund scholarships.

Whereas a regular scholarship is a one-time thing, an endowed scholarship keeps producing income. This is how your endowment can fund scholarships for years.

How Does an Endowment Fund Work?

If an endowed scholarship sounds interesting, you will have to make several decisions. The university manages your funds but you do get to decide how the money will be used.

For starters, how do you want to name your fund? If the fund is in memory of somebody, you will likely name it after that person.

Another thing you will need to decide are the qualifications for students to win the scholarship. Do you want to award the scholarship to students who excel in academics? Or is it more important to you that the money goes to students studying a particular major? You may base your decision on your company’s mission.

Finally, you need to decide how much you would like your endowed scholarship to give every year.

These decisions can be difficult to make on your own. Consulting with the development officer at the college can help you make these decisions.

Once you decide on the details of your fund, you will have to sign a gift agreement. This legal contract will include important details of your fund. These are things like the amount, name, and purpose of the endowed scholarship.

There is usually a minimum amount of money that you must donate to the university. They may ask for a gift of $50,000 or more.

You may choose to give the endowed fund in a gift of cash or stock. But, this isn’t suitable for everyone. You may also choose to pay for the fund over a number of years.

Why Choose an Endowed Scholarship?

There are several reasons why you may wish to give an endowed scholarship.

Regardless of the reason, creating an endowed scholarship provides many benefits.

First of all, there is the obvious benefit of helping many students get a college education. College is extremely expensive and a great number of students aren’t able to afford the high costs on their own.

There are also benefits for you and your company. When you create an endowment fund, you get recognized by the university. It’s a big honor to donate such a fund. The university might choose to recognize you by inviting you to special events and ceremonies.

Creating an endowment fund also offers you tax benefits. You will be able to take a charitable deduction of as much as 50% on your adjusted gross income.

Finally, the fund will help you build your brand. Creating such a fund will bring a positive image to your company.

If you have the means, creating an endowed scholarship can benefit a large number of students. It will also create a positive image of your company and you will receive a lot of recognition from the university.