Hi. I am going to U of Michigan this fall with enough scholarships/aid to cover the full cost of attendance. Usually each school has parts of their estimated cost of attendance for personal expenses etc. If I am getting a full ride, does this personal expenses money basically become mine? And if so, how will I get the money? Thanks for reading!
Have you seen a breakdown of award? Usually it list all the billed costs and then specific amounts you are receiving either from a grant or a scholarship. If the grants/scholarships exceed the billed amounts, you’ll receive the excess as a refund if the scholarships or grants do not restrict the fund to a specific costs, like tuition only or books only. You’ll receive the excess as a refund, and it is up to the school when that happens. One of my kids receives the money almost immediately after the term starts but the other child receives hers weeks after her term starts as they wait for the drop/add period to pass, and then its another week or two to process the check (ridiculous) as they ‘only process them on Wednesdays’ and then send them to an outside vendor to actually cut the check. Ridiculous.
If you have books included in your package, you may have a credit you can only use at the bookstore. Check on that.
You’ll also owe taxes on the amount that exceeds qualifying expenses. Room and board doesn’t count. There are several threads on here and you can go direct to the IRS pub.
Yes, you’ll owe taxes on any non-loan, non-WS aid for non-qualified expenses. Sorry, but room and board, travel, personal expenses are not qualified. So the aid you get that covers room and board, etc, is taxed.
If you’re receiving WS or loans, that is sort of assumed to be for travel, personal expenses, and/or room and board…also some of your grants may also be paying for those things.
Avoid loans as much as possible. Don’t do what my hubby did when he was in undergrad and grad school…and that was taking the maximum loans to reach full COA and then used that money for fun, dating, etc. It was a nasty experience paying back those needless loans. If he had gotten a summer job or worked while in school, he could have worked/saved to avoid most of those loans which really just went for fun.
Get a job each summer and work/save as much as you can to avoid the need of some/all loans.
For clarification… wages from a work study job are subject to income tax (but not FICA).