Form Your Own SGO or Partner With an Existing One? A Framework for the Decision

One of the first strategic questions any organization faces when exploring the Section 25F program is whether to form its own Scholarship Granting Organization or to partner with an existing SGO that is already approved and operational.

The answer is not the same for every organization. It depends on factors specific to your mission, your donor base, your governance structure, and your long-term ambitions for the scholarship program. This post lays out the framework we use when helping organizations evaluate the decision.

The Core Trade-Off

Forming your own SGO gives you control — over brand, governance, scholarship criteria, donor relationships, and program design. Partnering with an existing SGO gives you speed and simplicity — you can begin accepting scholarship contributions and awarding scholarships without the four-to-six-month formation and approval timeline.

The trade-off is real, and neither option is inherently better. The right choice depends on which factors matter more for your specific situation.

When Forming Your Own SGO Makes Sense

Your organization has a distinct mission that requires specific scholarship criteria. If your scholarship program is specifically designed to serve students in your faith tradition, your school network, or your geographic community, a partnership SGO may not be able to implement scholarship criteria that match your mission. A diocesan SGO can award scholarships specifically to Catholic school students in the diocese. A coalition SGO serving a broad population cannot easily restrict awards to a specific faith community.

You have an existing donor base that gives because of your organization's identity. If your donors give to you because they trust your organization — your leadership, your mission, your track record — they may not transfer that giving to a third-party SGO that happens to hold their contribution before it becomes a scholarship. The donor relationship is an asset, and it belongs to the organization that cultivated it.

Your program scale justifies the formation investment. The cost and time of formation is fixed — it does not scale with the size of the scholarship program. An organization that expects to raise $2 million per year in SGO contributions is absorbing that formation cost against a significant program. An organization that expects to raise $50,000 per year is absorbing the same cost against a much smaller base.

You need governance control over award decisions. Section 25F's no-earmarking requirement means that scholarship awards must be made through an arm's-length process. But the SGO board still controls the criteria: which students are eligible, how awards are prioritized, what expense categories are covered. If your organization's leadership needs to have final authority over those decisions, forming your own SGO is the only way to achieve that.

Your state has a mature opt-in framework. In states with well-developed approval processes, the state registration phase is predictable and has an established timeline. In states still building their frameworks, formation risk is higher. Check where your state is in the process before committing to a formation timeline.

When Partnering With an Existing SGO Makes Sense

You want to move quickly. If your organization wants to begin accepting SGO contributions in 2027 but is starting the exploration process late in 2026, formation may not be feasible in time. An existing SGO with approved status and operational infrastructure can begin accepting contributions on your behalf far more quickly than a new entity can be approved.

Your organization does not have the administrative capacity to operate an SGO. A compliant SGO is an ongoing operational commitment — state reporting, donor management, income verification, compliance monitoring. If your organization's leadership does not have the bandwidth to oversee these functions, and you are not planning to engage an infrastructure partner to handle them, the ongoing operational burden of a standalone SGO may exceed what you can manage.

Your scholarship program is small or experimental. If you are testing whether the SGO model works for your community before committing to full formation, a partnership arrangement allows you to learn without the formation investment. If the program grows to a scale that justifies its own infrastructure, you can form your own SGO later.

You operate in a state that has not yet completed its opt-in process. If your state is still developing its opt-in framework, you may not be able to get state approval at all in 2026. An existing SGO approved in a state that has opted in may be able to serve donors who live in your state, depending on how your state's framework handles multi-state operations. This requires careful legal analysis of your specific situation, but it is sometimes a viable path.

The Questions to Ask Before Deciding

If you are evaluating this decision, here are the questions that matter most:

1. Who are your donors, and why do they give to you? If donor loyalty is organizational — tied to your brand and mission — a partnership arrangement that transfers the giving relationship to a third party creates relationship risk.

2. What scholarship criteria matter most to you, and can a partnership SGO implement them? Be specific. "Students from low-income families in our community" is implementable by most SGOs. "Students attending schools in our diocese who demonstrate financial need as assessed by our admissions office" is not.

3. What is your realistic fundraising projection for the first three years? This drives the ROI calculation on formation investment. If you do not know, start with a bottoms-up estimate based on your existing donor relationships.

4. What is your state's opt-in status and approval timeline? If your state has not yet opted in, your formation timeline is uncertain regardless of when you start.

5. Do you have (or plan to engage) the operational infrastructure to run a compliant SGO ongoing? Compliance monitoring, state reporting, and donor management are not one-time tasks. The ongoing cost and complexity of operating your own SGO is often underestimated at the formation stage.

The Most Common Mistake

The most common mistake we see is organizations defaulting to "form our own" without working through the criteria above — because forming their own SGO feels like the full commitment to the program, while a partnership feels like a temporary half-measure.

The full commitment question is: how many students do you want to help, and which path — formation or partnership — gets you there faster, more reliably, and with the scholarship criteria that match your mission?

For some organizations, that is clearly their own SGO. For others, it is a partnership that gets them operational in 2027 while they develop the program scale to justify formation in 2028 or 2029.

Neither is a half-measure. Both are legitimate paths to the same outcome: scholarship dollars reaching income-eligible students.