May a 501(c)(3) organization award scholarships to a for-profit trade school? Are restrictions on the payment required?
A charity that operates a scholarship program may make a scholarship grant for an eligible recipient to attend a for-profit school such as a for-profit trade school or a for-profit university. The key characteristic that makes it charitable is that the benefit provides an educational opportunity to an eligible individual. It is like helping a person who has lost a limb to buy a prosthesis from a for-profit medical equipment company. You are helping the individual who has a need. If you are paying directly to the for-profit institution, you should require that the amount be applied only for the benefit of the named individual and returned to you if the individual does not attend.
You should also assure that you are not providing so many scholarships to the same for-profit organization that you could be accused of providing an improper private benefit from the charity to the for-profit. This would be especially possible if any of the insiders at the charity had a personal ownership interest in the for-profit. No one can tell you exactly where the line would be drawn, but an occasional grant for an individual attending a specific for-profit in a broad-based scholarship program should not cause a problem.
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