Scene from the Lawn at the University of Virginia in Charlottesville. (Norm Shafer for The Washington Post)

The University of Virginia aims to create an endowment of up to $300 million for student scholarships, using private donations and revenue from a controversial strategic reserve fund valued at $2.2 billion earlier this year.

What U-Va. calls the Bicentennial Scholars Fund, named for the public university’s approaching 200th birthday in 2019, will be built over five years under a plan the Board of Visitors approved last week.

“With this step, the university is beginning the process to permanently fund through philanthropy, rather than tuition dollars, its financial aid program,” U-Va. Rector William H. Goodwin Jr. said in a Dec. 9 statement. As rector, he chairs the governing board.

The scholarship fund will support grants to undergraduates based on financial need or on academic merit, benefiting students at the state flagship in Charlottesville and U-Va.’s College at Wise in southwestern Virginia. The plan establishes an incentive for donors: The university’s strategic reserves will provide a $1 match for every $2 donated to the scholarship fund on gifts of $100,000 or more, and a dollar-for-dollar match on gifts of $1 million or more.

With the initiative, U-Va. provided a further example on how it plans to use the strategic reserves. Amassed outside of the endowment during the past decade, the reserves drew intense scrutiny last summer when their value was disclosed at $2.2 billion. U-Va. officials said that sum was enough to finance the school and its medical center for nine months. A former board leader, Helen Dragas, called the reserves a “slush fund,” and some lawmakers wondered how the university could justify sizable annual tuition increases given its cash stockpile.

U-Va. has raised tuition significantly in recent years, in part to support financial aid for students in need. The price for in-state freshmen — about $13,000 this fall, not counting fees, room and board — is up 30 percent since 2013. University officials defend their actions, citing independent rankings that say U-Va. provides a top-flight education at a bargain price.

Debate over the reserves receded after the state legislature’s leadership indicated its support for the university’s financial stewardship. In September, the board approved $26 million in academic, research and technology projects, the first to be financed after the reserves were announced as a Strategic Investment Fund. This month the board approved an additional $29 million in projects, including $17 million for a cross-disciplinary effort to combat childhood diabetes.

The scholarship fund, if it reaches the $300 million target, would provide a fraction of what U-Va. spends every year on financial aid. U-Va.’s endowment generally pays out between 4 percent and 5 percent a year. That would translate to roughly $12 million to $15 million a year in aid funding from a $300 million endowment.

But U-Va. provides students with about $110 million a year in need-based aid, with $53 million of that coming from tuition revenue. U-Va. is one of a small group of schools nationally that declares it is need-blind in admissions decisions and will meet the full need of students who enroll.