How to Fund a Scholarship

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Your alma mater needs you. Alumni giving hasn't recovered to pre-financial-crisis levels, and colleges and universities must wage even tougher battles to wrest money from fiscally strapped states. You may feel pinched yourself. But you can still make a big impact if you magnify the size of a scholarship fund by rallying others to your cause. Collective giving has become more common in recent years, universities report.

SEE ALSO: Start Your Own Charity

Shawn Riley has won over more than 150 people to help him raise money for a scholarship at Ohio Wesleyan University that honors Riley's son, Aaron. Aaron was a 2011 graduate of OWU who died from an epileptic seizure while swimming last July. His father's goal is to raise $100,000 for the scholarship by the one-year anniversary of Aaron's death.

When he died, Aaron was wearing an epilepsy awareness bracelet on his wrist that read, "Out of the Shadows." Those words defined his struggle, says Riley. Aaron lived a full and adventurous life despite frequent seizures. "Trying to bring epilepsy out of the shadows was a challenge that he had taken on, so we wanted to create a memorial that would have a positive effect for other young people living with epilepsy," Riley says.

The scholarship, about $5,000 annually, will be awarded to an OWU student with epilepsy who keeps a 3.0 grade point average (see details on giving at https://community.owu.edu/makeyourgift ; click on the "Designation" drop-down menu). If such a student isn't found, the scholarship may go to a student studying neuroscience or a related field.

Riley doesn't think that will be an issue, though he says the university expressed concern that the guidelines were too narrow. Riley has contacted all the major epilepsy organizations to advertise the scholarship and, as a practical matter, he says, "If you create a scholarship with a large enough endowment, the university can't ignore it and will work to recruit students."

That gets to the crux of a common issue when endowing a scholarship. The university wants guidelines to be as general as possible, while the giver often has very specific criteria. David Lieb, associate vice-president for development at Penn State University, says sometimes the negotiations start with, "I want my scholarship to be for kids who came from my high school, who have one green and one blue eye and who played football." Lieb says contributors should prepare for some give-and-take with the school. For example, you may want your scholarship to go to a student from Johnstown, Pa. "That's reasonable, but we might suggest that be a first preference, followed by perhaps a student from southwestern Pennsylvania."

But universities recognize that the more that donors can identify with a recipient, the more they are likely to give. "People who have given us hundreds of thousands of dollars write to thank us after they've developed personal relationships with students," Lieb says.

Riley is looking forward to that. "We're excited about the opportunity to give a little bit back and keep in touch with young people who have epilepsy."

For an ongoing scholarship, you'll need at least $50,000. However, many universities now require $100,000 or more. Generally, 5% of that amount will be awarded annually. There are two main avenues to establish a scholarship fund:

Contact a university's development department. It will provide you with the paperwork you need and guide you to others who need to be involved. For example, if your gift is meant to benefit a physics major, you may work with the physics department.

Use a community foundation. These groups will often manage scholarships for students from a certain geographic area, or students with certain health issues. Find one using a tool at www.cof.org/locator . Be sure to select a community foundation with experience picking scholarship winners and managing an endowment.

If you rally friends and co-workers to endow a scholarship, you might not be able to name it -- that's one restriction some institutions impose on multiple-donor scholarships.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , College

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