How do scholarships not run out of money?

Question

There are scholarships at my University that have been around for a few decades. Do people top them up constantly?

In: Economics

Answer 1

Your endowed professor doesn’t merely have an impressive chest, her salary is paid from the earnings of an account that was established to pay her salary.

For instance if you wanted to endow a chair at your local university you could cough up $4,000,000 and donate it to the university’s foundation. They’ll invest the money and pay back to the university (these days) 4% to whatever your donation agreement indicated. As long as your donation was intended to fund a professorship, you are providing $160,000 in perpetuity toward the salary for the professor who was endowed by your gift.

The same works for student scholarships.