This has been bothering me a lot lately. Why do so many foundations pay their scholarships directly to the schools? In many cases, if a scholarship winner has financial aid, that scholarship money won’t offset anything beyond the student contribution/loans offered as part of the financial aid package.
The other night, one scholarship foundation person told me that 501©(3)s cannot legally write checks to individuals, except in the case of employment. Can someone help me find more information about this to confirm or deny it? I’d like to write to my Senator about this, but I don’t think I know enough about it yet.
Any other information is appreciated!
What do you expect your Senator to do?
If scholarships are paid directly to institutions because of regulations imposed on 501©(3) organizations by the IRS, I would like to advocate for my Senator to take legislative action to change these regulations in the tax code (would these regulations even be in the tax code? This is the type of information I need before writing a letter).
I think that if enough students signed a petition and wrote to their own senators and/or representatives, a meaningful change could be created in DC.
Even if the scholarships were given to you directly, you’d still be obliged to report them to the school. Different paths, same result.
They don’t want people abusing the money. How complicated is that?
rScholarship funds are generally not taxable income for degree candidates. The important point is that a scholarship-granting organization must exercise due diligence to see that funds given are used for the purpose for which they were given. This can be done in various ways. The “shortcut” is to disburse funds to the school for the benefit of the student. However, this is not required. It eliminates a lot of due diligence and record-keeping.
There is no point writing to anyone. Even if they send you the check, it will still reduce your financial aid…
I had one scholarship that sent me the check directly but I had to submit receipts to confirm the money was used towards college expenses. I agree with many above that it would add additional work for scholarship-granting organizations which is why most of them probably don’t want to do that.