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Creation of a Scholarship Fund

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Purpose, Options, and Procedures for the Creation of a Scholarship Fund


A named scholarship is a unique way to honor or memorialize an individual who understands the importance of an education.  Scholarship awards not only recognize the individual, but they also provide meaningful financial support to deserving students.    

Scholarship Options

There are four different types of options to consider when creating a scholarship fund in the College Heights Foundation:

  1. Endowed Scholarship Fund.  An endowment provides a permanent source of funding to ensure that a scholarship is awarded in-perpetuity to honor the designated individual forever.  A minimum of $10,000 is required to endow a fund before it will begin awarding scholarships.  Only a portion of the earnings is used each year to make the scholarship award thus ensuring its permanent existence.  Scholarships are administered in accordance with written guidelines reflecting the expressed wishes of the donor.
  2. Custodial Scholarship Fund.  A custodial scholarship fund is a non-endowed fund that can be established with a minimum gift of $1,000.   The entire amount of the gift is spent as directed by the donor or the specific fund guidelines.  Custodial funds provide meaningful financial support to current students, but these types of funds are not designed to last in perpetuity.  When the balance of the fund is spent on scholarships and not annually replenished by the donor, then the named fund ceases to exist.
  3. Building Scholarship Fund.  A building scholarship fund allows the donor flexibility and time to determine if the fund will reach the necessary level to become an endowed scholarship.  Often times these funds are established with the hope and intent that the fund will reach the minimum $10,000 endowed level, but there is some uncertainty as to the level of support that will ultimately be received.  Building funds are granted 5 years from the date they are created to reach the minimum endowment level and annual earnings are applied.  Once the fund reaches that level, it is converted to an endowed scholarship fund and will begin making awards.  If the fund does not reach the $10,000 endowment level in that time period, then it will be utilized as a named custodial scholarship fund to benefit deserving students.
  4. General Scholarship Fund.  The first three options provide a specific named scholarship fund.  Many individuals choose to honor or memorialize an individual with a specific one-time gift, but don’t necessarily wish to create a separate scholarship fund.  These gifts are deposited into the General Scholarship Fund and then an award is made from the General Fund in the name of a certain individual.  These scholarship awards are similar to the Custodial Scholarships, but they do not require a minimum amount and are also designed to handle gifts that are not likely to be recurring in nature.


Once it is determined which type of scholarship fund is most appropriate, then the following procedures outline the steps necessary to establish the fund:

  1. A donor makes a philanthropic gift to establish the scholarship fund.  This gift can be made by writing a check, using a credit/debit card, transferring appreciated securities, gifting real estate, or a variety of other giving vehicles.
  2. The gift(s) are deposited in the College Heights Foundation and will be invested in a specific balance of equities and fixed income.  For endowed funds, 4% of the total fund balance is awarded to the scholarship recipient.  The remaining earnings stay in the corpus of the endowment to keep the fund growing through down markets and to keep place with inflation and tuition increases.  For custodial funds, the entire amount of the gift may be spent in any given year.
  3. The donor can determine how the scholarship fund will be awarded and develop written guidelines specifying the criteria for the recipients to be chosen each year.
  4. The scholarship award will be applied to the WKU account of the recipient each year split equally between the fall and spring semesters.
  5. A copy of the award letter that is sent to the student is also sent to the donor or family who established the scholarship fund.
  6. An annual fund statement is sent to the donor or family indicating the balance of the fund, the earnings growth, and the annual scholarship distributions.


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 Last Modified 7/13/17