Rewards
After donating nine books, you'll receive a Wizard Hat. It will be Bright or Dark depending on which books were donated.

Bright Wizard Hat
Give the teacher a number of 'good' books, of which there are 12.
'Good' books are easier to find when the hero is good.
The teacher will ask for these books before asking for the 'bad' books, making the Bright Wizard Hat much easier to get.
List of 'Good' books.
Creatures of the North
Making Friends
The Arena
The Dragons
The Northern Wastes
The Oakvale Raid
The Old Kingdom
The Other Land
The Tailor's Tragedy
The Trials of Aarkan
The Ugly Guide
Windbreaker Rule Book

Dark Wizard Hat
Give the teacher a number of 'bad' books, of which there are 14.
'Bad' books are easier to find when the hero is evil.
'Bad' books are often found in the houses in Bowerstone South, and in the Heroes' Guild dorm and library.
If you are aiming to obtain the Dark Wizard Hat, it is strongly recommended that you get these books before picking up any others. If you already have the good books, you may try donating them in Snowspire Village.
List of 'Bad' books;
A Love Story
Creatures of Albion Book I
Creatures of Albion Book II
Creatures of Albion Book III
Eyes of a Killer
Jack of Blades
The Balverine Slayer
The Guild of Zeroes
The Pale Balverine
The Repentant Alchemist
The Sock Method
The Tale of Maxley
The Tale of Twinblade
You Are Not a Bad Person

Silver Key
Give the teacher 25 books.