Scholarship funds can be set up for a variety of reasons, such as to honor a loved one or to benefit a specific population of students. Anyone can set up a scholarship fund, and there are many different approaches.
If you wish to set up a fund for a specific person or group of people – for example, for the surviving victims of a tragedy, or a college fund for a specific individual or relative – contact your local bank or credit union about setting up a fund to accept donations from the public. Please note that these funds are not considered exempt charities, so contributions will not be tax deductible.
If you wish to start an exempt scholarship fund, the IRS regulates who might be disqualified as a recipient of scholarship grants in section 4946 of the Internal Revenue Code. An article from FinAid.org entitled Scholarship Design & Management makes note of these regulations. Among the guidelines listed there, the following have been excerpted:
- The scholarship must be awarded on an objective and nondiscriminatory basis.
- Family members of these individuals are also not eligible to receive grants.
- The group of applicants from which the recipients are selected must be sufficiently broad as to be considered a charitable class.
- The donor of a scholarship cannot take a charitable deduction for a scholarship that is earmarked for the benefit of a specific individual, not even if that individual is unrelated to the donor. Moreover, donors may not circumvent this restriction by tightly delineating the selection criteria.
Often, scholarship funds are set up and administered by a third party, such as a community foundation. Your local community foundation may have programs and services related to helping you set up funds of this type. If you need help locating a community foundation in your area, you can use our MapShot: Community Foundations tool to search for local organizations.
Below are links to other resources that may be useful:
Foundation News & Commentary's article, Hands On: Setting Up Scholarship Funds answers basic questions about the process, such as how much money is needed to start one, and how to establish criteria for the fund.
The American Society of Radiologic Technologists issued a PDF article, Developing an Educational Scholarship Program, illuminating the different strategies and considerations you might investigate when setting up a scholarship.
LifeTips offers brief explanations of different avenues for setting up scholarship funds.
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