Scholarships are a wonderful way to support promising and deserving students by assisting them with the costs of their education. Many students and their families were adversely impacted by the pandemic and economic challenges, causing fewer disadvantaged students to enroll and more to drop out. Many donors have tried to fill this need by providing support to scholarship programs. Other donors have used scholarships as a meaningful way to honor or memorialize friends, teachers, or family members.

Most commonly, donors contribute to specific scholarship programs within a school. When donors want to create a named scholarship to honor someone, the simplest and most efficient method is to rely on the school or other charitable organization and its scholarship selection committee to create the scholarship, advertise, screen for qualified applicants, and administer the scholarship. The donor can then recommend a grant from their donor advised fund (DAF) account to support the scholarship program.

The AEF Granting Policy states: “Donors may recommend a grant for a scholarship administered by an eligible charity or school. The donor may indicate the grant is for a recipient of the named scholarship but not designate the specific individual by name. The grant check will be made payable to the organization sponsoring the scholarship for the benefit of the scholarship fund. It cannot be made payable to an individual. The donor and other members of the donor’s family may participate on the independent scholarship selection committee but may not represent the majority of the committee.”

Per IRS guidelines as it pertains to scholarships and donor advised funds, the donor can serve on the committee but cannot be a deciding vote on identifying qualified applicants. The donor may not amend the scholarship decision in any way nor can any relatives of the donor receive grants from the scholarship.

Some family and corporate donors occasionally inquire about creating their own scholarship program. This is possible though it typically requires additional time, money, training, and can be an unexpected administrative burden. Organizations such as Scholarship America can create and manage these scholarship programs. They handle the administration of the scholarship fund, select committee members, market the scholarship, review the applications, provide customer service, and distribute the scholarship awards.

There is considerable need, but fortunately options exist for AEF donors to help students in need, whether through existing scholarship funds or new ones that they can help create.

Contact us or call at 1-888-966-8170 with any further questions.

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Creating a Scholarship Through a Donor Advised Fund