About Scholarship Funds
Scholarship funds are set up to help a specified group of people pay for education in a particular field. Most funds are established in honor of a person, organization, business or family. Endowing a scholarship fund is an excellent way to help deserving students pay for college. Scholarship funds can be designated for any level of education, including post-graduate study.
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Benefits
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Many scholarship funds recognize talents or characteristics other than academic achievement. Some have unusual requirements but can benefit students who might not qualify for traditional academic scholarships. For example, there are scholarship funds whose only qualification is that you have a specified last name or be the dependent of a member of the military. Others include being fat, thin, short, tall, wearing duct tape to the prom and winning a duck-calling contest. Another benefit of establishing a scholarship fund is the contribution it makes to the community while honoring the significance of education in the donor's life. There are also tax benefits for creating a scholarship fund.
Features
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The donor can handle the creation and administration of a scholarship fund but most look elsewhere for help in setting up and administering the fund. Many donors choose a college or university to handle the endowment. Other possibilities include hiring a private service or using a nonprofit organization to administer the scholarship fund.
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Considerations
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There are many decisions to be made when establishing a scholarship fund. The donor makes these decisions based on personal wishes and intended objectives of the endowment. They include the type of scholarship fund, who will administer it, the amount of the scholarship and how often it will be awarded. The donor must also choose a name for the scholarship fund and establish criteria for selecting recipients.
Types
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There are several types of scholarship funds. A one-time award, as the name implies, is granted only once and is funded by a single donation. The funds are depleted once the scholarship has been awarded. An annual scholarship fund grants a scholarship each year. It is funded by periodic donations or a one-time donation to be spread out over several years until the funds are depleted. An endowed scholarship fund is an account set up so that scholarships are funded by the interest earned on the account. The type of scholarship fund is determined by the donor when the fund is established.
Warning
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There are IRS guidelines and specifications that must be met when establishing and administering a scholarship fund. These should be studied carefully prior to creating a fund. Students who receive scholarships should also be aware of IRS regulations that apply to such income.
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