Because of the current structure of the American college system, private scholarship funds play a crucial role in determining whether deserving students get the chance to attend the best schools. To meet this need, private and public organizations and individuals award nearly two million scholarships to deserving students nationwide each year. Even so, those scholarships only cover 7% of all students. Combined with the grim fact that college tuition continues to rise at precipitous rates, more than 70% of all undergraduate students will graduate with student debt.
Worse, the average student needs nearly two decades to pay off this debt, with compounding interest rates and inflexible monthly payments often delaying home ownership, the formation of new businesses, or even the freedom to start a family. Many students look to potential debt forgiveness as a way out of this financial bind, but the contentious nature of debt forgiveness bills means constant delays and false starts.
Less controversial, however, is the simple belief that hardworking students across the country deserve academic and financial support as they set out to chase their dreams. So, while millions of Americans wait with bated breath for news on loan forgiveness, an increasing number of private individuals and foundations have begun offering their own scholarship funds to better the lives of deserving students.
To aid in this growing effort, we've done the research to outline how to start a scholarship fund. In this article, we'll break down the process into three major steps, give information and resources for each, and help you start making a difference.
Step 1: Build Your Scholarship Program
Chances are, you already have a loose vision of how you want your scholarship fund to look. Depending on the level of detail you've already established, consider contacting a credible scholarship management organization. These nonprofit organizations work with private individuals to build, advertise, and administer scholarships and can dramatically reduce the burden and confusion of the scholarship creation process.
Whether you choose to work with a management organization or go it alone, it's best to outline certain factors about your fund early on, then let that information guide you as you move forward.
Scholarship Amount
When you start your scholarship fund, think about how much money you're willing or able to contribute. If the scholarship consists of only your personal funds, its structure may look significantly different from scholarships from a corporate or community foundation. Similarly, some platforms help founders create fundraising campaigns to boost certain scholarship funds—an advantage that can massively increase the reach and impact of your efforts.
Finally, consider whether you want to provide an annual scholarship or a one-time fund, as this will drastically change the scope of your financial commitment.
Intended Recipients
There are deserving students from different backgrounds all across the country, but most founders have a specific demographic in mind when starting a scholarship fund. This could mean catering to first-generation college students, students from specific communities, or those entering certain fields.
Regardless of your choice, it's important to clearly understand your ideal scholarship recipient before promoting your fund. That way, you can connect with the communities you most want to serve.
Eligibility Requirements
Once you've established what community you want to help, the next step is outlining scholarship eligibility criteria to better determine which person in that community most deserves the scholarship. For instance, many funds look for individuals who regularly perform community service, maintain a certain GPA, or excel in various extracurricular activities.
The more clearly you establish your eligibility criteria, the easier it will be to choose between the many qualified applicants you'll likely encounter during the judgment process.
Step 2: Publish Your Scholarship Fund
After you've nailed down the specifics of your scholarship proposal, it's time to publish your fund and advertise it to potential recipients. In our experience, this step is where experienced scholarship management services provide the most value. Often, these organizations maintain online forums and boards where students go to find financial assistance and expert coordinators to help with the technical aspects of creating a scholarship fund.
Filing Paperwork
Between IRS rules, trying to navigate tax deductions, and any potential legal fees, the paperwork involved with starting a scholarship fund can be daunting. Even if you maintain the services of a financial advisor, it's typically best to find a consulting company or nonprofit organization specializing in scholarship funds.
That way, you can be certain that the legal requirements are handled while you focus on the more satisfying, impactful parts of the process.
Scholarship Promotion
No matter how well-designed, any scholarship is only as successful as the people it reaches. Luckily, social media and online scholarship forums can amplify your reach exponentially. Even better, a scholarship management service can give advice on how to develop promotional materials to advertise your fund.
These materials might range from online articles about your values and beliefs, TikTok clips to reach potential recipients, or collaborations with public figures from the community you want to help.
Step 3: Select Scholarship Recipients
Perhaps the most fulfilling—and challenging—step of the scholarship process is selecting a scholarship recipient (or recipients!) from a pool of deserving students. During this phase, you'll interact with countless young people who fit your values or ambitions in one way or another, giving you a first-hand glimpse into the good your fund can do.
Even so, narrowing potential winners down can seem all but impossible, which is why we suggest following certain guidelines to simplify the process.
Sort Applications
As you first begin to receive applications, it's likely that some will conform more strongly to your eligibility requirements than others. And, because of the highly-competitive nature of scholarships, you may receive an enormous amount of these applications. To maximize your chances of finding the perfect recipient, start by sorting applications according to how accurately they meet your base eligibility standards.
