There are scholarships at my University that have been around for a few decades. Do people top them up constantly?
In: Economics
Math.
Say you have $10 million and you expect to earn
a 8%return on average.
To be safe, you decide to set aside 1% of that 8% to cover administrative costs and 2% to keep up with inflation over time. You could also set aside another 1% as a reserve for a bad year.
Say after year 1 you’ve earned an 8% return. You could give away $400,000 in scholarships and still know that the fund is very safe and will last a long time.
Through both new donations to the foundation, but also growth of the endowment. For each million dollars in the endowment it can reliably draw around 40k per year without losing any of the endowment just due to market growth.
Sometimes there’s not real money backing them. They’re just a way the school can discount their tuition price for some students when they want to.
What was considered a big pot of money 50 years ago, even if invested wisely, probably covers many fewer scholarships than expected, as tuition has risen so much faster than inflation or investment growth.
Many scholarships are paid out of university funds, and endowments of major universities have grown rapidly.
University funded scholarships are essentially shifting costs to fully self paid students from scholarship students.
Scholarships have initial funding from donations or endowments. These funds are invested to generate returns, sustaining the scholarship over time for future recipients.
I was involved in setting up a scholarship fund in memory of a friend who passed away shortly after graduation. We had to fund a $30000 endowment to generate a $1000 annual scholarship, which is a 3.3% annual withdrawal rate. So as long as the endowment is invested in a portfolio that generates more than 3.3%, then it will never run out of money. The scholarship is still running strong 26 years later and the endowment has grown enough to generate a larger scholarship.
Arent private donations renewed yearly??
I can attest to it being up to the organization that issued the scholarship. I received several scholarships. One went straight to the university, and any funds remaining went back to the issuing organization. I didn’t have a hand in it. Another I was just awarded a monetary amount. If there was any left over I could use it however I wished (for example I found a great deal on a used textbook for 3 bucks instead of the 120 dollar price new, thus netting me 117 dollars).
As others have mentioned, it is indeed up to the issuing organization, so check with them. But, if your studies have successfully concluded and you’re sitting with a positive sum in your bank account, chances are, this is yours to keep.
In addition to what other people have said, about legit scholarship funds, a lot of the lower tier universities basically have fake scholarships to make students feel like they’re getting deals or feel special enough to want to actually go to their school. The schools build these “sales” into their pricing and basically it’s like sales in a store. Some people pay full price, some pay a discount and on average the school makes more money by enticing more people to attend. There is no actual pool of money they pull from in this case.
The terms of each scholarship fund differ, but here’s how my family’s scholarship works:
1. Before he passed away, my father donated stock worth about $100k to the university. He stipulated that at least 1 scholarship worth $2500 be awarded each year, and more than 1 if the fund has a very good year. If the fund has an extremely good year, several scholarships are awarded, such that the fund’s value always hovers around $100k at year’s end.
2. As the current trustee of the scholarship, I donate $2500 / year to the fund. This way, I know that even if the fund’s value tanks in a given year, they’ll still be able to award 1 scholarship.
3. Other people sporadically donate to the fund, in memory of my parents. It’s anonymous, but on average, $1-2k is donated each year in addition to my own donation.
4. With rising education costs and whatnot, I periodically request that the value of the scholarship be raised (it was $2k until 2 years ago.. this is Canada, education isn’t quite as expensive)
Anyhow…every scholarship is different. Whoever endows it at the beginning helps to make the rules. This is why universities have a staff just to handle all of this.
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