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Exactly what to do

  1. 1. Ten or more students, not all one school. Design your catchment wider than a single school from day one.
    2. Priority order. Last year’s recipients first, then any eligible student whose sibling has received a scholarship from you, then everyone else; budget renewals before recruiting new students.
    3. No earmarking. Donors may not designate a particular student; strip designation options from every gift form and marketing surface.
    4. Eligible students only. The statute’s two-part definition: household income at or below 300% of area median gross income (eligibility calculator) AND the student is eligible to enroll in a public elementary or secondary school. Write both tests into the policy, not just the income line.
    5. No insiders. Board members, officers, substantial contributors, and their families don’t receive your scholarships. Adopt the conservative rule today; the exact federal definition lands with the regulations.

    Don’t draft from scratch; adopt this by board vote and adapt only what your program genuinely needs:

    SCHOLARSHIP AWARD POLICY: paste-ready starting point

    SCHOLARSHIP AWARD POLICY OF [ORGANIZATION NAME] 1. Eligible students. Scholarships are awarded only to students who (a) are members of a household with income for the prior calendar year not greater than 300 percent of area median gross income, and (b) are eligible to enroll in a public elementary or secondary school. Household income is verified before any award. 2. Breadth. The organization awards scholarships to no fewer than 10 students in each year, attending more than one school. 3. Priority. Awards are made first to students who received a scholarship from the organization in the previous school year; second, to eligible students with a sibling who has received a scholarship from the organization; then to other eligible students under criteria the board adopts. 4. No earmarking. The organization does not accept, and its solicitation materials do not offer, contributions designated for a particular student. 5. No insider awards. No scholarship is awarded to a student whose parent, guardian, or household member is a director, officer, or substantial contributor of the organization, or a family member of one. 6. Qualified expenses. Scholarships pay only qualified elementary and secondary education expenses within the meaning of section 530(b)(3)(A) of the Internal Revenue Code, and are paid directly to schools and providers wherever practicable. 7. Administration. The scholarship committee administers this policy; exceptions require a board vote recorded in minutes. This policy implements the organization's bylaws and section 25F of the Internal Revenue Code, and is reviewed annually. Adopted by the Board of Directors on [DATE].

  2. Two screens on every application: income (household income + family size against the area median, with documents in a verification file) and insiders (a short relationship question catching board, officer, donor, and selection-committee families). Then protect the data: access-limit the income file, keep income status out of anything public, and destroy documents on a schedule.
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Questions people actually ask

What about year one, before we have 10 students?

The 10-student test is about your operating reality, so plan the ramp: recruit across schools from the first award cycle and track the count from award one. Whether multistate SGOs count 10 per state or in aggregate is an open regulations question; the safe plan clears 10 in your home state alone.

A donor insists their gift go to a specific child. Now what?

Refuse gracefully and keep the donor: explain the federal rule, offer what IS allowed (general support, or in some cases a school-level preference handled carefully), and never take the earmarked dollar. One earmarked gift is exactly the kind of fact state vetting exists to find.