By Ken Nopar, VP-Senior Philanthropic Advisor

Advisors and AEF donors regularly inquire whether donor advised fund (DAF) donors can recommend grants to scholarship funds. Scholarships can support promising and deserving students by assisting them with the costs of their education. Some donors have also used scholarships as a meaningful way to honor or memorialize friends, teachers, or family members.

ScholarshipsMost 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 DAF account to support the scholarship program.

AEF asked Scholarship America to share some trends it has seen over the past two years:

” The pandemic has had a disproportionate effect on students from low-income communities.”

” Vocational-technical and trade-specific programs are on the rise.”

” Sponsors are interested in scholarships that support diversity, equity, and inclusion.”

The AEF Granting Policy answers many of the questions we receive about who is eligible and how granting to a scholarship fund works:

“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.”

The IRS further clarifies that a DAF 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.

Most AEF donors who wish to provide support for scholarships identify and recommend grants to existing scholarship programs or create them through the schools they wish to support, though other options do exist.

At American Endowment Foundation, we look forward to helping donors and advisors determine the best strategies for their charitable giving. Please contact us or call at 1-888-966-8170 with any questions.