What is an Endowed Scholarship? | An In-Depth and Thorough FAQ

An endowed scholarship is a major gift to a university or college that is used to fund scholarships. It frequently honors one loved donor or the donor himself. The characteristic that most differentiates endowed scholarships from other sorts of charities is that the capital is sustained in the endowed gift of the scholarship so that the gift can last for ever.

In this FAQ, you’ll learn about:

  • What is an endowed scholarship?
  • What is the difference between a scholarship and an endowment?
  • Why are endowed scholarships important?
  • How an endowed scholarship works?
  • What are the benefits of an endowed scholarship?
  • How are endowed scholarships awarded?
  • How are endowments used?
Endowed Scholarship
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What is an endowed scholarship?

Endowed scholarships are investments founded by individuals, families or donor groups who provide ongoing assistance to certain college students with a general financial need or who meet the guidelines set out in the endowment scholarship memorandum of agreement.

What is the difference between a scholarship and an endowment?

Whether you choose an endowed scholarship or a regular scholarship, your organization will be donating money to help relieve one or more students from the college’s financial burden. The main difference lies in administration and funding of the scholarships.

A regular scholarship is fairly straightforward.

You put a certain amount of money aside to fund a scholarship. All the money you donate goes straight to funding that same year’s scholarship. If you want to see the scholarship recur annually, the following year you have to donate more money. From the university’s perspective, a regular scholarship is not an annual commitment but a one-time donation.

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On the other hand, when you build an endowed scholarship, you are donating a large amount of money for a specific purpose to the university. This fund is meant to be permanent so you never actually spend the money you donate. Instead, the investment income earned from your endowment fund is used for years to come to fund your scholarship.

Why are endowed scholarships important?

Establishing an endowed scholarship permits distribution of the scholarship in perpetuity. The endowed scholarship fund revenue provides continuous annual awards to the students.

How an endowment scholarship works?

The university manages the funds in perpetuity when you make a scholarship endowment.

You do have some control over how the funds are being used, however. When making your donation, you’ll be asked to submit a letter of intent specifying how you’d like to use your endowment. The university will honor your wishes and leave the principal untouched so that your scholarship will continue to be a consistent source of student assistance.

You can select the name for your scholarship, and set eligibility criteria. For example, you can decide whether the scholarship is based on necessity or merit, and whether it is limited to students in a particular study area. That way, you can ensure that your organization’s reputation and mission is fostered by the scholarship.

Most colleges set a minimum amount for endowment scholarships. An endowed scholarship, however, doesn’t need to be fully funded immediately, and over time you can add to your endowment. You can also set up a scholarship endowment through your trust or will, to be created after your death.

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The larger your endowment, the more it earns when it is invested – and the better it can do.

What are the benefits of an endowed scholarship?

An endowed scholarship offers several benefits to the donating individual or organization:

  • Brand building: You can tailor the name of the scholarship and its criteria to help build the reputation of your brand.
  • Longevity: You can continue to make a difference far into the future through an endowed scholarship.
  • Recognition from the university: Donors are often invited to special events, and the university honors them.
  • Tax benefits: For a cash gift, you can take up to 50 percent of your adjusted gross income with a charitable deduction.

Other than benefitting the donating individual or organization, it also benefits the society:

  • Endowed scholarships enable institutions to deliver greater value and attain higher quality levels than otherwise would be possible.
  • Reliable long-term support from an endowed scholarship enables institutions to increase student aid, commit to senior faculty, initiate pioneering research, develop stronger teaching programs, invest in new technologies, and maintain their libraries, laboratories, and other physical assets.
  • Endowments can sustain teaching and research by institutions even in difficult financial times, and enable them to provide essential support to faculty and students. Endowments also enable institutions to engage in long-range planning with confidence that they will have the necessary resources to complete their major projects.
  • Institutions need long-term horizons to improve capital, build strengths in emerging academic fields, and adapt to the changing needs and interests of their students and society as a whole.

How are endowed scholarships awarded?

If an endowed scholarship is fully funded before November 30 it will start in the next financial year. A scholarship, for example, will be fully funded on 1 October 2018; this scholarship will be awarded in the fiscal year 2019-2020.

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How are endowments used?

Endowments provide stability, flexibility and a degree of confidence for the future for private – and increasingly for the public – colleges and universities. They allow institutions to aim higher and to more effectively accomplish their educational and charitable purposes.

These benefits justify the effort needed to build and maintain endowments – for the institutions and those they serve. Endowments allow institutions to deliver greater value for students, their families, and society in general, and to attain a higher quality level than would otherwise be possible in their teaching and research.

Reliable long-term endowment support allows institutions to increase student support, commit to senior faculty, initiate pioneering research, develop stronger educational programs, invest in new technologies, and maintain their libraries, laboratories, and other physical assets. An endowment can sustain the teaching and research of an institution even in difficult financial times, and enable it to provide essential support to its faculty and students.

Endowed scholarship also enables institutions to engage in long-term planning with confidence that they will have the necessary resources to complete their major projects. Institutions need long-term horizons to improve capital, build strengths in emerging academic fields, and adapt to the changing needs and interests of their students and society as a whole.

Finally, endowed scholarship stimulates donor contributions that want to be sure their gifts will benefit the educational purposes of an institution in future decades. This charitable impulse to commit private dollars to unceasing support of valued public purposes continues to create and reinforce endowments for this and future generations to benefit.

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