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Scholarship providers struggle to help students facing campus coronavirus evictions because of scholarship taxation


Scholarship providers attempting to provide room and board aid to students who have been displaced from their college dormitories due to the pandemic face losing their tax-exempt status.  It also provides undue burden to students who face hefty tax bills on this support. To learn more about the amount of taxes students face due to their scholarship awards, visit the new Scholarship Tax Calculator tool.

Learn more about this issue and the shocking growth in taxes on college scholarships here



NSPA PositionS

We are committed to advocating on behalf of the scholarship community and are focused on the following areas in 2019:

Restore tax‐free status to scholarships, grants and fellowships

  • Clarify that the recipient of a qualified scholarship can be pursuing a certificate or other recognized educational credential, not just an academic degree. Increase the awareness of scholarship provider, government and institutional aid practices, aid policies, and their effects on collective scholarship practices.
  • Ensure that qualified scholarships are available to pay for the full cost of education, including covering room and board, transportation to and from college, and disability‐ and other college‐related expenses. Increase awareness of scholarships and their impact on student college/university choice as well as to institutional financial aid packaging policies and practices.
  • Eligible educational institutions should be limited to Title IV institutions that are eligible to receive Title IV federal student aid. Increase financial literacy.
  • Limit eligibility to regular students enrolled at a postsecondary institution that is eligible for Title IV federal student aid. Promote and share best practices that foster student access, retention, and success.
  • Clarify that college grants to students are also excluded from income.
  • Require that the group of applicants from which the recipients are selected must be sufficiently large and indefinite as to be considered a charitable class. Prohibit recipients from including anyone who is involved in selecting recipients or funding the award, or their family members. This will prevent the scholarship, fellowship or grant from being earmarked by the donor for the benefit of a particular individual.

Visit our Advocacy in Action page to learn more and watch our recent media conference about this topic.

Mitigate Award Displacement

  • Establish a priority order that requires institutions to reduce unmet need before loans, loans before student employment and student employment before grants, similar in concept to the regulations that establish an order for the return of unearned Federal Title IV aid. Alternatively, mitigate displacement by striking the references to scholarships and fellowships in the definition of estimated financial assistance and various coordinating restrictions or increase the over-award tolerance from $300 to $1,000.
  • Stop indirectly taxing 501(c)(3) scholarship providers by taxing private scholarship awards made to students. Congress should allow scholarships to be used tax-free for the full institutional COA, not just for tuition, required fees, books, supplies and equipment.
  • Establish a mandatory standard for financial aid award letters or eligibility determinations for all Title IV eligible institutions i.e. the Financial Aid Shopping Sheet developed by the US Department of Education and the Consumer Financial Protection Bureau.
  • Expand the definition of COA to include other common college costs, such as the cost of a computer and student health insurance.
  • Allow the EFC to go negative when the family income falls below the subsistence level as reflected by the income protection allowance.

Allow Sharing of FAFSA Data with Scholarship Providers

  • Amend the Higher Education Act to add private scholarship providers to the list of entities that can receive FAFSA data.



Regardless of your advocacy experience, there are lots of way to support our scholarship community:

  1. Stay Informed: Do you receive NSPA’s Wednesday Announcements? Have you reviewed our advocacy positions? Don’t forget to follow us on Twitter, Facebook, and LinkedIn!
  2. Stories Matter: Your stories and your student’s stories are powerful. Contact your member of Congress to make your voices heard. Follow these links to connect with your representatives U.S. House of Representatives and U.S. Senators.
  3. Support Our Campaigns: When the time comes, write letters, call, and send emails to your delegation and to committee members expressing support or concern for proposed legislation.
  4. Share Your Progress: Let us know about your work to influence lawmakers so we can coordinate efforts.


National Scholarship Providers Call on Congress to Stop Taxing Student Scholarships Press Release NSPA & Scholarship America, October 2019

Living Expenses are College Expenses
– Op Ed NSPA & Scholarship America, April 2019

The One Question You Need to Ask Your College About Scholarships – Acorn + CNBC, April 30, 2019

4 Reasons Your Scholarship Might Be Taxable – USA Today, Empowering Nonprofits! February 2019

Why Getting Too Many College Scholarships Can Actually be a Problem – The Wall Street Journal, February 10, 2019

NSPA Press Conference Oct. 1, 2019
from NSPA on Vimeo.


Thank you to the following organizations for their generous support!

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