Reverse Scholarships
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Review Concept
Legal Aspects
COF Comments
What Audience is Doing in This Area
Reverse Scholarships:
Randy Maiers
Stclairfoundation.org
Sounds Easy enough…
• Competitive scholarship program providing
“back end” financial support for recent
graduates
• Applicants must be willing to move back home
to be eligible
• Applicants must be graduates of a STEAM
program/degree
• Scholarships help pay off student debt
Go climb that hill…
But first……Why?
Why a Reverse Scholarship?
• You first have to understand the context of the
conversation
• How did we arrive at this idea?
• How does it fit in with our strategic priorities?
• Why should non-donors and non-foundation
friends care?
• How did this conversation begin?
Step #1:
Ask “What’s Important to You”?
“What’s Important to You?”
then
“What can we do about it?”
What’s Important?
• Having our kids come back home
• Having them take over the family business
• Or work on the farm as engineers, scientists,
chemists, farmers and business owners
– Today’s farms are big, high-tech businesses
• Or start up their own business
• Craft Agriculture…craft beer….hops farming…
And some brutal honesty….
• Why do we send kids away to school?
• Why do you give out so many scholarships to
kids who don’t come back?
• How do you know those scholarship dollars
are a good investment?
• What % of your kids drop out, change majors,
or don’t do what they said they would?
Traditional……Front end
Scholarships….
Are they really a good investment?
So we got our friends together….
If this is so important…..
What can we do about it?
Our solution….
• We’ll give donors a choice….front end
scholarships or back-end….
• We’ll invent: Reverse Scholarships
• We’ll pay recent college graduates to come
back home instead of paying them to go away
• We’ll have a greater degree of certainty that
our dollars will be invested wisely
How does it fit in?
• Downtown Revitalization
• Slowing down or reversing the “talent drain”
• Bringing skilled, educated and trained
professionals back to small towns
• Increasing entrepreneurship
• Filling skilled & educated job openings
• Giving farmers & small shop owners a hope
that a family member will take over their
business
Reverse Scholarship?
• Never been done before by a community
foundation
• No model to follow
• Is it legal?
• Is the income taxable? (for now it is)
• Is it charitable?
• We’re going to need some help….
More questions than answers..
1. Does it run like a normal scholarship?
2. How do you define a “recent college
graduate?”
3. Why STEAM?
4. How long do they have to live back in their
“hometown?
5. What if they move?
6. What is the dollar amount of the
scholarship?
Possible Legal Challenges….
• Can we prove it “ lessens the burden of
government?”
• Can it be operated under the auspices of local
government….or….
• Sanctioned by a local unit of government
• How can our EDA’s and local municipalities
help?
• Some unit of government must consider the
lack of STEAM grads as a “burden”
Answers….so far….
• We think it can work….
• Especially here in the Midwest
• Create a pilot program via a new Supporting
Organization
• Working concurrently with our local units of
government & Economic development
organizations
We’re excited….
Focus group surveys with donors
and community groups…..
Responses as high as 95% prefer a
Reverse Scholarship over a
traditional, front-end scholarship
Questions?
Legal Aspects
Dave Lindberg
dlindberg@michiganfoundations.org
Charitable Issues to Consider
• Programs to attract medical professionals or
teachers to underserved populations or areas
experiencing shortages are charitable
• Attracting college graduates to a particular
community in itself is not charitable.
• Economic development is not “per se”
charitable
Charitable Aspects of Econ. Dev.
• Has the effect of relieving the poor, distressed
or underprivileged, or combatting community
deterioration
• Lessens neighborhood tensions, eliminating
prejudice & discrimination, defending human
& civil rights or combatting juvenile
delinquency
• Lessens the burden of govt. in community
suffering financial distress or disinvestment
What would make the reverse
scholarship program charitable?
1. Promoting economic development in a
financially distressed community
2. Local unit of government acknowledges the
program lessens the burden of govt.
Key Indicators for Area Suffering
Financial Distress
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Unemployment Rates
Poverty Rates
Vacant Housing
Income Levels
Mich State Housing Dev. Authority has criteria
for distressed areas
Support For Lessening Burden of
Govt.
• Identify broad charitable class that will benefit
• Local govt show interest in meeting need to
be addressed through legislation or ordinance
• Document economic benefit to community or
savings to govt.
Support For Lessening Burden of
Govt. Continued
• Document relationship between community
foundation & govt. agency
• Business owners who benefit from program
should not be involved in management of
program
• 1 or more public officials serve on committee
administering program
Graduate Student Income Issues
• Scholarship would be taxable income
What’s Next
• Community Foundation of St. Clair County will
be establishing a supporting org. to administer
program
• Nationally pursue a private letter ruling with
help of COF