8.10.7 Scholarships, Fellowships and Educational Assistance Grants
Policy Statement
As defined in IRS Publication 970 Tax Benefits for Education, scholarships, fellowships and educational assistance grants are amounts paid for the benefit of an individual to aid in the pursuit of study or research. No past, present or future services are expected in return for these payments, nor are recipients expected to repay them. These payments support educational needs, such as, tuition, fees, room, board, supplies and travel, primarily for the benefit of the student's academic development. Scholarships, fellowships and educational assistance grants designated for qualified expenses (i.e. tuition and mandatory fees, books, or supplies) are not taxable income to the recipient. However, scholarship, fellowship and grant payments for unqualified expenses (e.g. room, board, travel, research, non-mandatory fees, books or supplies) are taxable income to the recipient. It is the student’s responsibility to determine and report to the IRS taxable scholarships, fellowships and/or grants received.
Reason for the Policy
The Internal Revenue Service (IRS) and the U.S. Department of Education (ED) impose strict guidelines by payment type on how payments to students must be reported. For additional information, see Payments to Students.
Applicability of the Policy
Students receiving scholarships, fellowships and educational assistance grants. Scholarships, fellowships and educational assistance grants are reported to the Office of Student Financial Aid (OSFA) and considered a resource when determining the student's financial aid eligibility. Therefore, these payments may have an impact on the type and amount of financial aid the student is eligible to receive. OSFA will make the necessary adjustments to the student’s financial aid upon receiving notification of the payment. These adjustments may create or increase a balance due on the student’s university account. The university’s reporting responsibility with respect to Federal Student Aid (FSA) and any other financial assistance received by students is outlined in Volume 3 of the Federal Student Aid Handbook, specifically Chapter 7.
Procedure
The Banner account code used for scholarships is 181100; the program code rolls up to NACUBO function 1787. The Banner account code for fellowships used to pay educational expenses is 181300, the Banner account code for fellowships used to pay living expenses is 281300; the program code for fellowships rolls up to NACUBO function 1788.
Scholarships, fellowships and grants paid to U.S. Citizen and Resident Alien students are reported to the IRS and the recipient on Form 1098-T, Tuition Statement, by University Bursar. A Social Security Number (SSN) is required for IRS Form 1098-T reporting.
Scholarships, fellowships and grants paid to Nonresident Alien students are not reported on Form 1098-T unless the student requests University Bursar to do so. However, with the exception of qualified scholarships and fellowships, and W-2 reportable wages, all payments to Nonresident Alien students are reported to the IRS and the recipient on Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, by University Payroll and Benefits (UPB). Withholding may be required on these payments. For additional information, see Payments to Foreign Nationals.
Units must follow applicable requirements for processing these payments. Guidance for reporting payments and additional instructions are described in Payments to Students.
Additional Resource
See IRS Publication 970 Tax Benefits For Education for additional information regarding taxability of these payments.
Last Updated: February 18, 2020 | Approved: Senior Associate Vice President for Business and Finance | Effective: March 11, 2019