Definition of Endowed Scholarship

An endowed scholarship can benefit generations of students.

An endowed scholarship is a major gift to a college or university used to fund scholarships. It often honors a donor's loved one or the donor himself. The feature that most distinguishes endowed scholarships from other types of donations is that the capital in the endowed scholarship gift is preserved so that the gift can last indefinitely.

Permanent Gift

When an endowed scholarship is given to a school, the donated money is invested. The school never withdraws any of the principal; only the interest earned from that donation is used to fund scholarships. That makes an endowed scholarship a permanent gift. Whereas a one-time gift may be spent just once, an endowed scholarship keeps on generating income indefinitely.

Restricted Versus Unrestricted

A scholarship donor should specify whether the gift is restricted or unrestricted. While schools like to receive unrestricted gifts, which they can use wherever the need is greatest, many donors prefer to specify how their donation will be used. Some of the criteria that donors can require of scholarship recipients are that recipients study in a particular field, be in a certain major, have a specified minimum grade-point average, and/or have financial need.

Naming the Scholarship

Many donors name their endowed scholarships in memory of a loved one or in their own name. Because endowed scholarships are permanent, a named endowed scholarship is a way for donors to have their name, or their loved one's name, tied to a productive cause and an institution that was important to them.

Funding the Scholarship

Schools will usually have a minimum amount that they require to set up an endowed scholarship. That amount will vary from school to school, so you should get in touch with the school's alumni association, development office or major gifts office for more information. You can fund the endowment in many ways: you can give an immediate gift of cash or stock; you can make a pledge and pay the donation over several years; you can leave a bequest in your will, or set up an annuity or a trust. Gifts can be structured so that you draw income for life. Development office staff can advise you on the best options for your particular situation.

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