How to Start a Scholarship Fund in 2023

How to Start Scholarship Fund

If you’re passionate about higher education, you can help students achieve their educational and financial goals by creating a scholarship fund. By starting a scholarship, you can set aside tax-free money to give deserving students to help them afford their college education.

Setting up a scholarship on your own can be fairly complicated because you have to go through the process of creating a tax-exempt foundation and providing documentation to the IRS. An easier way to start a fund is with help from a scholarship management organization that takes care of all the initial paperwork for you. These organizations can also collect donations for your award, advertise the scholarship, and go through applications to choose the best recipient.

What Is A Scholarship Fund?

A scholarship fund is a charitable grant for helping students offset the cost of higher education. In general, scholarship recipients put the money toward direct educational expenses, such as textbooks, fees, and tuition.

How To Start A Scholarship Fund In Four Steps

how to start a scholarship fund

Here are the basic steps to follow to set up scholarship:

1. Decide How Much Money You Want To Spend

The first step to starting a scholarship is to figure out how much money you want to contribute. You should also decide whether you want to accept donations from others instead of funding the entire award yourself. Keep in mind that if you choose to establish a nonprofit or a private foundation on your own to host the scholarship that you’ll end up spending more money than just the amount you give to the recipient of the award.

Some potential costs include paying an attorney or tax expert, setting up a website to accept applications, and spending money on advertising fees. If you don’t plan on going through each of the applications yourself, you may also need to hire an assistant or two to help with the selection process.

You can reduce some of these extra expenditures by going through a scholarship management service. Many of these services will take care of the tax paperwork, advertise the award, accept applications, and make the first cut to find the best candidates. The fees for these scholarship management services vary.

While you’ll probably spend less with a scholarship management service than on your own, you can also find some free scholarship platforms. Organizations like provide free management services, so all of your money goes to the scholarship recipient.

2. Figure Out Your Scholarship Criteria

When you create a scholarship, you may have specific types of students you want to help. For example, maybe you want to encourage women who are pursuing STEM degrees or first-generation college students. You can also decide to use your scholarship funds to help students from low-income families or immigrants.

Another option is to base the selection on merit. For example, you could define specific criteria that focus on students who show excellence in academics, sports, music, or the arts. No matter who you decide you want to help, it’s important to make sure your target group is broad enough to be nondiscriminatory. U.S. tax laws require that tax-exempt scholarships be awarded in an objective and nondiscriminatory manner.

You can provide a scholarship to current college students or even those in a graduate or doctoral program. Another possibility is to create an award that high school students can apply for and use when they start college.

If you aren’t entirely sure how to structure the requirements for your scholarship, it’s a good idea to work with a scholarship management program like These organizations handle lots of scholarships, so they can explain all the relevant laws and help you create a program that has the best chance of assisting the students you want to help.

3. Finish The Paperwork

Now that you’ve decided on the basics of your scholarship, it’s time to make it official. You should come up with a name for your scholarship, and you’ll need to choose an application deadline as well. If you create your own nonprofit or private foundation, you’ll need to file documents with the IRS and your state government.

For the IRS application, you must get approval on your selection/award procedures, so you’ll need to write these out as well. If you plan to have a selection committee, you might need to create documents for the members to follow when they are reviewing applications.

If you plan to accept donations from others for your award, you also need to go through the paperwork to provide tax documents to your donors. As a private foundation or nonprofit, you need to keep certain records to provide to the government.

Going with an established scholarship platform like significantly reduces the amount of paperwork you need to do. When you create a scholarship with an existing nonprofit, you don’t need to establish your own foundation or work on setting up tax paperwork for your donors. The organization takes care of all the behind-the-scenes work for you, so you don’t have to spend your time on administrative tasks.

4. Select The Winner And Award The Money

Now that your scholarship is established, it’s time to advertise it so you get some applicants. With a private foundation or nonprofit, you would need to develop an advertising plan to make potential recipients aware of the award, the application requirements, and the deadline. If you create your scholarship with an online platform, it handles all the advertising for you.

Once you reach the deadline and have all the applications, you can go through them to select the recipient. The number of applications you have will depend on the eligibility rules, the deadline, and the application requirements. For example, you may get more applications for a no-essay award than for a scholarship that requires applicants to provide a personal statement or a video application.

If you set up your scholarship with, you won’t have to go through each individual application yourself, which could be prohibitively time-consuming. has a team of reviewers on staff. These experts will read all the applications for your scholarship and narrow down the field to several of the most qualified candidates. Then you can review this small group of applications and determine who should receive the scholarship.

How To Raise Money For A Scholarship Fund

If you don’t want to fund the scholarship entirely by yourself, you can accept donations. There are several ways to raise money. You could ask members of your church or community foundation to donate. Another option is sending the details to family members and friends.

