A scholarship is a grant-in-aid to a student by a college or foundation [source: Merriam-Webster]. People set up scholarship funds for any number of reasons. The main aim of giving scholarships and grants is to help individuals who need money to study further. There are individuals/groups/institutions that offer scholarships for certain unique things and to certain people. Every scholarship has its own criteria. Private people can create scholarships, as well as corporations and universities. Funding for these scholarships can come from one individual or from large corporations [source: Peckham]. The following is a list of what you have to do in order to create a scholarship.

To create a scholarship you must decide the following:

  • Type What type of scholarship will this be? Will the money be awarded to a student who can demonstrate financial need? Will it be granted to a student who can demonstrate outstanding performance in his/her academic achievement, regardless if there is financial need or not?
  • Name Naming the fund is very important. You can give it a general name, your name or name it after somebody you want to memorialize.
  • Purpose You have to decide for what purposes the money may be distributed and spent. Would you like to earmark the money for tuition, or can it be used to pay for room and board, or perhaps for buying books?
  • Who may benefit You have to decide to what type of student you want to give a scholarship; freshman, sophomore, junior, full-time student or part-time student.
  • Funding You must decide how much your initial contribution to the fund will be and how much subsequent contributions will be. You must also decide if it will be an endowment fund which is permanent and perpetual, or perhaps an annual scholarship with an annual commitment for a fixed number of years [source: St Petersburg College].
  • Compliance Ensure the scholarship program is established and operated within the guidelines of state and federal law, including the requirements of the Internal Revenue Service (IRS).
  • Tax Status The scholarship fund must be registered with the IRS. Apply for recognition as a charity under 503(c)(3), which confers tax exempt status. This will require you to satisfy the IRS that your fund complies with their regulations [source: IRS].