As a college student deeply engaged in exploring scholarship opportunities, I've recognized the profound benefits for individuals, companies, and organizations who decide to establish scholarships.
Many believe scholarships are just a great benefit for students, however, if you look at the bigger picture, the people behind creating scholarships benefit a lot too. When creating a scholarship, you publicly declare that you or your organization has a mission and you're dedicated to it. Announcing a scholarship and revealing a winner brings attention to your organization's website and social platforms. Moreover, you can receive tax incentives for qualifying donations!
In this article, I've compiled all the information you need for starting your own scholarship fund and IRS rules for tax-deductible scholarships.
The Key Takeaway
Bold.org is an excellent scholarship management platform for starting your scholarship fund. At Bold.org, we're scholarship experts, and our Donor Team is happy to assist donors with every step of the scholarship creation process, from conceptualizing theeligibility criteriato narrowing down finalists.
Creating your scholarship fund with Bold.org streamlines the process. The best part–it's free for donors and free for students!
Set Up Your Free Donor Account Today!
A Brief Look at Funding Options:
Utilize Bold.org
- Pros: Streamlined process at no cost
- Cons: Minimum of $500 to start
Set Up a Foundation Yourself
- Pros: Build a legacy
- Cons: Expensive and time consuming
Pay a Scholarship Management Service
- Pros: Efficient and accessible
- Cons: Expensive with less direct involvement
Easily establish a free donor profileon Bold.org to make a difference today!
What Is a Scholarship Fund?
A scholarship fund is a charitable grant that assists students with paying for necessary educational expenses, such as tuition, fees, and textbooks. Scholarship funds can award scholarships to students at all grade levels, and they commonly accept applications from all students, including high school, undergraduate, and graduate students.
If you weren't aware, scholarship funds are tax-deductible! To be eligible for tax-exempt status, the IRS requires that scholarships are awarded on a nondiscriminatory and objective basis. To ensure your scholarship is tax-deductible you'll want to follow IRS guidelines.
Check out our ScholarshipBlogto learn more about fighting student debt!
Transform Lives Through Fundraising
Create scholarships and funds for the people and causes you care most about.
Create Your Free Donor Profile
Is a Scholarship Fund Tax-Deductible?
Scholarship funds are classified as tax-deductible donations, given that they meet the following IRS guidelines:
- The scholarship must go toward helping students pay direct educational costs. Direct educational costs include tuition, fees, and required course materials.
- The scholarship must be awarded on an objective and nondiscriminatory basis. This means that your eligibility criteria need to be broad enough that a scholarship recipient can be classified as part of a charitable class.
- A charitable class is a group that is large enough such that providing assistance to a select few members will benefit the entire community.
- Setting up a scholarship fund for a specific person or insiders - such as members of the selection committee or employees of the donor company for company scholarship programs - is in direct violation of this principle.
For more information about the IRS Guidelines for starting scholarship fund, please refer to the official website.
Don't miss out on the valuable insights about Tax Deductible Donations! Learn how you can make a bigger impact while enjoying tax benefits.
How to Start a Scholarship Fund
In order to set up a scholarship program on your own, you will need to create a private foundation and complete the appropriate paperwork with the IRS.
Firstly, figure out what type of foundation you are going to create. There are multiple categories of tax-exempt organizations that the IRS recognizes, and scholarship funds can usually be classified as grant-making foundations.
The next step is to make sure that your foundation meets the requirements to apply for tax-exempt status and gather the necessary legal documents.
The procedure for setting up a private foundation scholarship fund can vary depending on the type of organization, the size of the foundation, and the amount of the scholarship fund. Hiring a lawyer or legal adviser to assist you with the process is necessary to make sure that you meet all the necessary requirements.
Finally, you can file your paperwork with the IRS and your local state government. This process of creating a scholarship on your own is usually time-consuming and costly. You will need to hire a lawyer and a financial advisor, pay for website costs, and incur a number of legal fees.
Working with an established scholarship management service like Bold.org is an easy solution to ensure that your scholarship fund qualifies for favorable tax treatment. Bold.org allows donors to create a scholarship for free, so all of your money can go towards deserving students, rather than the cost of setting up a foundation.
Check out our award features for scholarship donors and discover how you can create a stand out scholarship that truly makes a difference.
Basics of Starting a Scholarship Fund
Figure Out Your Budget
The first step to setting up your scholarship fund is to determine the amount of money that you want to dedicate to your scholarship program.
