How Do You Endow a Scholarship and How Much Does It Cost?

Endowing a scholarship at a beloved place of higher education can be a great, and surprisingly cost-effective, way to do good in the world while also realizing a tax benefit. You even have the benefit of creating an opportunity for a select group of folks who might not otherwise have it.

Our good friend the White Coat Investor takes us through his experience of creating and endowing a scholarship at a popular university in his neck of the woods. Endowing a university scholarship requires little effort, costs less than you might think, and allows you to be pretty specific about who gets the money.

What Is an Endowed Scholarship?

Arrow

The aim of an endowed scholarship is to donate money that can be invested and managed by the university so that the interest that’s earned on the principal of the donation can then be used as a yearly scholarship to those students who need it. An endowed scholarship is supposed to continue to produce income for years and is supposed to help a number of students instead of just one.

This is different from funding a regular scholarship, where you’d donate a set amount of money and it goes directly into a scholarship fund. The money isn’t invested. It’s just given to students directly. Yes, an endowed scholarship will require more money than a regular scholarship—maybe $50,000 for an endowed scholarship, maybe $100,000—but the gift should last for much, much longer.

The process was super basic. The university attorneys draft up a “letter” describing the endowment fund, and we send them some cash. That’s it.

How to Start a Scholarship Endowment

Like all the rest of our charitable giving, we run it through our Donor Advised Fund (DAF) for convenience and anonymity. All communication was by email, and everything was signed electronically. Easy-peasy.

If you want the scholarship to pay out immediately, you can just add the first year’s “distribution” to your contribution and get started right away. You could do the same in a year when the fund is unable to distribute a scholarship due to poor returns. We funded these at the end of 2020, so they will start paying out in 2022.

How Much Does It Cost to Endow a Scholarship?

SWIPE UP NOW TO READ MORE

How to Find College Scholarships to Help Your Child Graduate Debt-Free

MORE STORIES

Six Financial Considerations for Mid-Career Professionals