Endowed vs Annual (Current Use) Scholarships: What’s the Difference?

When it comes to supporting students through scholarships, there are two primary options donors can consider: endowed scholarships and annual (current use) scholarships. Both types of scholarships provide invaluable assistance to students, but they differ in terms of structure, funding, and long-term impact. In this post, we’ll explore these differences and help you decide which option might be the best fit for your giving goals. We’ll also discuss additional ways you can support scholarships at Starr King School for the Ministry without meeting the minimum funding requirements for a new named scholarship.

What is an Endowed Scholarship?

An endowed scholarship is a permanent fund designed to provide scholarship support to students indefinitely. Here’s how it works:

• Long-term Impact: The principal donation for an endowed scholarship is invested, and only the earnings (typically a percentage of the investment income) are used to award scholarships each year. This ensures that the principal remains intact, allowing the scholarship to continue supporting students in perpetuity.
• Sustainable Support: Because the investment generates income every year, endowed scholarships offer a reliable, ongoing source of financial aid for students, preserving the donor’s legacy over time.
• Minimum Commitment: At Starr King School for the Ministry, the minimum commitment required to establish an endowed scholarship is $25,000. This amount can be funded as a lump sum or pledged over a period of up to five years.

Example: A donor creates an endowed scholarship with a gift of $50,000. If the school’s investment strategy allows for an average 4% annual distribution, this would provide $2,000 in scholarship awards each year, while the remaining funds continue to grow, increasing the fund’s impact over time.

What is an Annual (Current Use) Scholarship?

An annual scholarship, also known as a current use scholarship, is funded with an annual donation rather than a long-term investment. Here’s how it works:

• Immediate Impact: Annual scholarships provide direct support to students, using the full amount of the donation for scholarships in the year it is given. This is ideal for donors who want their contributions to have an immediate, tangible impact on students’ lives.
• Flexible Commitment: Donors can commit to funding an annual scholarship for a set number of years (e.g., four years) or choose to make a one-time gift. At Starr King, the minimum commitment for a named annual scholarship is $5,000 per year, with a commitment of at least four years.
• Short-Term Focus: Unlike endowed scholarships, annual scholarships do not create a permanent fund. Once the annual donation is used, the scholarship ends unless the donor continues to contribute.

Example: A donor commits to funding a $5,000 annual scholarship each year for four years. This scholarship provides immediate financial aid to a student for each of those four years but will not continue beyond that period unless the donor renews their commitment.

Supporting Existing Scholarship Funds

If you are interested in supporting scholarships at Starr King School for the Ministry but do not wish to invest at the minimum levels required to establish a new endowed or current use fund, you can still make a meaningful contribution. Donors can give to any of our existing scholarship funds, helping to bolster the support available to our students.

• Flexibility and Impact: Giving to an existing fund allows you to make a contribution at any level that fits your capacity, while still having a direct impact on students’ educational journeys.
• School Priorities: Scholarship funds that the school is prioritizing in our fundraising plan can be found on our Giving Page. For a full list of these options and to discuss which fund might best align with your values, please contact our Advancement Office.

Key Differences Between Endowed and Annual Scholarships

Which Option is Right for You?

Choosing between an endowed scholarship and an annual scholarship depends on your giving goals:

• Endowed Scholarships are perfect if you want to create a lasting legacy that will support students for generations. The principal gift remains invested, providing a sustainable source of aid year after year.
• Annual Scholarships are ideal if you want your gift to have an immediate, direct impact. You can see the results of your generosity right away as students benefit from your support.

For donors who may not be ready to establish a new scholarship fund but still wish to contribute, supporting existing scholarship funds is a wonderful way to make a difference. Whether you choose to fund an endowed, annual, or existing scholarship, your gift will help provide much-needed financial aid to students at Starr King School for the Ministry.

Ready to Make a Difference?

If you’re interested in establishing a new scholarship or contributing to an existing fund at Starr King School for the Ministry, we are here to guide you through the process. Please contact our Vice President for Advancement, Jessica Cloud at jcloud@sksm.edu or via phone at 571-438-8333.

Your generosity not only transforms individual students’ lives but also contributes to the future of compassionate, justice-oriented leaders. Thank you for considering this impactful way to support our mission.