3 Ways Financial Aid Will Affect Your April 15th FilingTax time is just around the corner, and if you’re a college student with loans and grants, this is a great time to get all of your papers in order. That’s right, just because you’re a student with or without a job doesn’t mean you can’t file tax returns. In fact, depending on how your financial aid is used during your college years, you might have to pay the government some money. The best way to look at how financial aid will affect your tax return is to look at the three categories below and decide if your financial life fits any of them. If you have any further questions about what can be excluded or included, contact FASFA for detailed information.
1. Exclude Government Student Loans and Grants from Taxable IncomeFederal grants, like the Pell Grant, or student loans, such as the Stafford Loan, can be excluded from your taxable income, but not for the same reason. The Pell Grant is a federal grant that you don’t pay back, so long as you use it for approved purposes, like tuition and books. If you use it to help pay your living expenses, then it is no longer part of the grant and you must include the amount you used from the grant on your tax return.
2. Include Work-Study EarningsWhile working part-time at your school as part of your FASFA award is a great way to help pay the expenses of college, it is, unfortunately, taxable. This is because the amount of money you are making does not go directly to the school but back to you where you can do what you please with it. It is taxable under wages and salary.
3. Evaluate State Financial AwardsState grants and loans are also excluded from your taxable income because these were awarded to help you pay for school. Again, just like federal loans and grants, if you use any portion of these financial packages to pay for something other than school, you must include the amount as part of your taxable income. There are no exceptions.
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