LicenseQ helps you secure the best terms for your Microsoft agreements, such as the Enterprise Agreement, CSP, or MCA-E.
Author:
Erik Hollander
Erik started his software licensing career in 2005 as a senior procurement officer at the Dutch TAX Office, followed by a large global LSP and Microsoft.
You are now reading:
The End of Free Microsoft 3... The End of Free Microsoft 365 for Nonprofits? Understanding the July 2025 Shift
Author:
Erik Hollander
Introduction
Microsoft has long supported nonprofits with free and heavily discounted licensing options. However, significant changes are coming to Microsoft nonprofit licensing starting July 1, 2025. These changes will impact thousands of organizations that rely on Microsoft 365 for productivity, collaboration, and communication.
In this article, we’ll break down what the current nonprofit licensing model looks like, what is changing, and how organizations can prepare for the shift.
Microsoft licensing for nonprofits today
Currently, eligible nonprofit organizations benefit from:
Free grant-based licenses:
- Microsoft 365 Business Premium: Includes desktop Office apps, Teams, email, security features (up to 10 users)
- Office 365 E1: Web-only productivity apps and email (up to 300 users)
Discounted licenses (up to 75% off retail):
- Microsoft 365 Business Standard and Premium
- Office 365 E1, E3, E5
- Microsoft 365 E3, E5
- And many other products and services
These grants and discounts are designed to help nonprofits access essential tools without significant financial burden. However, the free licenses have been the most attractive offer, particularly for smaller nonprofits looking to minimize overhead.
What changes after July 1, 2025?
Beginning July 1, 2025, Microsoft will discontinue its free grant-based licenses for:
- Microsoft 365 Business Premium
- Office 365 E1
Organizations currently using these free plans will be allowed to continue using them until their next renewal date. After that, they must transition to an alternative plan. Once the grant expires, Microsoft provides a 30-day grace period to retain access, followed by a 60-day period during which data remains accessible but cannot be modified. If no action is taken, the data will be deleted after this period.
This change will significantly impact nonprofit IT budgets, especially for those with limited resources and many users signed up to these plans.
New licensing options available to nonprofits
Although Microsoft is ending grants for Business Premium and E1, it will continue offering:
Microsoft 365 Business Basic (Grant):
- Up to 300 users
- Web and mobile versions of Word, Excel, PowerPoint, and Outlook
- Microsoft Teams, SharePoint, and OneDrive
- Business-class email hosting
- No desktop Office apps
Discounted Paid Licenses:
- Microsoft 365 Business Premium: Includes desktop apps, advanced security, device management
- Office 365 E1, E3, E5: For nonprofits with over 300 users, available via Enterprise Agreement (EA)
- Microsoft 365 E3, E5: Enhanced productivity and security solutions, eligible for nonprofit discounts
These discounted plans still offer significant cost savings, but nonprofits must now carefully assess their actual needs to avoid unnecessary spending.
Keep an eye on the Microsoft Nonprofit page and the Microsoft 365 Enterprise pricing page for more information.
Strategic advice for nonprofits
1. Audit your current licenses
Start by identifying who in your organization is using grant-based licenses. Determine your next renewal date and estimate the cost of transitioning to paid plans.
To simplify this process, LicenseQ has developed our LicenseQ Hub tool that audits your Microsoft 365 environment and identifies:
- Users currently on grant-based or free licenses
- License usage patterns across the organization
- Renewal timelines and projected costs
- Opportunities for optimization
The LicenseQ Hub gives you clear, actionable insights and allows you to model what-if scenarios to understand the financial impact of moving to paid nonprofit licenses.
2. Profile your users
Not everyone in your organization may need a full-featured license. Segment users into categories:
- Full productivity users who need desktop Office apps
- Light users who can work with web-only apps
- Volunteers or occasional users who may not need a license at all
Read more about the importance of user profiling for Microsoft 365 here.
3. Consider Hybrid Licensing Models
To control costs, combine Business Basic (free grant) for light users with paid Business Premium licenses for power users.
4. Evaluate Enterprise Agreement Options
Larger nonprofits (typically with more than 300 users) may benefit from the flexibility and pricing of an Enterprise Agreement (EA). LicenseQ can help you access EA-based nonprofit pricing.
5. Seek Independent Licensing Advice
Work with an advisor who can assess your unique environment and recommend the most cost-effective licensing strategy. Independent consultants like LicenseQ, not tied to Microsoft margins, can provide unbiased insights.
Conclusion
The end of Microsoft’s free Business Premium and Office 365 E1 grants marks a major shift in nonprofit licensing. While discounted licenses remain, they require more strategic planning to maximize value and avoid unnecessary expenses. Nonprofits should begin preparing now by auditing their current usage, profiling users, and exploring alternative licensing options.
With the right approach, organizations can still benefit from Microsoft’s powerful tools without exceeding their budgets. But preparation is key! Waiting until your renewal date could result in lost access or rushed decisions.
Are you unsure where to start?
LicenseQ is here to help. Our nonprofit-focused licensing audits and the LicenseQ Hub tool give you the clarity and insight needed to make smart, cost-effective decisions. Contact us today for a free consultation and take control of your Microsoft licensing transition.
Frequently Asked Questions (FAQ)
Will our nonprofit lose access to Microsoft 365 if we don’t act by July 1, 2025?
No, the change applies at your next renewal date after July 1. However, once your grant expires, you will have 30 days of continued access and 60 days of data retention before Microsoft deletes your data.
Can we still get free Microsoft licenses after July 1, 2025?
Yes, Microsoft 365 Business Basic will remain available as a grant (free) for up to 300 users. It includes web and mobile versions of apps, Teams, email, and cloud storage—but not the desktop Office apps.
What happens if we do nothing when our grant expires?
After the 30-day grace period, your users will lose access. Data is retained for 60 additional days, after which it will be deleted unless you assign a new license.
How do we know if we’re eligible for nonprofit pricing?
You must be a recognized nonprofit or NGO and undergo Microsoft’s validation process. Eligibility criteria are outlined on Microsoft’s official nonprofit website.
Can we mix free and paid licenses?
Yes. Many nonprofits will use a mix of Business Basic grants for light users and paid licenses for staff who need full desktop apps or advanced functionality.
Where can we get help?
If you need help planning your transition or selecting the right licenses, consider working with an independent Microsoft licensing expert who specializes in nonprofit scenarios.
Need help evaluating your nonprofit’s licensing situation? Reach out to our team for an independent, obligation-free consultation.