What is FAFSA? FAFSA is a form completed each year by college students to determine eligibility for student financial aid. There are many sources of financial aid available. Loans, grants, scholarships, and work-study funds all affect taxes differently.
Student loans are not considered taxable income. You are expected to pay back the lender, so loans are not considered a source of income.
Grants are essentially “free money” to help pay for education. Grants generally do not have to be repaid and are needs-based, therefore, are not considered taxable income. If grants are used to pay for unauthorized expenses, it may become taxable.
Work-study programs are part-time jobs on campus offered to students to reduce tuition costs. This income must be reported on your tax return.
It can be tough to figure out if any part of your financial aid needs to be reported. It is a good idea to talk to your financial aid office or stop into one of our offices for a qualified CPA to help sort through this with you.