What You Need to Know About FAFSA and Taxes

Advertisement CollegeChoice.net is an advertising-supported site. Featured or trusted partner programs and all school search, finder, or match results are for schools that compensate us. This compensation does not influence our school rankings, resource guides, or other editorially-independent information published on this site.

Are you ready to find your fit?

3 Ways Financial Aid Will Affect Your April 15th Filing

Tax 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.

[If you’re looking for some quick ways to get more FAFSA money by appeal, click here. If you’re looking for a guide to cutting your FAFSA fill-out time in half, click here.]

1. Exclude Government Student Loans and Grants from Taxable Income

Federal 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 Earnings

While 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 Awards

State 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.

Online College Resources

Best Online Master’s Programs 2021

Best Online Master’s Programs 2021

January 22, 2021   |   Staff Writers

A master's program typically takes two years of full-time study to complete. However, several factors affect completion time, including enrollment status, credit requirements, field of study, and delivery format. Online...

Career Paths for Law School Graduates

Career Paths for Law School Graduates

October 19, 2020   |   Staff Writers

Legal training prepares graduates for a variety of in-demand careers. Many law careers pay above-average salaries and report strong job growth. Professionals in the criminal justice and law field interpret and enforce the law. They work in law enforcement, the court system, and the correctional system. Some law school career paths include high-paying roles like […]