If you go through a scholarship organization to set up your award, you get access to countless potential donors. In most cases, anyone can make a nonprofit donation to a scholarship fund through a management organization. Creating your award on a scholarship platform is often the easiest way to raise funds.

Things To Consider When Starting A Scholarship Fund

how to create a scholarship fund

Before you begin the paperwork to set up your scholarship, be sure to think through these essential issues.

1. Deciding Who You Want To Help

You probably want to create a scholarship because you value education and want to give students the chance to attend college more affordably. It’s essential to decide which students you want to focus on helping. Maybe it’s those who show exceptional athletic or academic prowess. Or perhaps you want to provide opportunities for students who may not attend college otherwise, such as those from specific socioeconomic backgrounds.

If you are a religious person, you may want to create a scholarship through your church and offer the award to students who attend a religious university. You can also think about the potential careers of your intended recipients. If you want to see more diversity in the sciences, for example, you could design your scholarship to help underrepresented groups, such as women or minorities.

While you can place certain limitations on your scholarship to help specific groups of people, you have to make sure the group of potential recipients is broad enough not to be discriminatory. This is one of the requirements for tax-deductible donations.

2. Funding Your Scholarship

Are you planning to provide all the money for your scholarship from your personal funds? Is it an award that you will offer every year? Will you set up a foundation or nonprofit to administer the scholarship? If so, will you be hiring a staff of people to review the applications or keep the books? All of these questions are essential to ask yourself, so you can determine a reasonable amount for your scholarship.

Another option is to open up funding to other donors. You could do this privately by contacting family members or close friends and asking them to contribute.

Opening the fund to any potential donor is easy with an online platform. This type of service has already completed all the nonprofit paperwork and can provide tax documents to your donors. By setting up your scholarship on an established platform, you can advertise it for free to countless potential donors.

3. Advertising The Award

It’s essential to advertise your scholarship as much as possible. The more people who know about it, the better your chances of getting applications from highly qualified and deserving students. Remember to include the deadline in all of your advertising material.

Depending on the laws of your state, you may be able to list your scholarship at local high schools or colleges. If you created a scholarship within your religious community, you could probably mention it in your church bulletin or newsletter. Another option is to create a website for your foundation or the scholarship itself.

If you’re running your own nonprofit or foundation, there may be specific state or federal rules you have to follow in terms of spending money on advertising. If you decide to use a scholarship management organization, it will probably take care of the marketing for you. An online platform is ideal because it makes it easy for students to find your scholarship through a web search.

4. Reviewing Applications

Once you’ve established and advertised your scholarship, all that’s left is to wait for the deadline to pass and then review all the applications. If your scholarship is small and only a few students apply, you may be able to review them all yourself. In most cases, however, this process is too much for a single person to handle alone.

You may decide to create a selection committee, or the law may require you to establish one if your scholarship is part of a private foundation or nonprofit. If your scholarship is through your religious community, the church board may need to serve on the selection committee.

Creating a scholarship with simplifies the review process. The organization’s reviewers handle the first pass through the applications to find the most qualified candidates. Then, you can make the final decision after you go through these top applications.

IRS Guidelines For Starting A Scholarship Fund

ways to create a scholarship fund

When you’re setting up a scholarship fund, it’s essential to understand the relevant tax regulations. By following specific rules, you can ensure that the money you contribute to the fund is tax-deductible. If you want to accept tax-free donations from other people for your award, you need to make sure your fund follows the proper steps to be defined as a charitable organization.

1. Creating A Private Foundation

If you plan to administer the scholarship yourself, you’ll need to create a private foundation and submit the proper paperwork to inform the IRS of your foundation. Getting approval from the IRS is essential to secure tax-exempt status.

There are several steps you must follow to get tax-exempt status for your foundation. This chart from the IRS shows the process of creating a private foundation. You’ll need to figure out which type of foundation you want to create. A scholarship fund may fall under the category of grant-making foundations. You’ll also need to create organizational documents and bylaws.

Then, it’s time to file registration paperwork with your state and with the federal government. Before filing your paperwork, make sure your foundation meets all the requirements for tax-exempt status and that you have all the necessary legal documents filled out and signed. Once your foundation is established, it’s essential to make sure it operates within the IRS’ rules for tax-exempt organizations.

2. Developing Acceptable Selection Criteria

According to, most grants (scholarships) are taxable unless they meet certain conditions. One of the most critical conditions concerns the eligibility criteria for your scholarship. The IRS states that you must award the scholarship on a nondiscriminatory and objective basis.

This doesn’t necessarily mean that you can’t target your award to certain groups of students, like those pursuing music education or students with severe financial need. However, you do need to make sure your eligibility requirements are broad enough that the intended recipients make up a group that qualifies for charitable contributions. If you are setting up a foundation yourself without help from a scholarship management service, you may want to hire a lawyer to ensure you follow all the federal rules that apply to the selection process.

