I won a $20,000 scholarship from my high school. My town gave me the check and I used this money to pay my fall bill. I didn’t know how else I could’ve paid my bill because my parents weren’t going to contribute to my tuition if I reported the scholarship. I would’ve had to loan ~$35,000 for my first year in college as an 18 year old without a cosigner. My town said that the scholarship isn’t taxable and I wasn’t going to get a tax form at the end of the year or anything. 1) Does this mean it isn’t going to get reported to the IRS? They also said they won’t inform my college of the scholarship. 2) What are the repercussions if my school found out about the scholarship? 3) Could they ever find out about the scholarship if my town doesn’t report it to the IRS? 4) Can I still tell my school about the scholarship if I already paid my bill with it?
I am extremely stressed out and guilty because I blatantly broke the rules, but I don’t know how I was going to pay my bill without my scholarship.
Don’t take tax advice from your ‘town’. Just because the town will not send you a W2 or a 1099 doesn’t make it a tax free gift.
Did you take any federal financial aid from your school, like a Pell grant, SEOG, or federal student loan (the $5500 loan, even if you took a lesser amount?). If so, you are required to report it and yes, you can still do that. You agreed to report any outside scholarships when you completed the FAFSA. It MIGHT change the federal grants and whether the loan is subsidized or not subsidized.
It might only change your FA for the fall/one year if you used all $20k to pay your fall tuition (and if so, how will you pay the rest of your bills in the upcoming years).
Whether it is taxable has more to do with how much your tuition, fees, and books add up to and not what the hs/town advised you. Scholarships used for Qualified Educational Expenses aren’t taxable, scholarships used for room, board, travel, incidentals, etc. are. You have to look at your entire bill and all your scholarships together to know if it is taxable. The IRS often doesn’t get a report from the grantor of the scholarship but that doesn’t make it tax free.
Don’t fool around with this - do the right thing. It could come back to bite you if you don’t tell the truth.
How will taxes be applied to my scholarship? Is my tuition a “Qualified Equational Expense”?
Yes, I did take out a $5,500 student loan, but I also won an additional $5,500 of outside scholarships, so these other scholarships cover my student loan. What does this mean then? I did get a grant from my school as well.
Listen carefully to this. You are REQUIRED to report outside scholarships to your college.
If the scholarship was used for only tuition, fees or books, it won’t be taxable. But what about your grant aid?
You have $25,500 in outside scholarships. This reduces your financial need. It might not reduce your need based aid…but it might.
What makes you think that this was not reportable to your college?
@BelknapPoint how would this money be reported in subsequent financial aid forms?
@thumper1
I would very very much like to report the scholarship, but my parent’s aren’t going to help pay for my tuition if I report it. If I had $35,000 available to me to pay for my tuition, I would report the scholarship in a heartbeat. How will I loan $35,000 by myself without a cosigner? My college gave me a grant, but my bill for the year is still $40,000.
Add up all of the scholarship and grant money you got. That includes this $20k scholarship from your town, all the other awards and the School grants and PELL if you got any of that. Then, add up the tuition, fees, books ,supplies, course fee, equipment necessary for your courses. Subtract that amount from your total scholarship and you have the amount that MAY be taxable. It will be part of your AGI for that year on your Form 1040. I say “MAY be taxable” because you need to have $12k in income in a year before you start paying federal taxes on it. State taxes can be a whole other story.
You need to read the rules your school has regarding scholarships And how to report any outside awards.
When you fill out the FAFSA using the 2018 1040 tax info ( I’m assuming this all happened last. Year), you’ll report the taxable part of your scholarship which you included in your AGI on that tax form under the question that asks,”How much taxable grant or scholarship did you receive? “
You need to check YOUR college policies on how they deal with outside scholarships.
What was your FAFSA EFC? Are you saying your parents refuse to pay the family contribution…or what?
What was the total cost of this college?
You got $25,500 in outside scholarships which could have likely paid for tuition at an instate public…if you commuted from home.
@thumper1
My college decreases the student loan and then the student work study and then the grant money dollar by dollar.
Yes, I’m saying my parents refuse to pay the family contribution.
My FAFSA EFC is like $15,500, but my bill this year is $40,000.
Total cost of the college is $79k.
Why do people tell you to apply for outside scholarships if this money doesn’t help your family contribution? Why do schools needs to reduce the grant dollar by dollar?
Can your parents afford $40k/year? How will they pay when you no longer get the outside grant?
@austinmshauri My parents can’t afford $40k/year. We will likely need to loan lots of money after this year, but I think my bill next year will be less than 40k.
In the case of need-based grants, it’s because each dollar received from an outside scholarship means you need one less dollar from the school in grant money. The school will not give you institutional money to help pay part (or all) of your expected family contribution.
You know what your college does. You know that you should have reported this scholarship. Your grant money would have been reduced dollar for dollar after your loan and work study were reduced.
Like i said…you got $25,000 plus in outside scholarships.
You are going to a $79,000 college…with no way to afford paying the bills.
I hope you understand that you are receiving aid from your college without providing accurate information.
If you are receiving work study, that is federally funded aid. If you received it by knowingly providing misinformation, that is considered…fraud. Look that up in a dictionary. It’s a crime. It’s punishable…you could lose all of your aid, you offer of admission, and be fined.
I’m hoping someone else will chime in here.
Fact is…you are being dishonest. And colleges frown on dishonesty.
It sounds like you college doesn’t meet full need for all accepted students…and you are short on the money.
No one…repeat…NO ONE needs to go to a $79,000 college.
Why didn’t you pick someplace that was affordable. Your $25,500 in outside scholarships, plus the Direct Loan of $5500 would likely have funded an instate public university.
I’m sorry…but I just don’t understand this story. Are you asking us to tell you it’s OK not to tell your college bout this outside scholarship money? If so…that’s not going to happen.
You will need to borrow lots of money, or take a loan. If you loan lots of money, that means that you are providing money to someone else.
You need to do what you want. YOU sign the FAFSA. Yes, your parent do too, but they are just certifying their income and taxes, YOU are certifying all the rest of the info is correct and you agreed to report all outside financial aid to the school (who is the gatekeeper for federal aid). It doesn’t matter that your parents don’t want to do it. They aren’t the ones whose federal aid will be cancelled if the fraud, which is what non-reporting is, is discovered. If the school finds out, they will cancel your direct student loans and all federal aid.
There is a lot more wrong with this than just not reporting $20k. You have big holes in your FA. Your bill was $40k and you’ve paid half of that this semester. What are you going to do next semester? Where is the next $20k going to come from? And yes, if any of that $25,500 in scholarships is used for room and board, you will owe taxes on it.
MODERATOR’S NOTE: Closing thread since CC doesn’t want to condone dishonesty.