What Microsoft’s Nonprofit Licensing Changes Mean — And How to Transition Smoothly

In May 2025, Microsoft announced they are discontinuing their donation of 10 free Microsoft 365 Business Premium licenses to every nonprofit organization. This will take effect for each nonprofit at their annual license renewal on after July 1, 2025. While this may seem like a drastic change, and it will certainly impact smaller nonprofits the most, this article explains what’s really happening and how to make the best of it.

Here are the three keys steps we’re doing for our nonprofit clients, and we recommend you do the same:

1. Microsoft 365 Business Premium’s key features are locally installed versions of Office apps and Intune computer management. Begin by determining how many Microsoft 365 Business Premium licenses you truly need. Microsoft 365 Business Basic may be sufficient for people who use Office via the web, while other accounts may not need any licenses, particularly in situations where the person no longer works for the organization or the account could be migrated to an alias or shared mailbox. Some people may unnecessarily have multiple licensed accounts, especially if they have more than one computer. This reconciliation process will save you money!
   1. Microsoft is giving 300 licenses of Microsoft 365 Business Basic to each nonprofit for free.
   2. Microsoft is giving up to a 75% discount off Microsoft 365 Business Premium. Regular price is $22, but nonprofits will pay around $5.50 per license.
   3. Licenses go by the number of accounts, not the number of computers you have (each Business Premium account can install Office on up to 5 devices).

2. Purchase necessary licenses, assign them to appropriate accounts.
3. Remove the old licenses and cancel old grant subscriptions to minimize confusion.

Nonprofits can alternatively purchase other plans like Microsoft 365 Business Standard and Office 365 E1. These plans are discounted to $3 and $2.50 and come with slightly different features, so you can purchase the features you need to maximize your value. Here’s a comparison matrix between the four plans so you can decide what licenses are best for your nonprofit organization.

Pegasus Technologies is a Microsoft Partner with many nonprofit clients, so we’re here to help. If you prefer to tackle this on your own, here’s a step-by-step transition guide that will help you with the technical details.