Scholarship vs. Endowment: What’s the Difference?

One of the most impactful ways a business can give back to its community is through scholarships.  According to a table the College Board published, tuition and fees for a four-year public university have more than tripled over the last 30 years, from $3,190 in 1987 to $9,970 in 2017.

By funding a scholarship, for-profit and nonprofit businesses can help more people in their communities afford a college education. Those scholarship recipients, in turn, use their new skills and knowledge to make a positive difference in their families, their communities, and the world.

Once you’ve decided to offer a scholarship, you have another choice to make: Will you create an endowed scholarship or fund a regular scholarship?

Regular Versus Endowed Scholarships

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

Scholarship endowment for students

A regular scholarship is fairly simple. You set aside a certain amount of money to fund a scholarship. All the money you donate goes directly toward funding that scholarship that same year. If you want the scholarship to recur annually, you must donate more money the following year. From the university’s perspective, a regular scholarship is a one-time donation rather than an annual commitment.

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

How a Scholarship Endowment Works

When you make a scholarship endowment, the university manages the funds in perpetuity. However, you do have some control over how the funds are used. When you make your donation, you will be asked to submit a letter of intent that specifies how you would like your endowment to be used. The university will honor your wishes and leave the principal untouched, so your scholarship will remain a consistent source of aid for students.

You can choose the name for your scholarship, and you can set criteria for eligibility. For instance, you can decide whether the scholarship is need-based or merit-based and whether it is limited to students in a particular area of study. In this way, you can ensure the scholarship furthers the reputation and mission of your organization.

Most colleges set a minimum amount for scholarship endowments. However, an endowed scholarship does not have to be fully funded immediately, and you can add to your endowment over time. You can also set up a scholarship endowment to be created after your death through your trust or will. The larger your endowment, the more it will earn when invested—and the more good it can do.

Benefits of an Endowed Scholarship

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

  • Recognition from the university. Often donors are invited to special events and honored by the university.
  • Tax benefits. For a cash gift, you can take a charitable deduction of up to 50 percent of your adjusted gross income.
  • Brand building. You can tailor the name and criteria of the scholarship to help build your brand’s reputation.
  • Longevity. Through an endowed scholarship, you can continue making a difference far into the future.

Creating a scholarship endowment is a wonderful opportunity to honor a loved one, give back to your community, or build a charitable reputation for your brand.

Want to explore how Submittable can streamline your process? Connect with us anytime for a free demo of our scholarship management software.

Rachel Mindell

Rachel Mindell is a Special Projects Editor at Submittable. She also writes and teaches poetry. Connect with her on LinkedIn.