Scholarship funds are created for a variety of reasons, such as to honor a loved one or to benefit a specific population of students. Anyone can set up a scholarship fund, and there are many different approaches.
If you wish to start a fund for a preselected person or group of people – for example, a relative or a family – contact your local bank or credit union about opening an account to accept donations from the public. Please note that these funds are not exempt charities, so donations will not be tax deductible.
If you wish to start a scholarship fund that can receive tax deductible donations, the IRS has guidelines on who can and cannot receive grants, as summarized by FinAid (scroll down to "Laws and Regulations"):
The scholarship must be awarded on an objective and nondiscriminatory basis. The group of applicants from which the recipients are selected must be sufficiently broad as to be considered a charitable class. The donor of a scholarship cannot take a charitable deduction for a scholarship that is earmarked for the benefit of a specific individual, not even if that individual is unrelated to the donor. Moreover, donors may not circumvent this restriction by tightly delineating the selection criteria. No grants may be awarded to an officer, manager or trustee of the organization, nor to a member of the selection committee, nor to a substantial contributor, nor to certain US government officials. Family members of these individuals are also not eligible to receive grants.
Scholarship funds often are set up and administered by a third party, such as a community foundation. Your local community foundation may have services to help you set up a scholarship fund. FinAid also lists organizations that provide scholarship management services.
You also can start your own organization, but this may be the most complex option. More about starting a nonprofit.
Selected resources below may also be helpful.
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