You do not need to spend tens of thousands of dollars to set up a scholarship! It's true that creating an endowed scholarship at a university may require tens of thousands of dollars. However, establishing a scholarship fund can cost as low as $500, especially if you leverage the scholarship management services from Bold.org.
Creating a nonprofit organization on your own without the help of scholarship management organizations will be much more costly, since you need to pay for legal fees, advertising, and the cost of setting up a professional website.
Luckily, Bold.org is an established, tax-exempt organization. Any scholarships you create through our platform will be classified as tax-deductible donations to the Bold Foundation, 501(c)(3) non-profit.
Effortlessly set up scholarships, grants, and more on Bold.org. Create new awards in minutes while we handle the heavy lifting.
When planning your budget for a scholarship fund, think about the type of scholarship you want to create: one-time, renewable, or an annual scholarship. For instance, you can create a scholarship that accepts applications during specific months or a renewable scholarship that provides funding for each year.
Find Out Who You Want to Help
Once you've determined how much money you plan to allocate towards your scholarship fund, the next step is to figure out which students and communities you want your scholarship program to go towards.
For example, you may want to create a memorial scholarship in honor of family members or friends and draft eligibility requirements that align with their career path or interests.
View the G.A. Johnston Memorial Scholarship for a fantastic example of the scholarships you can create. Get inspired and see how you can make a difference with your own unique scholarship fund.
You may also want to create a scholarship for younger generations of your community, such as minorities, women, or low-income, first-generation college students who share your experiences.
Setting up a scholarship for members of your community or students who are underrepresented in higher education can make the process of creating a scholarship even more rewarding, since you know that your money is going toward those who will benefit the most.
Choose Your Scholarship Eligibility Criteria
After you've figured out your budget and the type of scholarship you'd like to create, you can begin drafting the specific eligibility requirements for your scholarship.
Think about the following areas when determining your specific criteria for eligibility:
- Education Level: Is your scholarship fund for high school seniors who will matriculate to university in the fall? For current undergraduate students? Graduate students?
Decide what grade level and types of schools are eligible for your scholarship fund. Community colleges and trade schools are other kinds of institutions to consider in addition to four-year universities that offer bachelor's degrees. - Academics: Are there GPA requirements to apply for your scholarship? Should students be interested in a specific field or intending to major in a particular discipline?
- Leadership and Extracurricular Activities: Do you want to focus on students in athletics? Students who have volunteered during high school? Students who have demonstrated exceptional leadership or community service?
- Demographic Information: Is your scholarship fund intended for African American college students? Students with financial need? Students of color?
- Submission Requirements: Finally, what materials do students need to submit to apply to your scholarship fund? Is there a required essay or letters of recommendation? A video submission?
Complete Necessary Paperwork
After you've determined the eligibility criteria for your scholarship fund, you can finally create your scholarship!
There are three routes that you can take when setting up a scholarship fund:
- You can create your own nonprofit organization. This is usually the most expensive and time-consuming process, and you will need a lawyer, a professional website, and legal fees.
- You can also create an endowed scholarship by donating to a particular institution. Most institutions have minimum requirements for endowed scholarships, so unfortunately this is only an option for those who have extensive wealth to spare.
- The third option and best option is to create a scholarship through scholarship management organizations like Bold.org which will handle the administrative work, legal fees, and advertising for you. Creating a scholarship fund on Bold.org is easy and free and gives you free access to our world-class team of scholarship creation experts, as well as our database of millions of students.
Set Up a Scholarship
Ready to make a difference? Head over to Bold.org and create a donor profile to kickstart your scholarship. Once you're verified as a donor, you can submit a proposal for a scholarship or grant. Our philanthropy team will promptly reach out to you, scheduling a call to provide more details about the scholarship creation process on our platform.
Once your proposal is revised and finalized, you can fund your scholarship! Within just an hour, it will go live on Bold.org. Students can easily find your scholarship through our scholarship search feature and begin applying.
With Bold.org, you can raise funds for your scholarship program by seeking charitable contributions from friends, family, and the community. This allows you to make a significant contribution towards students' education.
Create a scholarship fund that makes a meaningful impact on current and future students and graduates. Start financing your scholarships today!
Advertise Your Scholarship
After you've finished setting up your scholarship and accepting applications, you can start sharing your scholarship to attract more applicants!
When it comes to advertising your scholarship and reaching the most deserving applicants, using our management service at Bold.org makes it incredibly easy. With a vast database of millions of students, we curate lists of scholarship funds that cater to students from various demographics.
You can also share your scholarship fund on your social media, with schools, student organizations, or other groups that could assist with outreach.
