Create an Educational Scholarship Fund

Setting up an educational scholarship fund can be a meaningful way to give back to your community or to honor a loved one. There are a number of things to consider when planning a scholarship, including how to fund and administer it. In addition, you will need to devise selection criteria, design an application, and plan to maintain the scholarship.

Steps

Planning for the Scholarship

1. Determine the purpose of your scholarship. Founding a successful scholarship depends upon identifying the reason for awarding it, as well as the target student audience it can potentially help. Normally, your scholarship will carry a name that characterizes its purpose, such as “The Jane Doe Memorial Scholarship,” “The Michigan Rural Community Scholarship,” or “The Leaders of Tomorrow Scholarship.” Common reasons for founding scholarships include:
   • Memorializing a loved one by helping students with a scholarship in that person’s name
   • Providing financial aid to students studying in a particular field, such as medicine, writing, or social work
   • Providing financial aid to students who attend a particular school or type of school
   • Helping students who have financial or personal hardships to overcome
   • Awarding students who excel in a sport, activity, or academic field
   • Honoring students who have completed an essay on a topic of interest
   • Honoring students who have made a significant impact in their community
   • Honoring students based on personal characteristics such as ethnic or cultural background, gender, or geographic origin
2. Set a timeline for the scholarship. There is a lot of planning that goes into starting an educational scholarship, and you will need to think ahead. Typically, if you want to award a scholarship by a summer prior to a given academic year, you should begin planning for it the previous summer. Steps to factor into your timeline include:
   • Program development
   • Fundraising
   • Advertising
   • Evaluating applications
   • Awarding the scholarship
3. Determine the duration of the award. Some scholarships make a one-time award to one or more students, while others offer them support for multiple years. In addition, scholarships may be awarded only during one year, or they may become an ongoing program with application cycles each year, or on some other set cycle. The duration of your scholarship will depend upon your financial abilities and intentions.
4. Determine the scholarship terms. It is a good idea to specify the details of your scholarship in writing. You may decide to award a certain amount, or leave the amount open. The latter method allows you flexibility in determining the number of students to award each year.
5. Plan how to fund the scholarship. Actually providing the funds for your scholarship is very important. You may decide to fund it entirely on your own, or with the aid of corporate, community, or educationally-based donors.
   • Depending on your scholarship terms, donors may be able to receive tax benefits for making contributions to your scholarship. Contact an accountant or talk to a school’s financial aid office for details.
6. Raise funds for your scholarship. If you or someone directly involved with the project cannot finance the scholarship alone, you will need to do some fundraising to get the project off the ground. If you are working with a school to develop the scholarship, it may already have a network of donors to contact. If you will be raising funds on your own, start by making a list of potential donors, such as businesses and community organizations. Draft a flyer, letter, email, or website to let these potential donors know about the purpose of your scholarship. Your promotional materials can also request a donation or let potential donors know about fundraisers you can host, such as:
   • Auctions, where items such as antiques or artwork are sold to raise funds
   • Offering perks (such as a free dinner at a restaurant) to those who donate
   • Raffles for items or perks (each participant pays a fee to enter the raffle; one or more entries is chosen as the winner of a prize)
   • Bake sales
   • A game night (bowling, board games, etc.) where participants pay a donation to enter
   • A crowdfunding campaign, where people from anywhere in the world can donate online to your scholarship fund
7. Determine how the funding will support the scholarship. Scholarships can be based on a one-time gift. This award can be divided and distributed across multiple years, if desired, until the funding is depleted. Scholarships may also be based on an endowed fund. In the case of an endowed scholarship fund:
   • A gift of a fairly large amount is set aside as a principal balance and invested.
   • Scholarships are then awarded by drawing from the interest earned on the principal, and any remaining interest is reinvested to grow the principal and the balance that can be awarded for future scholarships. As a reference point, a scholarship awarding $1000 per year may need an endowment fund of $20,000-$25,000.
   • If you choose to create an endowed scholarship, you should talk to a trusted investment broker about creating a sustainable plan for the scholarship.
   • You will also want to talk to a tax advisor, since there are usually restrictions on how awards can be administered.
   • You may also wish to select an advisory board to help with investing and other financial planning required by an endowed scholarship.
8. Choose the criteria used to award the scholarship. When you advertise a scholarship, you may have many applicants, and you will want to choose criteria that will help you select the most deserving applicant(s) to receive the award. The criteria used for selection will vary based on the purpose of your scholarship, but common ones include:
   • Financial need
   • Academic achievement, shown by grade point average, test scores, etc.
   • Extent of community involvement
   • Leadership skills
   • Work history
   • Writing skills, demonstrated by an application essay or otherwise
   • Achievements in particular fields (sports, debate, performing arts, etc.)
9. Find a scholarship administrator. Creating and reviewing applications, selecting recipients, and making scholarship awards can be time-consuming. You may be able to do all of the work yourself, but selecting a scholarship administrator to assist is very helpful. Your options include:
   • Creating a board of community members.
   • Letting a particular school administer the scholarship, with or without your input. If you choose this option, contact a school’s financial aid office or gifts office to create a plan for administering the scholarship.
   • Using a third-party scholarship administration service. These professional services specialize in assisting with scholarships, and can streamline the process. However, most will charge a fee (even if they are non-profit), ultimately cutting into the amount you can potentially award to students. A school’s financial aid office may have information about finding a scholarship administration service, if you would like to choose one.

Awarding the Scholarship

1. Determine the application procedures. Actually getting students to apply for the scholarship, and making the award, entails a lot of steps and requires planning. You will need to consider:
   • Where and when will applications be made available?
   • Where should the applications be sent?
   • When will applications be due?
   • What will the components of an application be?
   • Who will select the recipient(s), and how?
   • How and when will the recipient(s) be notified?
   • How and when will the scholarship funds be distributed?
2. Promote the scholarship. To ensure a successful scholarship program, you will need to notify student applicants of the opportunity. You can ask high schools and/or colleges to advertise the scholarship (via email, flyers, financial aid workshops, etc.) by contacting their office of financial aid or scholarship coordinator. You may also advertise the scholarship opportunity via community groups, student workplaces and activity centers, etc.
3. Design the application. A scholarship application can be simple: for example, a form that asks for an applicant’s name, contact details, and grade point average. Usually, however, a scholarship application has many components. However you design your application, you want to make sure that it will solicit the information you need to select the recipient(s) based on your criteria. Common components of scholarship applications may include:
   • An essay on a topic relevant to the scholarship purpose
   • A list of academic and/or non-academic awards and achievements
   • A description of extra-curricular involvement
   • An explanation of financial need
   • Copies of high school and/or college transcripts
   • Letters of recommendation from teachers, advisors, employers, etc.
4. Select the recipient(s) and make the award(s). Once you have designed the application, advertised it, and received submissions from applicants, you can begin to select its recipient(s). A committee working together can read applications, determine the best candidate(s), and then vote for approval. You should then notify the recipient(s) and award the scholarship funds according to the timeline you scheduled.
5. Monitor the scholarship. If your scholarship is a continuing program, it is essential to periodically review it for financial health, and to ensure that it is serving its purpose and help students. An annual report from your scholarship administrator can help with this. Reviewing the scholarship will help you determine if there are any issues to take care of regarding the scholarship fund’s finances (such as raising or lowering the award to continue it) or its purpose (such as changing the application to improve the selection process).

Tips

• Even if you don’t have enough funding to start a scholarship program, you can still make an award to a college or university, to an existing scholarship program, or to a community organization that helps students. Usually, this award can be publicized by the name you choose so that it is recognized.

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Sources and Citations

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