<p>^^
That’s what I thought. It wouldn’t be reported to the school as a scholarship.</p>
<p>So, the school just needs to change the name of their award and say that it’s just an award for academic achievement. Since the school has been giving the money to the student already, the school doesn’t seem to be demanding that it be used for school. A student could be using it for a graduation trip, a down payment on a car, or whatever.</p>
<p>The one caveat I can think of for the not-a-scholarship award is that for a low-income student, receiving the income as a gift that has to be reported on FAFSA could impact their Pell eligibility. Depending on what kind of aid the school gives, and their policy on outside scholarships, they could end up worse off, I think.</p>
<p>I would like to have a word with that school principal. What s/he is saying is absolutely not right. It could also have some dire consequences for some students, not just with the school if discovered, but with the federal government when federal aid is involved. When you enroll at a college, you are agreeing to the terms of that school.</p>
<p>Most of the time, scholarships are not going to make a huge cut in someone’s aid. Most schools will take the amounts off of any loan awards and works study first, and then the governments as required by federal law. (with some exception for PELL), and then if the award is so large, cut into the meat of the financial aid, which are the school grants. You can still take out the Stafford loans on an unsub basis if you have any uncovered COA and with work study no longer in the picture, find an outside job and get funds that way instead of having to use those hours towards financial aid. </p>
<p>With large outside awards, that’s when some discussion can be made with colleges and can be part of what helps you decide what school to attend.</p>
<p>*The one caveat I can think of for the not-a-scholarship award is that for a low-income student, receiving the income as a gift that has to be reported on FAFSA could impact their Pell eligibility. Depending on what kind of aid the school gives, and their policy on outside scholarships, they could end up worse off, I think.
*</p>
<p>the kid would have to get/earn more than about $6k per year in order to start reducing Pell. And even then, it wouldn’t be a dollar for dollar reduction of aid (which a scholarship would). </p>
<p>It doesn’t sound like the scholarship is for THAT much, but even if it is, it’s better to have a slight reduction in aid then a full dollar for dollar reduction from the scholarship amount.</p>
<p>I’m thinking of the case where a kid is only getting the Pell, federal w/s and federal loans from a school that doesn’t meet need, and has more than enough “gap” to cover the outside scholarship. In that case, i don’t think the scholarship would impact the aid at all if reported as an outside scholarship, but could reduce the Pell if reported as a gift.</p>
<p>I guess if the “gift” is that large. How much is the school giving? I was thinking that it was maybe a couple of thousand dollars.</p>
<p>My guess is that this particular scholarship is indeed probably just a thousand or less. But I know this school isn’t the first scholarship granting organization to have that concern, and the larger the award, the more likely the organization is to have the concern. So I was thinking about whether there are caveats to this as a general solution to the “problem”.</p>
<p>The “caveat” is that you are breaking the school’s rules when you do this and lies can have short legs. Many ways one can get caught. At 18, the world is your oyster and each time you take a chance doing something like this, it can come back and bite you on the back side. You don’t know what kind of investigation on your financials you may be needing for one position or other in the future. You really should not be doing this, but if contemplating it, be aware of the possible consequences. </p>
<p>For small amounts, the impact is very small on most people’s packages due to the self help component that is first hit. For large amounts, you may have to report some of it on taxes, and the school will be seeing that return next year when you are asking them for more money. If a PR piece comes up, or you mention on some apps that gets noticed that you won some schoalrship award or other, you can get caught. The world is a lot smaller than you would think. I could write a book on some crazy coincidences. </p>
<p>I don’t think any adult should be urging a young person to break school rules like this principal is, and those organiations that are urging students to do this should be ashamed of themselves as they are not looking at the whole picture. If any student or person chooses to do this subterfuge themselves, it’s one thing. To give all of the information out about the ramifications including possible loss of college financial aid is just that, giving info. But to broadscale say to not mention the award, is terrible advice and WRONG.</p>
<p>A school cannot give a “gift” but could give an award. However, if that award is more than $600 the school is required to report that award as taxable income on form 1099-MISC. Not only would it become income which could reduce aid the following year, but taxes would have to be paid. For dependent student, with earned income, anything over $300 is likely to end up taxed.</p>
<p>This Principal is walking on very thin ice. Whoever is giving the scholarship is likely to be a 501(c)3 or (c4) entity, and handing out loads of “awards” as opposed to scholarships could cause problems their status as a non-profit organization.</p>
