How to set up a scholarship fund to support students

If you care about helping students, honoring someone’s memory, or giving back to your community, creating a scholarship is one of the most powerful ways to make a difference. And it’s more doable than you might think.

Whether you’re an individual, part of a company, or running a nonprofit, the steps to get started are clearer, and simpler, than you’d expect. We’ve walked through this process with plenty of people, and we’ve seen firsthand how a small idea can grow into something that changes lives.

This guide is here to walk you through everything. We’ll keep it simple, clear, and focused on what really matters, supporting students and making an impact.

The benefits of establishing a scholarship fund

Starting a scholarship fund isn’t just about giving money, it’s about opening doors. For a lot of students, especially those who are first in their families to go to college, even a small scholarship can be the thing that tips the scale. It’s not just about tuition. It’s about feeling seen, supported, and believed in.

We’ve worked with organizations that started with one scholarship and ended up changing entire communities. Why? Because when students feel like someone is rooting for them, they push harder. They dream bigger. And they come back to invest in others.

For you or your organization, the benefits go beyond impact. A scholarship fund can honor a loved one, represent your values, or highlight what your company stands for. It can build deeper ties with your community, show your commitment to education, and even become part of your brand’s story.

There’s also a financial side to consider, many scholarship funds offer tax advantages when set up the right way. But more than anything, this is about purpose. If you want to help students take the next step, a scholarship fund is one of the most personal and lasting ways to do it.

Determine your goals and vision

Before you jump into paperwork or funding, take a breath and think about your “why.” What’s driving you to start this scholarship? Maybe it’s to honor someone special. Maybe it’s to support students in your town. Or maybe you just believe education should be more accessible. Whatever it is, start there.

Next, figure out who you want to help. High school seniors? First-generation college students? Maybe students studying a specific area of study like healthcare, engineering, or the arts? The more clearly you define your audience, the more meaningful your impact will be.

You’ll also want to decide if this is a one-time gift or something you want to give every year. Is it a personal effort, or part of your company’s scholarship program? Are you aiming to help one student or several?

This part doesn’t need to be perfect. You’re just sketching out the big picture. Think of it like writing your scholarship’s mission statement. Keep it clear, focused, and tied to what matters most to you.

Choose your scholarship management structure

Once you know who you want to help and why, the next step is figuring out how you’ll manage it all. You’ve got a few solid options here, and each comes with its own level of effort and flexibility.

If you want to keep things simple, you can partner with a scholarship management organization or a community foundation. They handle most of the heavy lifting, things like collecting applications, reviewing them, handling tax stuff, and even sending the money to the schools. It’s a great path if you’re short on time or don’t want to deal with the back-end work.

Another option is to work with a nonprofit organization that already has systems in place. Some nonprofits will help you run your scholarship under their umbrella, which can be easier (and cheaper) than setting up your own nonprofit from scratch.

Of course, you can manage it all yourself, but that means taking care of the legal setup, IRS compliance, selection process, and fund distribution. It’s doable, but it requires time, tools, and a clear system.

At Harness, we’ve seen partners choose all three paths, and we’ve helped with each one. Whether you want to be hands-on or hand things off, we can help set up and manage your fund so it runs smoothly from day one.

Decide how to fund and sustain the program

Now it’s time to talk about money. How much do you want to give, and how often? You don’t need to be a millionaire to start a scholarship fund. Some of the most impactful programs we’ve seen started with just a few hundred or a few thousand dollars. What matters most is consistency and clarity.

If you're planning to make this a yearly thing, think about whether you want to fund it out of pocket each time or set up something more long-term, like an endowed scholarship. That’s where you invest a lump sum, and the scholarship is paid out from the interest it earns each year. It takes more upfront, but it keeps going even when you’re not actively funding it every year.

Businesses might build company scholarship programs as part of their community efforts or employee benefits. That can come from a budget line or even be supported by customer donations. We’ve seen some companies get creative with matching programs or donations tied to sales.

The key here is to build something sustainable. You don’t have to start big, but you do want to know how you’ll keep it going. A little planning now can make sure your scholarship keeps showing up for students year after year.

Set the rules: eligibility criteria and selection process

This is where your scholarship starts to take shape. You’ll decide who qualifies and how you’ll pick the winner. Start with the basics, what kind of student are you hoping to support? Maybe it’s someone from your hometown, someone studying a specific area of study, or someone facing financial challenges.

Keep your eligibility criteria clear, fair, and on a nondiscriminatory basis. That just means you can’t pick winners based on race, gender, or other protected categories unless your scholarship is set up in a way that meets legal guidelines. (This is where a good partner or advisor can help.)

Now let’s talk about picking your scholarship recipient. You’ll want a process that feels fair to applicants and makes sense for you. Will they need to write an essay? Submit transcripts? Get recommendations? You don’t need to make it too hard, but you do want to learn enough about them to make a thoughtful choice.

If you're reviewing applications yourself, set up a simple scoring sheet. If you’re working with a scholarship management organization, they can help you build a system and even score the applications for you.

Bottom line: Keep it simple, clear, and tied to the heart of your mission.

