Scholarship funds play a crucial role in supporting education for countless students by providing financial assistance to those who need it most. In the current landscape, where the cost of higher education is steadily increasing, scholarship programs can have a profound influence on a student’s life. Yet despite the incredible cost of secondary education, only 7% of students receive a scholarship. Establishing a scholarship fund allows you to enable deserving students to chase their aspirations and achieve their maximum potential.
In this comprehensive guide, we’ll show you how to start a scholarship fund. We’ll cover IRS guidelines, selecting the kind of fund, working with a management service, setting criteria, funding your scholarship, promoting and giving out the awards, and tracking its success. Ultimately, we’ll help you take the guesswork out of starting a fund so you can start making a difference in a student’s life.
Why You Should Use a Scholarship Management Organization
Managing a scholarship fund can be complex and time-consuming, especially when it comes to ensuring tax compliance and efficiency. Partnering with a scholarship management organization like Bold.org can significantly simplify the process and provide valuable support throughout the fund’s lifecycle.
Scholarship management services offer several advantages, including helping you navigate IRS guidelines, handling administrative tasks, and providing a streamlined application process for students. By leveraging their expertise, you can focus on your fund’s mission and vision while ensuring its continued success.
When selecting a scholarship management service, consider factors such as their experience and expertise in the field, the range of services they offer, their fees and costs, and the level of customization they provide for your unique scholarship fund. Look for a service with a proven track record and a commitment to helping you achieve your philanthropic goals.
Starting a Scholarship Fund in 5 Simple Steps
Once you’re ready to get started, setting up your scholarship fund will require five main steps. The following information will help you get an idea of what to expect during the process.
Step 1: Choose the Type of Scholarship Fund
When starting a scholarship fund, deciding on the type of fund that best aligns with your goals and objectives is crucial. There are several scholarship funds to choose from, each with unique advantages and considerations.
Personal scholarship funds
Individuals or families can establish personal scholarship funds to support specific educational goals or honor a loved one. These funds are often created to benefit students from a particular school, community, or field of study. Personal scholarship funds can be an excellent way to leave a lasting legacy while making a meaningful impact on students’ lives.
Memorial scholarship funds
A memorial scholarship fund is created in memory of a loved one who has passed away. These funds can serve as a tribute to the deceased’s passions, values, or achievements by supporting students with similar interests or backgrounds. They can also provide comfort and inspiration to the family and friends of the deceased by carrying on their legacy through the fund.
Corporate scholarship funds
Companies can establish corporate scholarship funds as a way to invest in the future workforce and demonstrate their commitment to education and community development. These funds can be tailored to support students pursuing careers in specific industries or fields of study relevant to the company. Corporate scholarship funds benefit the students they support and enhance the company’s image and reputation.
Non-profit organization scholarship funds
Non-profit organizations, including educational institutions and foundations, can set up scholarship funds to support their mission and goals. These funds may be dedicated to particular fields of study, communities, or a demographic aligned with the organization’s objectives. Non-profit scholarship funds can strengthen the organization’s impact, expand its reach, and foster long-lasting relationships with the students and communities they serve.
Step 2: Define the Scholarship Eligibility Criteria
A crucial aspect of creating a successful scholarship fund is establishing clear and objective criteria for eligibility and selection. This ensures that your fund supports the right students and aligns with your goals and values.
Select the target student population
When deciding on the target group for your scholarship fund, take into account aspects such as geographic location, education (e.g., high school students, undergraduate, or graduate students), and demographic features (e.g., first-generation college students, underrepresented groups, or students with disabilities).
Decide on the award amount and frequency
The award amount and frequency will depend on your fund’s financial resources, the target student population’s needs, and your objectives. You may choose to offer a one-time award, renewable awards, or a combination of both. Consider the direct educational costs and the financial barriers your target students may face when determining the award amount.
Establish academic and extracurricular requirements
Your scholarship criteria should include academic requirements, such as minimum grade point averages, standardized test scores, or specific coursework. You may also consider extracurricular achievements, leadership roles, or community service involvement to identify well-rounded students who align with your fund’s values and goals.
Step 3: Fund and Sustain Your Scholarship Program
A successful scholarship fund requires a solid financial foundation and strategy for ongoing support. Consider the following options for funding and sustaining your fund:
Initial funding and endowment strategies
The initial funding of your scholarship fund can come from personal savings, donations from family and friends, or fundraising events. Alternatively, you can establish an endowment, which is a long-term investment that generates income to support the scholarship awards. The principal of the endowment remains untouched, ensuring the fund’s longevity.
Options for ongoing fundraising and financial support
To maintain and grow your scholarship fund, explore various fundraising options, such as annual appeals, corporate sponsorships, planned giving, or online crowdfunding campaigns. Engaging your community and leveraging social media can also raise awareness and attract additional support.
Legal and financial considerations for sustainability
Ensure your scholarship fund complies with all legal and financial regulations, including tax-exemption requirements, state and federal laws, and reporting obligations. Consult with legal and financial professionals to address any concerns and safeguard your fund’s sustainability.
