How a Nonprofit Can Set Up a Scholarship

By Sydelle John

Scholarships are one of many tools used by nonprofit organizations to do charitable work. And given the continuing increase in education costs, scholarships from private organizations have become even more important for struggling students and their families. If your nonprofit wants to become one of the many entities providing funding for students, the process of creating a scholarship program is straightforward but requires some planning.

Whom Does It Target?

Most nonprofits name their scholarship programs after the organization, but far too many neglect to determine what students the program should target. Creating a specific target group gives the scholarship a focus and also makes it easier to attract and select the best candidates. Scholarships can be open to students pursuing a specific degree, those of a specific ancestry or ethnicity or those from a specific state, among other options. Some nonprofits create gender-specific scholarships, which are predominantly for women and aim to increase the number of female graduates.

Application Requirements?

It is essential that a scholarship program have qualifying requirements that help the nonprofit select the best recipients. As such, choose which requirements are most important. If your organization focuses on animal welfare, for instance, it can limit application to students who aim to become veterinarians. Generally, most scholarships require the completion of an application form, resume, recommendations and a transcript. Scholarships for students with the most financial need require a copy of the applicant’s Free Application for Federal Student Aid form. The FAFSA is used by the federal government to determine how much to give applicants based on their family's income. Your organization can use FAFSA information to decide how much to give a recipient.

Ready to start your LLC? Start an LLC Online Now

Is It Tied To a Specific School?

If your nonprofit conducts programs with a neighboring college or university, it may be best to make the proposed scholarship school-specific. In that case, the school can take over the burden of administering the scholarship, allowing your nonprofit to allocate its limited staff and funding to other essential affairs. For a school-specific program, work with the potential school's financial aid department to determine the details of the arrangement, such as when scholarships should be disbursed. Keep in mind that the alternative to a school-specific scholarship program will draw large numbers of applicants, making it difficult for a small nonprofit to efficiently review and select candidates.

Raise Money and Report Funds

There is no rule on how much money a nonprofit needs to create a scholarship. The organization need only solicit funds from individuals and groups to create adequate funding for the program. If the scholarship is for one student each application period, the amount can be as little as $500. If the money is for multiple students, raising thousands enables the scholarship program to support more candidates.

Ready to start your LLC? Start an LLC Online Now
How to Start a Charity for the Needy


Related articles

Non-Profit C4 Vs. C3

Title 26, Section 501(c) of the Internal Revenue Code recognizes several different types of nonprofit organizations. Nonprofit corporations, trusts and foundations have several advantages over for-profit organizations, including an exemption from paying federal income taxes. Two classes of 501(c) nonprofits, known as “C3” and “C4” organizations, are similar in some respects. However, they have different eligibility requirements, and the IRS places different restrictions on their activities and donations. When deciding whether to structure your nonprofit as a C3 or a C4, these distinctions should be considered.

Benefits for a 501(c)(4)

If you operate or have management responsibilities within a nonprofit organization, you may want to evaluate whether it satisfies the requirements of Internal Revenue Code 501(c)(4). In the event it does, there are a number of tax benefits of which the organization can take advantage that are only available to nonprofits that obtain tax-exempt status with the IRS.

What Is a 501(c)(3) Determination Letter?

The Internal Revenue Service sets down the tax rules for nonprofit corporations, including the charitable organizations formed under state law and in accordance with Section 501(c)(3) of the federal tax code. A 501(c)(3) should operate in the public interest or for charitable purposes and not for the profit of any individual or group. If the 501(c)(3) conforms with these requirements, it is tax-exempt. The IRS is the final arbiter on tax status, using determination letters to hand down its decisions.

LLCs, Corporations, Patents, Attorney Help LLCs

Related articles

How to Start a 501C3 Nonprofit Ministry

Charity work is often part of a church's activities -- and some churches may choose to expand their charitable work by ...

How to Start a Non-Profit Organization for At-Risk Youth

Starting a nonprofit for at-risk youth can be as complex as starting a for-profit enterprise. Although it may be ...

A Divorce With a Handicapped Child

Parents of children with mental or physical handicaps or disabilities must consider the special needs of their child ...

Everything a Nonprofit Needs to Know About Bulk Mail

A nonprofit organization frequently needs to mail in quantity, but mailing in quantity at the first-class postal rate ...

Browse by category
Ready to Begin? GET STARTED