(StatePoint) Everyone knows about scholarships. They’re no-strings-attached money to help students pay for their higher education. Right?
Usually, but not always. In some cases, there are significant strings attached -- including situations in which scholarships are treated as taxable income. While unusual, it’s important for students, their families and scholarship providers to understand all the implications.
The tax status of scholarships first codified in 1954 was simple: for students pursuing a degree, all scholarships, fellowships and grants were tax-free. But later legislation specified portions of a scholarship could be taxed if it is considered “fees for services,” or if it’s used for living, travel or research expenses.
What’s more, scholarships for non-degree-candidates are also taxable. As professional certifications and certificate programs become vital to certain industries, experts say these laws put non-traditional students at risk of a heavy tax burden.
Some experts say taxing scholarships comes at a cost for students and scholarship providers and the government.
“For students, it can harm their ability to pay for their education,” says Robert C. Ballard, president and CEO of Scholarship America. “For providers wanting to make the biggest charitable impact, it can make providing scholarships less attractive than alternative philanthropic efforts.”
With most federal financial aid calculations based on the pre-tax value of the scholarship, students risk a shortfall in aid. All of this has a disproportionate impact on low-income students. Those from the bottom income quartile spend the largest percentage of family income on higher education; almost half of that money is spent on the non-tuition costs for which scholarship awards are taxable.
“Taxing scholarship funds may increase government revenue in the short term, but it’s short-sighted,” says financial aid expert Mark Kantrowitz. “The federal government benefits financially long-term when students graduate and have the potential to earn more taxable income.”
Kantrowitz, along with Scholarship America’s Despina Costopoulos Emerson, say restoring scholarships’ tax-free status will help certificate and degree-seeking students, and those who must work out of necessity, pursue their education without undue financial burdens.
To learn more visit blog.scholarshipamerica.org.
“Scholarship America and our partners are in ongoing talks with members of Congress, and we hope to see some progress on initiatives that will ensure qualified scholarships are available to students to pay the full cost of education and allow scholarships to be used, tax-fee, to pay for room and board, transportation and other college-related expenses,” says Ballard. “In the meantime, students and their families should research the specifics of all grants, scholarships, fellowships and tuition waivers they are offered in order to understand the true value of their financial aid package after taxes and plan accordingly.”
How service leadership prepares today's students to succeed
(StatePoint) Students are more successful when they practice leadership outside of the classroom. A recent survey conducted by Harris Poll found that 91 percent of respondents agreed with this statement.
This survey was conducted on behalf of Lead2Feed, a free student leadership program attracting more than a million students and over 6,000 educators across all 50 states.
There’s already real-world evidence supporting the survey data’s sentiment. Participants in Lead2Feed thought critically about their role in their communities, and say they gained the following benefits:
• Engaged teachers. The Lead2Feed Student Leadership Program takes students through the steps to design and implement an effective, relevant service project. Teachers and advisers can enter their student teams into the Lead2Feed Challenge, where they can win grants for their school and charity.
When teachers participate alongside students, the entire classroom is given an opportunity to transform their way of thinking.
“What I realized was that the leadership principles I was trying to teach my students had actually began to transform me as well,” says Mrs. Allison Silverman, a teacher at Port Chester Middle School where students have earned more than $50,000 for charity and more than $15,000 in technology grants for their school over the six years they’ve been involved in the program. “I gained renewed confidence in my work and in my profession,” says Mrs. Silverman.
• Relevant lessons. Classroom learning can often feel theoretical. When students lead their own community service projects, they have an opportunity to directly engage with real-world issues that have received national attention. Students at Miami’s Design and Architecture Senior High (DASH, one of the winners of the Lead2Feed Challenge), sought to address the issue of mental health that has consumed the nation’s psych through a project called “No More Stalling.” They created signs for school bathroom stalls with hotlines for tough issues students may be facing.
“The class of 2021 was transformed into problem solvers and they emerged with a vision,” says DASH teacher Mrs. Zudannie Nuñez-Hernandez.
• 21st century skills. Working with fellow students to complete a project develops critical thinking, collaboration and communication skills, fostering the necessary attributes for students to become leaders within their classrooms and greater communities. Before completing the Lead2Feed program, only 27 percent of participating students felt that they could work well with others, only 18 percent believed they could develop effective solutions to problems, and only 16 percent felt they could communicate clearly and concisely with their peers. After completing the program, these numbers rose to 55 percent, 49 percent and 48 percent respectively.
“Feeding young minds and local community groups in need are all part of this leadership program where students use 21st century skills, literacy skills and service learning to refine their leadership skills and to benefit local nonprofits,” says Diane Barrett, executive director of Lead2Feed’s presenting foundation, The Foundation for Impact on Literacy and Learning.
To learn more, or to become part of the Lead2Feed network, visit lead2feed.org.
Student leadership projects are an ideal component of a well-rounded education experience, fostering growth for the students that participate in these initiatives, and for the larger community that is improved through their service.