Step 4: Promote and Award the Scholarship
Once you’ve established your scholarship fund and criteria, promoting the opportunity and attracting qualified applicants is essential. Then, you’ll need a fair and transparent process for selecting and awarding the scholarship.
Market your scholarship to attract applicants
Use various channels to promote your scholarships, such as social media, email campaigns, local newspapers, and school or community bulletin boards. Reach out to schools, colleges, and community organizations that serve your target student population to spread the word about your scholarship opportunity.
Evaluate applications and select recipients
Establish a scholarship selection committee to review applications, using a predefined set of criteria and a scoring system to ensure objectivity and fairness. The committee should consist of diverse and qualified individuals who can make unbiased decisions. In addition to academic and extracurricular achievements, consider the applicants’ personal essays, letters of recommendation, and interviews when making your final selection.
Celebrate and recognize your scholarship winners
Acknowledge and celebrate your scholarship recipient(s) through award ceremonies, press releases, or social media announcements. Public recognition not only boosts the recipients’ morale but also raises awareness about your scholarship fund and its impact.
Step 5: Evaluate the Success of Your Scholarship Fund
To ensure your scholarship fund’s continued success and growth, monitor its progress and evaluate its impact on the students and communities it serves.
Track the impact of your scholarship
Collect data on your scholarship recipients, such as their academic achievements, graduation rates, and career outcomes. Gather testimonials and stories from recipients to showcase the positive impact of your scholarship fund on their lives and the broader community.
Review and adjust your scholarship criteria and processes
Regularly review your scholarship criteria, eligibility requirements, and selection processes to ensure they remain relevant and effective. Identify areas for improvement and make necessary adjustments based on feedback from recipients, donors, and the selection committee.
Ensure the continued success and growth of your scholarship fund
Stay informed about trends in education and philanthropy, network with other scholarship providers, and attend workshops and conferences to learn best practices for managing your fund. Continuously seek new fundraising opportunities and partnerships to expand your scholarship fund’s reach and impact.
What Are the IRS Rules for Starting a Scholarship Fund?
Before you embark on the journey of starting a scholarship fund, it’s essential to understand the IRS guidelines that govern scholarship funds. Is a scholarship fund tax deductible? Yes, but adhering to these guidelines is vital to qualify as a tax-exempt organization and ensure your fund receives favorable tax treatment.
Tax treatment for scholarship funds
As a tax-exempt organization, scholarship funds usually allow donors to claim tax deductions for their contributions. This means that donors can reduce their taxable income by the amount they contribute to the fund up to the allowable limits. Additionally, the scholarship fund’s investment earnings grow tax-free, maximizing its financial support for students.
Qualifying as a tax-exempt organization
In order to be recognized as a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code, scholarship funds need to be established and function solely for philanthropic, educational, or other distinct objectives. The IRS requires that scholarship funds demonstrate they award grants based on objective, non-discriminatory criteria and processes.
Complying with the IRS requirements
To maintain tax-exempt status, scholarship funds must meet various IRS requirements, such as keeping accurate records, filing annual information returns, and avoiding activities that could jeopardize their exempt status. This includes steering clear of political lobbying or campaigning and avoiding private benefit or inurement.
Why We Recommend Bold.org
In the world of scholarship management services, Bold.org stands out as an exceptional partner for individuals, organizations, and corporations seeking to create and manage scholarship funds. We highly recommend Bold.org for several compelling reasons:
- Ease of use and cost-effectiveness: Bold.org offers a user-friendly platform that allows donors to create a scholarship without any fees, ensuring that your funds are directed entirely toward deserving students instead of administrative costs. This commitment to maximizing the impact of your scholarship dollars makes Bold.org an attractive choice for philanthropists.
- Expertise in scholarship management and compliance: With a dedicated team of professionals, Bold.org ensures that your scholarship fund adheres to all IRS guidelines and regulations, giving you peace of mind and allowing you to focus on the mission and vision of your fund. Their expertise in tax-exemption requirements and scholarship management ensures a smooth and efficient process for donors and applicants.
- Customization and flexibility: Bold.org offers a high level of customization, enabling you to create a scholarship fund that aligns with your unique goals, values, and criteria. They work closely with donors to tailor the scholarship program to meet their specific needs, ensuring the fund’s impact is maximized and the desired outcomes are achieved.
- Comprehensive support and resources: Bold.org provides end-to-end support throughout the scholarship fund’s lifecycle, from initial setup and promotion to application management, recipient selection, and award disbursement. Their platform also offers valuable resources, such as articles and guides, to help donors make informed decisions and confidently navigate the world of philanthropy.
By partnering with Bold.org, you can create a powerful, lasting impact in students’ lives and ensure that your scholarship fund thrives and grows for years to come.
Starting a scholarship fund can be an incredibly rewarding endeavor that benefits deserving students and leaves a lasting legacy for you, your family, or your organization. By following this comprehensive guide and working with a scholarship management service, you’ll be well-equipped to navigate the process of creating, managing, and growing a successful scholarship fund that makes a meaningful difference in the lives of students and their communities.