Reverse Scholarships

• 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 Lindbergdlindberg@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

• 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