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College of Business Alumni

Creating Your Own Scholarship - Endowed vs. Expendable
Contributor: Lia Kizilbash Gillet

Thinking about creating a scholarship? There is one important decision you will need to make...create an endowed scholarship or an expendable scholarship? These are two very different types of funds donors select from when making a gift.

Endowment funds are placed in a permanent investment account which is managed by the NIU Foundation under the supervision by the NIU Foundation Board of Directors. Donor funds are tracked separately, yet are part of NIU's larger endowment. In order to establish an endowment, a donor must commit to giving a minimum of $25,000. These funds must reside in the NIU Endowment for a minimum of 12 months in order to generate earnings. On July 1 of every year, each donor's endowment is valued (as part of the larger endowment) and an endowment award is made. The NIU Foundation applies a 4% payout rate for endowment funds, presuming a positive investment return. Any earnings in excess of 4%, less fees, are applied to the endowment principal in order to grow the endowment.

The benefit of an endowed fund is it lasts in perpetuity because only the earnings are used for scholarships. A challenge is that endowment funds must reside in an investment fund for a minimum of 12 months in order to generate earnings before a scholarship is made. Thus, the start-up time is a little longer and stock market volatility can impact scholarship awards.

Expendable funds are like a checking account. Donor contributions are deposited into a NIU Foundation account and distributed to the intended area the year the gift is made. The benefit of an expendable fund is donors have immediate impact on the intended area. The drawback is funds are usually exhausted in the same year the gift is made. If the donor wishes to continue supporting the fund, they need to make another gift. The minimum amount to establish an expendable scholarship is $3,000.

After your decision to establish a scholarship and the type of fund is determined, the procedure is quite simple. First, you must determine the name and purpose of the scholarship. Second, scholarship criteria are needed (GPA, needs or merit based, etc.). You decide on the criteria you'd like to require of the scholarship recipient. Once you have an idea of the type of student you want to recognize with the scholarship, an agreement form will be drafted for you with the scholarship guidelines clearly outlined. After your review and any edits, signatures will take place. Congratulations, you are now the proud donor of a scholarship!

Have questions or interested in discussing your options? Contact Anthony D'Andrea at adandrea@niu.edu or (815) 753-1736.