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<p>Which school’s rules – the school giving the award or the school you are attending? I believe that if the donor school gives an “award” rather a “scholarship” and the student correctly declares it as income and puts it on their FAFSA / Profile for the following year, no one is breaking anyone’s rules. They’re just playing by a different set of rules, which may help some students, but may hurt others.</p>
<p>To clarify, I’m not condoning the principal telling the student to take the money and not report it. I’m suggesting that the principal and the school giving the award might want to change they way the money is awarded, so that the student legally reports it differently (as income, rather than as a scholarship).</p>
<p>Lots of speculation in this thread about “could have, should have, would have.” Bottom line, if the OP is awarded a scholarship, he’d better darned well declare it if his college asks him to.</p>
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<p>Definitely!</p>
<p>Right, but if this student tells his principal about the fraud issue and tells the principal that if they can just call the award a gift, then that will mean that the money won’t get reported as a scholarship.</p>
<p>Obviously the school would want to investigate any impact on their end from giving out an award that is not a scholarship. They may get some tax benefit from awarding scholarships that they would no longer get.</p>
<p>Do non-profit schools pay taxes?</p>
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<p>Right, but that is so not the student’s job! He should accept the scholarship graciously and report it to the college as needed. End of story.</p>
<p>And, frankly, if the “principal with no principles” says, “Sure, just call it a gift!” - would that make it okay? I don’t think so!</p>
<p>If this principal has done the legal work to have made the money be a “gift” rather than a scholarship, that’s fine. Perhaps, the student should ask about this. There are ramifications to most money transactions, so hopefully they are addressed. There could be IRS and other federal government issues involved here, is the problem. If someone who gets the money already has full tuition and supplies covered, that is taxable money, for instance. Also if someone is getting this award and it is going towards his FAFSA EFC, he is not entitled to subsidy of those loans, or Perkins loans, or SEOG or workstudy, according to federal regulations. State money might also have such stipulations. So it’s not just the colleges that are involved here. </p>
<p>I cannot imagine that we are talking large amounts here; most outside awards are not, so if the subsidized Staffords and workstudy, which are usually the first things colleges replace with outside money, and that is also something that cannot stay as it due to federal laws, the same amount of Stafford can be used on an unsub basis towards EFC, and the student can use the hours regained from no workstudy to get an outside job. It’s really in a small number of cases that it makes a big difference and those are the cases made huge examples of by the media. More should be so lucky to have this problem.</p>
<p>*Quote:
Right, but if this student tells his principal about the fraud issue and tells the principal that if they can just call the award a gift, then that will mean that the money won’t get reported as a scholarship.</p>
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<p>Right, but that is so not the student’s job! He should accept the scholarship graciously and report it to the college as needed. End of story.</p>
<p>*</p>
<p>I don’t agree. I think it is very much OK for a student (or parent) to talk to the principal and say, “hey, I can understand that you don’t want a student’s aid to be reduced, but a student can get into trouble if he doesn’t report the scholarship. However, if you call the scholarship something else, that avoids the problem.”</p>
<p>This reminds me of a situation that happened at Bama. A student with GI benefits was also given the Presidential full tuition scholarship. The gov’t was going to reduce the GI benefits by the amount of the Presidential since the feds policy is to do that if another tuition scholarship is awarded. Once Bama was told that that would happen to this student, Bama rewrote its award so that the student will get both the GI Benefits AND the Presidential (which will now get used towards R&B).</p>
<p>To suggest that it’s not the “student’s job” to say anything to the principal would mean that the student (or parent) should not have told Bama about a similar problem. Bama was very happy to QUICKLY change its wording…no long red tape…probably just a quick ask to the legal dept to make sure everything was kosher.</p>
<p>And, frankly, if the “principal with no principles” says, “Sure, just call it a gift!” - would that make it okay? I don’t think so!</p>
<p>If the principal has the power to change the wording of the scholarship to be a reward for good grades (or similar) then that is okay. Just like it’s ok to use whatever legal tax loop-holes that are out there to legally shelter/delay taxes, etc.</p>
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<p>I don’t think so if they are either public or private with 501(c)(3) status. But either of those statuses may impact the rules in place for them giving away money.</p>