How to write scholarship and gift restrictions that hold up
By the Awarded team · Published · Updated
How do you check that a scholarship restriction is OK?
Ask three questions. Is it legal: does it avoid criteria based on protected classes, proxies for them, and donor control over who receives the award? Is it feasible: will enough current students qualify, and will the program still exist? Is it documented clearly: can a committee apply it consistently, and does it match your templates and policies? A restriction that fails any one of these can leave a fund unawardable or expose the institution to risk.
1. Legality
Criteria based on race, ethnicity, national origin or ancestry, sex, religion, or age carry legal risk for institutions, and the landscape keeps moving with court decisions, federal guidance, and state laws. Watch for proxies too: criteria that aren’t explicit but effectively select for a protected class.
Donor involvement in choosing recipients is a separate risk: it can jeopardize the charitable deduction. Donors can describe who the fund is meant to help; the institution selects.
| Risky | Safer starting point |
|---|---|
| “…for undergraduates who are women” | “…for undergraduates with demonstrated financial need” |
| “…for a student of Irish descent” | “…for a student who has studied Irish history or language” |
| “…recipient to be chosen by the donor’s family” | “…selected by the scholarship committee; the donor may be informed of the recipient” |
2. Feasibility
A restriction can be perfectly legal and still impossible to award. Each added criterion shrinks the pool: a county, then a major, then a GPA cutoff can take a pool of a thousand students down to two. Programs and majors also get renamed or closed, leaving a fund with no one to support.
3. Documentation
If a committee can’t apply a criterion consistently, it isn’t administrable. Terms like “deserving,” “well-rounded,” or “outstanding moral character” invite inconsistent decisions. Replace them with criteria someone can verify, and keep language aligned with your approved templates and style guide.
Write the agreement so it can still be awarded decades from now, without being rewritten every year.
When the rules change
When new guidance or a new state law arrives, institutions have had to reread hundreds of existing agreements to find the ones affected, and rewrite them one by one. Keeping agreements searchable, and screening them against the same rules you use for new drafts, turns that into a search.
GATO runs all three checks on every draft and on your existing portfolio, rated red, yellow, or green, with the clause, the reason, and suggested language. See how it works for donor relations.
This guide is general information, not legal advice. Laws differ by state and province; review restrictions with your general counsel.