A scholarship program is a financial award granted by a university, private organization or individual to pay for part of a student’s college education. It is awarded based on a student’s academic achievements, community involvement, extracurricular activities or talent, among other criteria. It can range from covering tuition fees to fully funding all costs linked to a student’s higher education.

There are a few main categories of scholarships:

Merit based. These scholarships are based off academic achievement and often awarded to students with high SAT or ACT test scores as well as GPAs. These are generally offered by universities and are often referred to as “school scholarships”.

Demographic. These are based on a student’s gender, ethnicity, religion, family background or other specific criteria. These are usually harder to find and can be a good way for students to stand out in applications and to find funds that might not have been available otherwise.

How the money is spent may be left up to the student, but the rules are typically spelled out in the scholarship terms. Scholarships sent directly to a student are typically used for textbooks and supplies, but the exact use of the funds depends on the rules. Students should save receipts and proof that they are spending the scholarship funds according to the rules.

Students who are planning on starting a scholarship should plan ahead and understand how much it will cost to set up the entity, the fees for legal services and fundraising with friends and family. It will also take time to manage the scholarship funds once they are in hand.