Choose the Winners
Finally, the fun part! Once your scholarship's deadline has passed and you've stopped accepting applications, you can review submissions and determine your scholarship recipients.
At Bold.org our team is here to help support you in selecting scholarship recipients, making the overwhelming process much easier. We review applications on an ongoing basis and provide you with a curated list of the top 10-50 applicants. From there, you have the final say in choosing the lucky scholarship recipient from this pool of finalists.
Once you've selected the winner, Bold.org will notify the student and make sure that they safely receive the scholarship money.
Award the Scholarship to Deserving Students
Once you’ve selected your winners and finalists, we’ll handle the rest of the process! On the announcement date, the winners and finalists will be named under the scholarship description and the winning applications that were kept public will be shown.
Our team will reach out to the winners through text and email to confirm their information.Winners must provide proof of enrollmentand may be asked for other documentation to prove their eligibility, such as a transcript if a scholarship requires the winner to have a certain GPA.
Once a winner has been verified, the scholarship funds are then sent by check to the financial aid office of the winner’s college or university, and the money is applied to direct educational costs, including tuition, course fees, and textbook costs. If a winner is still in high school or is taking a gap year, the funds will be held until they enroll in a higher education institution.
In rare but occasional cases, a winner may end up not being eligible to receive the funds. If the winner was dishonest about their qualifications, isn’t attending college and won’t in the future, or is studying at a school located outside of the United States, a new winner may have to be chosen. In these cases, our Donor Team will reach out and let you know that a new winner will need to be selected.
The Donor Team member can help you as much or as little as you’d like in the process of selecting a replacement winner. Once a suitable candidate has been selected, often from the preexisting list of finalists, our awards team will follow the process outlined above to contact the winner and disperse the funds.
Don't forget to check out our Donor FAQs to get more information about funding and how Bold.org helps you choose the best candidates to receive your scholarship.
Benefits of Creating a Scholarship Program
Creating a scholarship fund benefits donors and students. Donors experience the gratification of making a lasting impact on individuals striving for education, which fosters a sense of social responsibility.
For students, the benefits are transformative. Scholarships alleviate financial burdens, opening doors to educational opportunities that might otherwise be unattainable.
A Bold Benefit
Here at Bold, when you create a scholarship fund with us, we work with financial aid offices to apply awards directly to your recipient’s tuition. And, if you’d like, you can also specify that your award goes toward paying off your recipient’s student loans or other educational expenses.
How Much Does it Cost to Start a Scholarship Fund?
Establishing a scholarship fund does not have to be a costly expense! You can set up a scholarship for as little as $500 when you use a platform like Bold.org, which provides you a smooth process and free set up.
How Much Money Do You Need to Start a Scholarship Fund?
This depends on whether you choose to set up a scholarship yourself or use a scholarship management service. To take advantage of Bold's scholarship management service, all you need is to contact the Donor Team and have an initial donation of at least $500.
Remember, Bold's scholarship program is fee-free for students and donors! You can increase your scholarship after it's been published and you can also raise funds by encouraging others to contribute to it directly on the scholarship page. There are many $500 scholarships on Bold.org and some scholarships are even worth $75,000.
How to Start a Scholarship Fund in Your Name
When you create a scholarship proposal, you can choose your title. Many donors name their scholarship after themselves or their organizations. In the case of memorial scholarships, many are named after a friend, family member, or loved one of the donor. You can easilystart a scholarship in your nameor in the name of family members or anyone and anything else you'd prefer.
Frequently Asked Questions About Scholarship Funds
Who can start a scholarship fund?
Anyone can start a scholarship fund! It's a myth that you need to be exceptionally wealthy or come from a certain background to create a scholarship. If you decide to create your scholarship with Bold.org, our team will help you with every step of the process.
Why should I use Bold.org to set up a scholarship fund?
For individuals thinking about starting a scholarship fund, Bold is a wonderful option. Bold.org is the largest independent scholarship provider in the country and seeks to eliminate student debt by making it easy for anyone, including families, individuals, foundations, companies, etc., to create scholarships.
Bold.org is a unique organization that is fee-free for both donors and applicants, helping anyone who has a vision to start scholarship funds to help others.
When creating a scholarship, what selection criteria can I require?
Choosing your eligibility requirements starts with finding a, great idea for your scholarship. Once you figure out what community you want to help, you can design any eligibility criteria. At Bold.org we can facilitate your effort to start a scholarship fund seamlessly.
Now that you understand the IRS rules for creating scholarship programs and how to set up a scholarship fund, you're ready to create your own scholarship in three easy steps!