You need to define the procedure you plan to use to make the funds available to the scholarship recipient. Then, you must get preapproval from the IRS on that procedure.

3. Meets The Legal Definition Of Charitable

Under IRS rules, your foundation needs to meet the legal definition of “charitable” to achieve tax-exempt status. When you are setting up your foundation, you will go through all the procedures and paperwork to make sure you follow the regulations that govern charitable organizations.

However, once your foundation is up and running, you must ensure it stays in compliance with the restrictions placed on tax-exempt organizations. The IRS provides a compliance guide for private foundations. The guide includes a list of actions that may compromise a foundation’s tax-exempt status. Some of these activities are accruing a substantial amount of money, making conflict-of-interest investments, and participating in political campaigns.

As you can see, setting up your own private foundation is a complicated process. Fortunately, it’s not the only way to create a scholarship. If you go through a scholarship management organization, you can avoid all the hassle of dealing with the IRS. A good scholarship platform handles all the paperwork for you so you can make and accept tax-deductible donations to your scholarship fund.

How To Start A Scholarship Fund Today

If you want to help deserving students afford higher education, set up a scholarship. The easiest way to create a scholarship is through, where it’s free to create your scholarship, and 100% of your tax-deductible donation goes to the recipient. Establish your scholarship with today.

Frequently Asked Questions On How To Start Scholarship Funds

Get answers to some of the most common questions about starting a scholarship.

How does a scholarship fund work?

In general, a scholarship’s monetary award is given to the person who best meets the application requirements. When you start a scholarship, you can decide what you want the eligibility criteria to be. For example, you may want to provide scholarship money for low-income students or minorities. Generally, scholarship money must be used to pay for direct educational costs: tuition, fees, textbooks, and other required educational expenses.

How much does it cost to start a scholarship fund?

The cost depends on the size of the program and how you plan to fund it. Most scholarship organizations recommend a minimum award of $500. The total cost will be more than just the amount of the award because you need to account for the administrative work of advertising the program, reviewing applications, and selecting recipients.

However, the cost is not tens of thousands of dollars, like some websites claim – you may be able to do it for under a thousand dollars a year. The best way to keep costs down and ensure your money goes to deserving students is to work with a nonprofit scholarship organization like, which is free for donors and students.

How to start a scholarship fund for high school?

In general, a scholarship provides funds for higher education, and some awards are only open to university undergrads or graduate students. However, many college scholarships accept applications for potential recipients while they are still in high school, usually at the beginning of their senior year. If you want to start a scholarship fund that high school students can apply for, you’ll need to specify that when you create the award.

You may need to broaden your application requirements compared to an award for grad students. For example, with a grad school scholarship, you could limit it to students pursuing an M.S. in engineering. But most high school students don’t know what they’ll major in at college, so you may want to keep the eligibility requirements more open. If you’re going to support STEM students, you could ask applicants for a relevant essay on engineering, scientist, math, or technology.

Is a scholarship fund tax-deductible?

In general, scholarship donations are tax-deductible. If you donate through a nonprofit scholarship program, you will receive an official document confirming your donation, which you can use when you file your taxes. If you set up your own scholarship fund, the money may be tax-deductible if you follow IRS rules for tax-exempt organizations.

Can anyone start a scholarship?

Yes. You don’t need to create a nonprofit or run a business to set up a scholarship.

How to start a scholarship fund for a church?

If you want to set up a scholarship fund through your church, most of the steps are the same as with any other scholarship. Your church may already have nonprofit status, in which case it can accept donations for the award and provide tax paperwork to donors.

There may be additional considerations for a church-based scholarship. Do you plan on having your church board review the applications? Are you only accepting applications from students in your church? Does the scholarship only provide funds if the student attends a religious college? Depending on your church’s bylaws, you may need to get approval from your members to set up the scholarship.

How to start a nonprofit scholarship fund?

You can start a scholarship and fund it yourself, but another option is to create a nonprofit scholarship fund that allows others to donate. This process can be complicated, and the exact steps depend on your state laws for starting and running a nonprofit.

Suppose you want to give others the chance to donate to your scholarship without the extra steps of creating a nonprofit yourself. In that case, you can go through a scholarship management organization like You don’t have to pay any extra fees, and the platform handles all the administrative work of managing your fund and accepting donations.

How to start a memorial scholarship fund?

Starting a memorial scholarship fund is very similar to starting any kind of scholarship. You’ll need to figure out how to fund and manage the award and what you want the winning criteria to be. If you plan to accept donations to fund the scholarship, figure out if you want to set up the fund at a nonprofit or at your bank. Don’t forget to discuss potential tax issues with a financial advisor or attorney.

How to start a scholarship fund in your name?

When you create a scholarship fund, you can decide what you want it to be called. If you’re going to start a scholarship in your name, the easiest way is to go through a scholarship management organization that will take care of creating, advertising, and accepting applications for your award.

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