An endowed scholarship is a type of financial aid that is a bit more complex than regular scholarships. It is a donation made to a college or university that is invested by the institution, and the interest earned on the invested money is used to fund scholarships for years to come. When a large amount is donated to an endowment fund, the money isnt given directly to students all at once. Instead, the money is invested, and the interest earned on the invested money can then fund scholarships for years to come. The principal amount itself will never be spent, but scholarships can be added to the endowment fund over time.

To create an endowed scholarship, a donor makes a large initial donation, creating an endowed scholarship fund. Universities often have a minimum amount required to create an endowed scholarship fund, but once it has been gifted, the amount generates interest year after year, which is then gifted to students in the form of scholarships. The university manages the funds, but the donor gets to decide how the money will be used.

Endowed scholarships are offered specifically to the university they were gifted to, and students from one university cannot apply for an endowed scholarship at a different university. This makes the scholarship less competitive and gives students a better chance of winning the scholarship. Establishing an endowed scholarship provides permanent, sustainable funding for current and future students.