Starting a corporate scholarship fund can have many benefits for your company. Charitable giving is associated with reputable companies. The goodwill created from donating money to deserving students can increase your company’s profitability by creating name recognition. Scholarship programs also carry tax benefits for the companies that offer them. Rusty Tweed details the process of setting up a corporate scholarship and explains its possible benefits for your business.
1. Decide Who is Eligible
The first thing to do when planning a new scholarship is to decide who is eligible. A good way to start is by deciding which fields of study would best relate to your company’s area of business. For example, a health care company could offer a scholarship to a deserving student in a health care field. Another way of determining eligibility could be a writing portion or an essay contest, like the Rusty Tweed Drug Free Scholarship.
2. Decide How You Will Fund Your Scholarship
If you are endowing the scholarship yourself, you will need at least $25,000 to begin with for a $1,000 award. The scholarship money itself will be drawn from the interest on the account. Endowing the scholarship will allow you to present the scholarship more than once, and will allow you to claim the entire amount on your taxes in the year when you set it up.
3. Make Sure You Are Set Up Properly with the IRS
Make sure that all of your activities around your scholarship are properly documented so that your company can receive proper credit when filing taxes. You may wish to institute a separate 501 (c) 3 nonprofit foundation.
4. Plan Ahead
It is wise to plan ahead at least a year before you want to award the scholarship. Creating a scholarship is a lengthy process. You will need to plan for advertising. You will also need to decide who will be responsible for selecting the lucky applicant. You could create a committee or have a scholarship administration company do it for you.
5. Make Sure Your Terms are Clear
It’s important to make sure you have clear expectations for the recipients of the scholarship, as well as fully written terms for the scholarship itself. You have the option of awarding a one-time scholarship or providing multiple years of support. You may choose to only support one student, or to support as many as you can.
6. Decide on Criteria
You may be interested in providing scholarships for students entering your field, or you may choose to run your scholarship as an essay contest. Some samples of other criteria include the applicant’s financial need, achievement in their field, academic grade point average or test scores, and work history.
7. Decide on the Timeline of the Scholarship
You will need to determine when applications are accepted, the method of delivery, the notification method, and who will actually be awarding the scholarship. You will also need to decide the method of awarding the funds, whether you want to write a check to the recipient or directly to their educational institution.
8. Advertise
You will need to promote your scholarship, ideally both online and in print. If you are interested in students from specific institutions, contact their financial aid offices and career centers. Create press releases announcing your scholarship and distribute them to a variety of online and print outlets. You may wish to do social media advertising as well.
9. Award Your Scholarship
Determine the best applicant or applicants for your scholarship. If you have a large number of applications, you may wish to set up a committee to help you. Local business and educational leaders can join your committee, along with representatives from your company.
After you have awarded the scholarship, recognize your student with press releases and online posts. Your student’s hometown newspaper will also be interested in publishing news stories about your scholarship and about the recipient. Public recognition will make your scholarship popular. It will also promote the social responsibility of your company and create goodwill.
10. Make Sure Taxes are Correct
The most important thing to consider, if you are creating your scholarship as a means of making tax deductible contributions, is to make sure you have everything set with the IRS. Any lack of paperwork or missed forms may expose your company to expensive difficulties and a loss of public reputation. Work with a financial professional to make sure all of your bases are covered.
In Closing
Starting a scholarship fund is a great way for even small companies to make a positive impact on the world. A one-time or recurring scholarship award will increase your reputation in the community and provide good name recognition. If you are prepared to handle the leg work that comes with starting a scholarship, your company will be able to reap the benefits.