Conduct Interviews
Once you've narrowed the field to a handful of potential winners, consider reaching out to schedule an interview with each. If you are the sole founder of your fund, this could be as simple as a one-on-one video call with each student. If, instead, you're part of a larger scholarship board or community foundation, this part of the process may require more planning and coordination.
To help facilitate better communication, consider using a nonprofit scholarship program with an established online presence. Often, these companies maintain scheduling and technological resources to help scholarship founders interact with students.
Award Funds
Finally, the part we've all been waiting for. Aside from the enormous impact a scholarship fund can have on a recipient's future, the exhilarating moment when you get to inform an applicant that they've won can make all of the paperwork worth it.
Like the rest of this process, how you choose to award your fund is entirely up to you. Whether you'd prefer to stay more removed and inform winners via letter or schedule a video call so you can enjoy their reactions, the choice is yours.
For the technical aspects of awarding funds, decide whether you want to deliver the money directly to the recipients or to the college on their behalf. Often, the choice between the two will depend on whether you want the funds to go directly to tuition or if you want to offset other types of fees as well.
Why Should You Start a Scholarship Fund?
Your decision to start a scholarship fund is likely very personal, and reasons vary widely across founders. Even so, most people who establish a scholarship do so in order to support people similar to them or those whose goals, identity, or background they value. By helping support students this way, scholarship founders give themselves a chance to shape the future into one that better aligns with their values.
Even if you only ever fund one student, the decision to donate your time and resources can have a profound effect on the world. By providing financial assistance, you not only allow students to access the schools they deserve but also improve their academic performance while in school. Specifically, several studies over the past two decades have suggested that higher levels of student debt reduce graduation rates, GPAs, and number of credits taken each semester.
Additionally, removing the burden of debt can benefit students long after graduation, with some research showing that rising student debt reduced small business formation by up to 14% between 2000 and 2010. Additionally, 12% of student loan borrowers in their mid-to-late 30s admitted to delaying parenthood due to their debt.
This means that a scholarship fund promotes not only academic excellence but also personal and entrepreneurial success for a recipient's entire life.
How to Take the First Step
If you decide that you want to start a scholarship fund, the best first step in our experience is to reach out to an established nonprofit organization specializing in scholarship management. While several admirable companies exist in the current market, we strongly recommend Bold.org.
As a 100% nonprofit organization dedicated to connecting scholarship founders with inspirational students from around the country, Bold.org gives you everything you need to make your scholarship fund dreams a reality. From crowdfunding to guidance with legal regulation, their team of experts has decades of combined experience in the field and could get your scholarship in the hands of even more deserving candidates.
Even if you're still on the fence, consider heading over to Bold.org's website and taking a look at how their system works.
Frequently Asked Questions
Starting a scholarship fund is a complicated process, so it only makes sense that you still have questions. We took some extra time to answer the most common questions below.
Are Scholarship Funds Tax Deductible?
So long as they meet certain strict, nonnegotiable regulations, a scholarship fund is completely tax deductible. Specifically, the fund must be awarded on an objective and nondiscriminatory basis, go towards direct educational costs such as books or tuition, and go to a recipient from an accepted charitable class.
How Do I Raise Funds for a Scholarship Fund?
If you want to combine resources from more people to fund your scholarship, consider reaching out to members of the community from which you intend to choose winners. Additionally, various crowdfunding platforms exist to help build scholarships and grants for deserving students.
What Is an Endowed Scholarship?
Unlike a traditional scholarship fund which is awarded directly to the most qualified applicants each year, an endowed scholarship is awarded to the college. This way, the college can use the funds in ways determined by the endowment or, in some cases, whatever way they see fit.
Are All Nonprofits Tax Exempt?
A common misconception is that all nonprofits are tax-exempt organizations. According to IRS guidelines, however, a nonprofit must meet strict standards outlined under section 501(c)(3) to qualify for tax-exempt status.
Are Scholarship Programs Only for High School Students?
One benefit of starting a scholarship fund is the flexibility to determine who it benefits. While the majority of recipients are high school students, you can also award scholarships to graduate students or those entering higher education later on in life.
What Is Scholarship Money Used for?
The vast majority of scholarships apply to direct educational costs such as tuition or textbooks. That said, founders often reserve the right to set specific criteria for how a scholarship should be used, such as to help pay for class fees in a certain academic field.
What Are the Most Common Types of Funds?
While you can establish your fund for any reason you choose, many people create a memorial scholarship fund to honor family members or distinguished community members. Others may start a scholarship to promote higher education in a certain field, such as public service, trade school, or the arts.