Summary:
- Donor-advised funds act as tax-advantaged investment accounts for charities, providing a reliable stream for private K-12 schools to secure funding.
- These organizations can complement private foundations and cash donations for schools looking to diversify fundraising streams.
- Funding through these accounts requires a strategic approach to donor engagement, alumni outreach, and seamless payment processing.
The National Association of Independent Schools reports a nine percent year-over-year increase in contributions to donor-advised funds for K-12 use. What are these new sources of private school funding, and how can administrators utilize their powers?
Individuals contribute cash, stocks, bonds, and other assets to a sponsoring organization. They benefit twofold from tax deductions and potential tax-free growth for the funds. The account holder then designates when, to whom, and how much to disburse, as long as the recipient is an IRS-qualified public charity.
We will cover how this applies to educational institutions, alternative funding options, and how your school can take advantage.
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What Are Donor-Advised Funds for K-12 Education?
Like any other 501(c) nonprofits, most K-12 private schools are eligible to receive or benefit from donor-advised fund disbursements. This eligibility applies to only two categories of donations.
As entities separate from a school, the nonprofits administering privately funded scholarships may receive donations. It is not uncommon for alumni to create a general scholarship program and feed it with contributions from their own donor-advised fund.
Speaking of donors, direct contributions to tax-exempt private schools are also eligible transactions. Contributors can request grants as general funding for private schools or for specific projects such as capital funding or expanded services. Make sure you maximize donation capture from charities, funds, and individual contributors alike with a flexible, secure online payments platform.
How Can Schools Advocate for Funds?
Your school can take advantage of donor-advised funds for K-12 educational grants with the right tactics. You must understand who contributes to these funds and how your school mission resonates with them. Current donors are already familiar with the work your school does. Alumni and families who are more removed will likely need long-term nurtures and outreach to communicate the value your school provides its community.
Motivation may also be tied to life events, such as retirement or as part of a will. A long-term outreach strategy will cultivate the relationship needed to have your school included in the disbursement plan.
Research from Indiana University Purdue University Indianapolis shows “87 percent of organizations that solicited of organizations [for donor-advised funds] gifts received [a donation] in the past three years,” while only half that number, “42 percent, of organizations that did not solicit for gifts received any in the past three years. Donor-advised funds are a viable method of long-term funding for K-12 private schools, and they require a long-term strategy to fully capitalize.
In the short term, schools can ensure a smooth donation process by integrating with online donation platforms or offering simple contact forms for gift processing. Families can make online payments on school websites using the embedded CampusPay online payment form. Forms cover the breadth of incidental payments, including admission fees, donations, summer program registration, and more.
To explicitly call for donor-advised funds, simply list them as a method of donation on your website. Place them alongside acceptable payment methods for standard individual contributions, which can include ACH, card, and digital wallet.
Another tactic is to partner with fund sponsors for matching gift opportunities. Another organization matches fund donations, creating a stronger incentive for donors.
What Are Alternative Charitable Sources of Funding?
With an abundance of tax-incentivized organizations, donor-advised funds are not the only philanthropy source available to private K-12 schools. Let’s compare options commonly available to liaise with your school.
Structured very similarly, private foundations allow private individuals or corporations to support charitable efforts of their choosing. As they often require significant sums of money to establish, it is unlikely there will be more than a handful of private foundations or donor-advised funds available for your school. The substantial money behind them will make outreach efforts worthwhile.
Cash donations will be the most common donation type. Families and alumni often prefer to donate through the most straightforward method possible. To maximize impact, host donation drives and events, and encourage donations on an easy-to-use platform.
See how each method compares.
| Donor-Advised Funds | Private Foundations | Cash Donations | |
| Tax Benefits | Income tax deductions | Income and capital gains tax deductions | Income tax deductions |
| Structure | Public nonprofit | Subject to stricter laws and regulations | Ad-hoc or incremental giving |
| Grantmaking Control | Limited | Total | N/A |
| Eligible Recipients | Only IRS-qualified, 501(c)(3) public charities | A wide variety, provided for charitable purposes only | Public charities |
| Anonymity | Allowed | All filings are public | No |
| Is Investment Growth Taxed? | No | Yes, 1.39 percent | N/A |
There are many options from which your school can solicit donations. Understand how alumni and families wish to donate so you can better relate their options. Knowing why individuals want to donate allows you to point them to the most mutually beneficial option.
How Can Your School Take Advantage of Donor-Advised Funds?
Donor-advised funds provide an exciting funding opportunity for private schools to receive regular donations from invested alumni and families.
Regardless of whether your school receives significant investment-based philanthropy, it will still rely on the generosity of families, alumni, faculty, and staff. Give them an easy-to-use, secure, and mobile-friendly way to donate. These donations can deposit to school bank accounts the next day.
Frequently Asked Questions
What are donor-advised funds in education?
Donor-advised funds are tax-advantaged accounts where individuals contribute assets to a sponsoring organization. The donor then recommends how much of those funds should be disbursed to an IRS-qualified charity, such as a private K-12 school.
How can schools accept payments from donor-advised funds?
Schools can solicit these funds by clearly listing them as a supported donation method on their giving pages. Integrating a secure platform like CampusPay from VenturEd Solutions® ensures smooth processing for all contribution types.
Are donations to private schools tax-deductible?
Yes, direct contributions to tax-exempt, 501(c)(3) private schools are generally eligible for income tax deductions. Donors should always consult a financial advisor to understand the specific benefits of their charitable giving.
