Hello everyone, I hope all of you are well and that you projects are off to a great start. Here at the University of North Texas, we are having a slight issue with the issuance of our stipends. Our Financial Aid Department would like to distribute the stipends in a way that impacts the amount of loans are students are receiving (reducing the amount of loans). We are aware that other universities have been able to navigate the system in a way that does not impact the alternate funds (grants, loans, scholarships) that their students receive. Can someone point us in the right direction explaining the delivery of the stipends in a way that is not considered to be a part of the financial aid package but instead financial support for living and daily expenses while they are associated with their internship responsibilities? We have found a temporary solution but are looking for assistance with assuring our financial aid office that we are not skirting federal regulations set forth by the Department of Education. Any help you could provide would be appreciated.
Warmly,
Angie Wilson
Dear Colleages,
We are having the same issue with our financial aid reducing student loans because of the stipend. Our students are very upset. This seems to be penalizing students who need financial aid. I am interested in learning about your temporary solution. I am aware of other universities avoiding this problem despite the Title IV recommendation. We had two 2014BHWET grants and did not have this problem.
Cindy Waltman, Plymouth State University
Thank you Cindy for the information. We are waiting for our face to face meeting to see how other universities are handling the situation, and gather a plan to present to our financial aid department. We really desire to pay our students without readjusting their financial aid packages. On the previous call, some universities stated they paid them as study participants and they did not have their financial aid adjusted.
Dear Kimmalla,
Can you please share with me what you learned from other universities related to students receiving the full stipend without having their financial aid readjusted?
Thank you,
Marcia
The end result for us was that we pay our students through a Voucher (Purchase Order) but their financial aid is impacted. You also must note, the students will need a 1099 for the grant funds since it is not used for tutition and fees. Their grant funds will be taxed in addition to their financial aid packages being adjusted. The only way for this to be to the student's advantage is to increase their cost of attendance by submitting a form stating they have more responsiblities and tasks outside of the normal course requirements.
Another solutions in the conference call earlier this year that may have worked for us was to pay the students as research participants and the stipends be a research stipend for participating in the project. The only reason that did not work for us is because we already started the process of paying through Purchase Order, and changing the way we pay the students could result in an audit investigation. I hope this information helps.
Please see the below information that we received from the Department of Education and our tax manager:
~The stipend policy states they are governed by the Department of Education and all stipends are consider as part of the overall Estimated Financial Assistance and must be calculated for their award. Students who receive financial aid (ie, loans) would still receive the same amount of refund, but the $5,000.00 per semester would essentially replace the amount of money they would have to pay back.
Below is the guidance from HHS Policy:
~Section 117 of the Internal Revenue Code applies to the tax treatment of scholarships and fellowships. Degree candidates may exclude from gross income (for tax purposes) any amount used for course tuition and related expenses such as fees, books, supplies, and equipment required for courses of instruction at a qualified educational organization. Non-degree candidates are required to report as gross income any monies paid on their behalf for stipends or any course tuition and fees required for attendance. The taxability of stipends in no way alters the relationship between fellows and sponsoring organizations. Stipends are not considered salaries. In addition, recipients of fellowships are not considered to be in an employee employer relationship with the OPDIV or the sponsoring organization solely as a result of the fellowship award. The interpretation and implementation of the tax laws are the domain of the IRS and the courts. HHS takes no position on what the status may be for a particular taxpayer, and it does not have the authority to dispense tax advice. Individuals should consult their local IRS office about the applicability of the law to their situation and for information on their tax obligations.
Form 1099
~Although stipends are not considered salaries, this income is still subject to Federal and, sometimes, State income tax. Such income may be reported by the sponsoring organization on IRS Form 1099, Statement of Miscellaneous Income. Normally, the business office of the sponsoring organization will be responsible for annually preparing and issuing IRS Form 1099 for fellows paid through the organization (fellows at domestic non-Federal organizations). Sponsoring organizations are not required to issue a Form 1099, but it is a useful form of documentation of income received and a reminder to the fellow that some tax liability may exist. Fellows are reminded that, even if the sponsoring organization does not issue a Form 1099, they still are required to report stipends as income. The OPDIV will issue a Form 1099 for each fellow training at a Federal or foreign laboratory and receiving a stipend check from the U.S. Treasury.
Kimmalla,
Thank you so much for the information. I like the suggestion of paying students as research participants.
All the best,
Marcia