Create and promote the scholarship program

Once your scholarship is set up, it’s time to get the word out. Even the most generous award won’t make an impact if the right students don’t know it exists. The good news? You don’t need a big marketing budget to spread the word, you just need to be intentional.

Start by writing a clear, simple description. Talk about who the scholarship is for, what it covers, how to apply, and when it’s due. Keep the tone encouraging, students are often nervous about applying, so help them feel welcome.

Then share it where your audience already is. If it’s for high school students, reach out to school counselors or district offices. If it’s tied to a certain field, connect with college departments, professors, or student groups. You can also list it on free scholarship sites, your company or nonprofit website, or even local news outlets.

If you're using Harness, we help promote your fund through built-in tools that make it easy to reach the right people. We also support things like automated emails and donor engagement so you don’t miss a beat.

Remember, your story matters. Don’t be afraid to share why you started this scholarship. The more real it feels, the more it’ll connect with the students who need it most.

Review applications and choose your scholarship recipient

Now comes the exciting part, seeing who applied. This is where your planning really pays off. You’ve set your eligibility criteria, shared your story, and now students are showing up, hoping for a chance.

First, decide how you’ll review the applications. If it’s just you or a small team, build a simple checklist or scoring system. Focus on what matters most to your mission, maybe it’s academic effort, community service, or a great personal story. Keep it consistent and fair for everyone.

If you're using a platform or scholarship management organization, they can help you sort, score, and even pre-screen applications. That saves time and reduces bias.

Once you’ve picked your scholarship recipient, let them know with a personal message. This moment means the world to them. It’s not just money, it’s proof that someone believes in their future.

Don’t forget to follow up with the other applicants, too. A kind thank-you goes a long way, and it helps keep the door open if your scholarship continues in the future.

Disburse funds and track your scholarship

Once you've selected your recipient, it’s time to actually send the money, but don’t worry, this part’s pretty straightforward.

The easiest and most common option is to send the funds directly to the student’s higher education institution. Most colleges and universities are set up to receive outside scholarships and apply them straight to a student’s tuition or fees. This also helps ensure the money goes exactly where it’s meant to.

Another option is to give the funds directly to the student. If you go this route, it’s important to communicate how the money should be used, tuition, books, housing, or other school-related costs. Some donors also choose to reimburse students after they submit proof of payment.

No matter which method you choose, make sure to keep a record of everything. Tracking how your scholarship is used, when it was paid out, who received it, and for what, helps you stay organized and builds trust with future donors, partners, or even your own board.

Platforms like Harness can help automate this whole part. From payment tracking to reminders, it’s all in one place, and you’re never left guessing what comes next.

Ensure legal compliance and understand tax deductibility

Starting a scholarship fund comes with a lot of heart, but there are also a few rules to follow. You don’t need to be a legal expert, but you do need to make sure your scholarship is set up the right way.

First, if you want your scholarship to be tax deductible, meaning donors (including you) can claim contributions on their taxes, you’ll need to run the fund through a nonprofit organization, community foundation, or a registered scholarship management group. You can’t just give out money and call it a tax write-off. It has to follow IRS rules.

One of the biggest things the IRS looks for is that your scholarship is awarded on a nondiscriminatory basis. That means you’re choosing students based on fair and clearly defined criteria, not personal connections, favoritism, or categories that would exclude people unfairly.

You’ll also need to avoid awarding the scholarship to your own family members, employees (in most cases), or anyone with a close personal tie unless your fund is structured very carefully.

If this feels overwhelming, you’re not alone. Most of the people we’ve helped through this part just needed a little guidance to make sure everything was clean and compliant. That’s one of the reasons we built Harness, to make all the paperwork and legal stuff feel a lot less stressful.

Manage and evaluate the scholarship program over time

Starting a scholarship is one thing, keeping it going is where the real impact happens. The good news? It doesn’t have to be complicated. With the right systems in place, managing your scholarship year after year can feel simple and even enjoyable.

Start by setting up a yearly schedule. When will you open applications? When will you review them? When will you send the funds? Having a basic timeline helps you (and your team) stay on track.

Next, think about reporting and reflection. What worked well this year? What could be better? Collect feedback from students, your review team, and even your community. This kind of input helps you improve the program over time, and it’s great to share with donors or board members if they’re involved.

Also, make sure you’re keeping records of recipients, award amounts, and impact stories. These details help you track your reach, celebrate success, and build a case for future support or expansion.

And if you’re working with Harness, we can handle a lot of this for you, from reporting dashboards to impact tracking and communication tools. So you spend less time chasing details, and more time seeing the difference you’re making.

Supporting students

Starting a scholarship fund might feel like a big leap, but you’ve seen by now, it’s really just a series of simple steps. Define your mission, set your criteria, choose your path, and follow through. Whether you're supporting one student or many, your effort matters more than you realize.

We’ve seen firsthand how a small scholarship can completely change the course of someone’s life. It gives students confidence. It opens doors. It tells them, “Someone believes in you.” And that’s a powerful thing.

So if you’re ready to take that first step, do it. You don’t have to have all the answers right away. You just have to start.