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10 May 2018

Can a Church Give Scholarships?

Raul Rivera

During this time of year, many high school and college students are preparing to graduate. This is one of the big milestones that one accomplishes and experiences in life.

For high schoolers, many are preparing to go off to college, away from home and away from their parents for the first time. And for college students, many are preparing to enter into the “real world” as working professionals.

Without having to say any more, it is pretty obvious that this is a momentous occasion that calls for celebration, which is why many churches spend time honoring their graduates.

One way churches and ministries honor graduates is through establishing scholarship funds. There are, however, guidelines that must be adhered to when establishing a scholarship program.

In this blog I will give you 5 important steps that will help your church or ministry to establish and operate a scholarship program that not only blesses the recipients, but also keeps your church or ministry in compliance.

But before we look at that, I want to give you a few pointers to help make your “Graduation Sunday” a memorable one for your church’s graduates.

5 things to do prior to Graduation Sunday

As a young adult, graduation, whether it be from high school or college, is like a right of passage into adulthood.

Graduation is the culmination of years of hard work for these students. Because of this, you will want to make sure that “Graduation Sunday” is special and memorable for everyone involved.

Below are 5 steps to take when preparing for your church’s graduation celebration.

  1. Determine the date and location of the graduation celebration. 
  2. Determine the intricacy level of the graduation celebration. 
  3. Make an announcement of the graduation celebration through your church’s bulletin, website, or other avenue.
  4. Consider inviting special guests to the graduation celebration. 
  5. Purchase token gifts to give graduates such as a Bible or some other inspirational book.

How to set-up a scholarship program in your ministry

Perhaps you have thought about starting a scholarship fund at your church, but you are just not sure what to do.

Unfortunately, many churches that do offer scholarships to graduates do not realize the IRS has regulations surrounding scholarships, and many may even be violating those regulations, which could jeopardize their tax-exempt status.

Next, I’ll to share with you 5 important steps to take when establishing a scholarship program.

(Recommended reading: "5 Ways to Reignite Your Passion for Ministry")

5 important steps to take when establishing a scholarship program

1. Create a written program that describes the type of scholarships the church will award. 

To begin creating your scholarship program, you should ask yourself some basic questions about the type of scholarships the church will award. Will the scholarships be merit based or need based? Will they only be for Christian college attendance or for attendance at any accredited college?

You will also want to list the maximum dollar amounts you will issue each semester and/or year and any other requirements such as a minimum grade point average (GPA).

2. Present the written program in a board meeting, and get it approved. 

It is necessary that the program be board approved and that at least three individuals be appointed to serve on a selection committee.

I know that some people hate committees, but in this case, the committee is a good thing. It helps to prove that the church is objective in selecting recipients.

3. Make at least one public announcement. 

One of the biggest shortfalls of church and ministry scholarship programs is failure to announce them. This is a requirement.

4. Keep a case history of recipients for at least three years, and show how they were selected. 

To do this, you will need to create an application that asks questions necessary to help you select students who meet the criteria of the program.

If any applicants or recipients are related to any individuals on the selection committee or the board of directors, please be certain that you implement a written procedure to ensure objectivity.

5. Require that the individual recipients sign an annual statement showing that funds were used towards books or tuition. 

Have the recipients submit an invoice or other record indicating the amount of tuition or other allowable expense that is owed.

You will also want to require an academic transcript to ensure that the student is enrolled at an educational institution.

Lastly, you may want to consider paying the scholarship amount directly to the college or university rather than to the student.

Are the scholarships your ministry offers taxable to recipients?

In order for a scholarship to be nontaxable to the student/recipient, the following two requirements must be met:

  • He/she must be a candidate for a degree at an educational institution.
  • The student may be enrolled either full-time or part-time. The scholarship given must be considered a qualified scholarship. This means that the scholarship funds must go towards tuition and fees paid to enroll at an educational institution or any fees, books, supplies, and equipment required for classes at the educational institution. (Room and board is not included.)

If your church gives a scholarship for more than $600.00 and the recipient does not use it for enrollment at an educational institution or towards books and supplies for classes, then he/she must be issued a 1099-MISC. This income will be taxable to the student.

Investing in the lives of young adults

There are many milestones that are worth celebrating during one’s lifetime, and being able to celebrate some of those moments with your church family is an invaluable experience.

By choosing to celebrate this moment, your church is expressing to the graduates that they matter and that you want to continue to invest into their lives.

Just as it’s important to continuously invest in the lives of young people, it is also important that you invest in the the health and well-being of your church or ministry.

That’s why I want to invite you to join us at one of our Ultimate Church Structure Conferences in a city near you.

Click on the link below or give us a call at 877-494-4655 for more information.

Find a Conference Near You!

Click Here

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Please feel free to comment. We always appreciate good dialogue. However, we do moderate each comment to ensure that it is on topic and not derogatory to other participants. We ask that you keep your comments brief and pertinent to the topic so that others may benefit.

Blessings,
Raul Rivera

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About the Author

Church Planter. Speaker. Author. CEO. Raul Rivera has had ample experience in the church planting world. His current venture, StartCHURCH, has helped 1000's of churches to start right. Raul has compiled an array of manuals and software tools that help churches stay compliant with the IRS. He also hosts over 35 national conferences per year, training pastors on how to launch their churches. Raul is married to his wife Genel, and they and their five children live in Atlanta, GA.