What is an endowed scholarship?
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Endowed scholarships are a unique form of financial aid, known for being a bit more complex than regular scholarships. These scholarships are created to help fund higher education for many students over a long period of time.
With an endowed scholarship, a donor makes a large initial donation, creating an endowed scholarship fund. When a large amount is donated to an endowment fund, the money isn't given directly to students all at once. Instead, the money is invested. The interest earned on the invested money can then fund scholarships for years to come.
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How do endowed scholarships work?
To understand how endowed scholarship funds can continue giving to scholarship recipients year after year, you must first understand where that money comes from and why the endowed fund is not drained over time.
When a large, endowed sum is gifted to a college, the university manages the funds, investing the amount. The university then takes out scholarship money from the fund each year, only giving the percentage of the fund that was earned as interest.