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The Daily Tar Heel

Students express frustration, scholarships taxed as income

20231213_Skvoretz_File-south-building-3.jpg
The South Building, Office of the Chancellor and other administrative offices, on Wednesday, Dec. 13, 2023.

Scholarships providing stipends for additional expenses beyond tuition and university fees are considered a taxable form of income, leaving some UNC students frustrated.

“My scholarship is not a job,” first-year Morehead-Cain scholar Addison Truzy said.

The Morehead-Cain Scholarship covers all expenses for its recipients during their four years at UNC. Beyond tuition and housing, a large part of the scholarship's stipend can be used for foodbooks, professional dress, club fees, research and internships, or can even be put into savings at the discretion of the scholar.

Without the Morehead-Cain Scholarship, Truzy said she would not have been able to afford college at all. Truzy said it is not fair to treat scholarships like a consistent payment when the money is used to cover necessary school expenses.

Being a student is a role, and not a paid one, she said.

Blue Sky scholar Sydney Young said she works two jobs — one on UNC’s campus and one off — on top of a scholarship that pays for her tuition. While the Blue Sky Scholarship is not taxed, Young said that taxing her scholarship would make college attendance "a lot more difficult."

"I make sure that every time I get my money I'm always budgeting, I'm setting aside certain portions, because I understand that while my scholarship covers everything this year, it might not cover everything next year, it might not cover everything the year after that," Young said.

Alyssa Williams, another first-year Morehead-Cain scholarsaid the rules and regulations of scholarships can be hard to understand, especially for students like her whose families earn too much income for specific financial aid but not enough to pay full tuition.

Williams said that a lot of the miscommunication surrounding scholarship finances could be solved if University administration sat down and talked with scholarship recipients.

Truzy learned about what taxes on her scholarship would look like for her during Morehead-Cain's "Discovery Weekend," which shared financial information about the scholarship to awardees. She receives an itemized receipt every semester of what can be taxed.

She said she has also attended a seminar on how to budget, hosted by UNC's Writing Center.

“I’ve learned so much about how to budget and so much about how to use my funds wisely,” Truzy said.

UNC Media Relations said in an email statement that it is generally the student's responsibility to navigate their scholarship's taxes and to speak with tax professionals if they have questions about their individual situations.

Other on-campus resources for students to learn more about how to manage their taxes include VITA Tax Filing Clinics, which are co-sponsored by Carolina Student Legal Services and the Carolina Union. These clinics are led by UNC accounting professor Margot Howard, who said she first attended similar courses as an undergraduate and wanted to revitalize those resources at the University.

At the clinic, graduate student volunteers and other financial professionals help to navigate student-specific tax concerns as well as financial literacy while emphasizing information regarding scholarship taxing that appears on the 1098-T tax form.

“It's a way that you can use technical expertise to help serve the community and do good in the world,” Howard said.

Howard said she plans to continue the program in coming semesters, including the 2025 tax season.

Kavya Sriram, a recipient of the Carolina Scholarship, said that she would like to see more financial advising offered for students to help them better understand how scholarships work. She said she doesn’t think students' scholarships should be taxed because the money is used for educational purposes, as opposed to "frivolous things."

However, she acknowledged that taxes are a part of life, and a responsibility students should learn to navigate.

“I wouldn’t say it's unfair because it does come with being an adult,” Sriram said.

Sriram said while her scholarship is not currently taxed, if it was, she would want to know why that change was implemented before she decided to support or oppose it. Young said taxing scholarships defeats their purpose.

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“That's doing a disservice to the kids who have worked very, very hard and defied all odds to be here, despite their financial situation,” Young said.

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