What is a Scholarship Contract?

Many students rely on scholarships to fund their education. Those scholarship dollars often come with strings attached, and understandably so. Scholarship providers - whether colleges, nonprofits, or other organizations - want to ensure their funds make an impact, and that people using their funds are doing so in an intended manner. This is where a scholarship contract comes in.

Students who have been awarded a scholarship need to understand the scholarship contract. A scholarship manager’s job is to lay out the expectations and agreements in the scholarship contract with the recipients.

This legally binding document spells out the terms and conditions that must be met for a recipient to keep receiving the scholarship funds. Don't make the mistake of glossing over the importance of writing the fine print! Doing so could lead to the nightmare scenario of your recipient(s) not using the funds as your program intended.

If you’re intrigued and want to make sure you avoid any scholarship contract pitfalls, stick around as we dive into all the nitty-gritty details. We’ll cover key questions like:

- What types of requirements are typically included?

- What are the elements of a scholarship contract?

- How to go about creating a scholarship contract?

And

- What are the best practices of a scholarship contract?

What Is a Scholarship Contract?

A scholarship contract is an agreement between a scholarship provider (such as a college, university, or other organization) and a scholarship recipient that outlines the terms and conditions under which the scholarship will be awarded.

Key elements of a typical scholarship contract often include things like:

- The parties involved

- The amount of money being awarded

- The purpose or objective of the scholarship

- Any academic requirements or other conditions the recipient must meet

- The duration and/or renewal terms of the scholarship

- What happens if the recipient fails to meet the terms

- Signatures of both parties agreeing to the terms.

To put it another way, a scholarship contract protects both parties by spelling out the expectations and requirements in writing. It provides clear guidelines for the recipient on what they need to do to keep receiving scholarship funds. Having terms in writing also allows the provider to revoke the scholarship if the terms are not met. Overall, a scholarship contract promotes accountability on both sides.

What Are the Elements of a Scholarship Contract?

We briefly alluded to them already above, but let’s break the elements of a scholarship contract down a little further. At a minimum, here’s what to include in your scholarship contract for your program:

Parties involved

Clearly name the scholarship provider (college, organization, etc.) and the recipient. Include contact information.

Scholarship details

State the total award amount, disbursement amounts (e.g. per semester), and duration. It’s also important to specify what expenses the award covers - tuition, books, housing, etc.

Purpose of scholarship

Describe why the scholarship is being awarded - academic merit, athletic talent, field of study, etc.

Academic requirements, if any

Explicitly state:

• The minimum GPA the recipient must maintain each semester or year
• Minimum credit hours they must pass
• Other academic standards the recipient must meet.

Enrollment requirements

This can mean whether the recipient must maintain full-time or part-time enrollment status. You should also include a clause if the student is required to be enrolled in consecutive years (i.e. continuous enrollment) or if they are permitted a leave of absence (aka a gap year). It’s a good idea to include rules/terms about whether or not summer semester enrollment is required. Some scholarships don’t require this, but if you choose to require it be sure to state this in the scholarship contract.

Financial aid reporting

If your scholarship is financial needs based, you might want to include a clause about reporting changes in financial needs.

It’s also important to note that scholarship awards may also impact other aid. Under U.S. Department of Education guidelines, scholarships impact the total financial aid package offered to a student. The school must adjust institutional aid to avoid exceeding the student's calculated financial need. Therefore, it’s recommended that you include a note/clause in your scholarship contract that states your recipient must report their scholarship amount to the school they are attending.

Consequences if terms not met

This will vary based on your unique scholarship, but as an example, your terms might look like this:

- Scholarship will be revoked if GPA falls below minimum, enrollment lapses, or other terms violated.

or

- May require repayment of scholarship funds already disbursed.

Other conditions (if applicable)

Your scholarship may require community service, internships, or other requirements the recipient must fulfill. Whatever those requirements are should be explicitly stated in your scholarship contract.

Signatures area

Signature and date lines for both the scholarship provider and recipient must be in your scholarship contract as well. In some cases, scholarship programs also include a witness or notary section, but this isn’t required for the document to be considered legally binding.

How to Go about Creating a Scholarship Contract?

If your organization is ready to move forward with creating a scholarship contract, below are some recommended steps to follow.

1. Start with a scholarship contract template or sample to ensure you include all the key elements.
2. Clearly define the terms and conditions of the scholarship - requirements, duration, amount, etc. Get input from any relevant departments (academic affairs, financial aid, etc).
3. Make sure the contract complies with any organizational policies, state laws, or regulations. Have your legal counsel review it.
4. Include detailed instructions for the scholarship application process, deadlines, and materials required (transcripts, letters, etc).
5. Specify the selection criteria and process - who will be reviewing applications and selecting recipients.
6. State how funds will be disbursed - directly to the student, applied to their account, etc. Coordinate with your finance/accounting teams.
7. Clarify how students can maintain and renew the scholarship each year.
8. Specify causes for termination or revocation of the scholarship.
9. Have the contract signed by authorized representatives of your organization and the recipient.
10. Keep records of all scholarship contracts and monitor compliance. Follow up if terms are violated.
11. Protect student privacy - only share relevant student data internally with those who need to know.
12. Review and update your scholarship contract template periodically to improve the process.

Having a clear written contract sets consistent expectations and policies for your scholarship program. This promotes transparency, accountability, and efficient administration.

Best Practices for a Scholarship Contract

Provide a copy of the contract to applicants at the time of application. Including it in the application materials allows applicants to understand the requirements before applying.

Send the contract to selected recipients with their scholarship offer letter. Ask recipients to sign and return a copy accepting the terms in order to receive funds.

Have recipients sign the contract again at the start of each academic period when funds will be disbursed. This may be each semester or year.

Share a copy of the signed contract with relevant departments at your organization, like the financial aid office, accounting, registrar's office, etc.

Make sure recipients understand the conditions and keep their copy for reference. Remind them to review it periodically.

If any policies change, have recipients sign updated contracts reflecting the new terms. Don't make unilateral changes.

Provide easy access to the contract terms throughout the scholarship period in case questions arise.

Closely monitor compliance and immediately address any violations of the terms in writing, referring to the contract.

The contract should be shared early and often to avoid misunderstandings. Both parties should be aware of their rights and responsibilities, and reminded regularly. For example, if your scholarship is for multiple semesters, it’s a good idea to share it again at the beginning of each semester to ensure your recipient maintains compliance with your contract’s terms. Establishing these expectations upfront is key to smoothly administering scholarship programs.

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