Many scholarship providers are calling on Congress to make changes to the laws that levy taxes on scholarships.
On Tuesday, the National Scholarship Providers Association (NSPA) and Scholarship America joined hands to urge Congress to stop taxing student scholarships, which mostly affects students from middle and low-income families.
Under the Tax Treatment Extension Act, scholarships, grants or fellowships are taxable if they fall under the “fees for services” category. The Tax Reform Act of 1986 further added the scholarship aid used for living, travel or research expenses in the taxable income slab.
The most recent Tax Cuts and Jobs Act passed in 2017 further hiked the tax rate of scholarships used to pay for room, board and other college living expenses.
“We believe this is an issue of basic fairness, to students and their families, who are already overburdened by the dramatically rising cost of higher education,” said Jackie Bright, executive director, National Scholarship Providers Association.
“Our tax code should not prevent the private sector from assisting students, and it should not burden students who have worked hard to earn their scholarships and grants.”
Robert C. Ballard, president of Scholarship America, called levying taxes on scholarships an “unacceptable burden” that affects the overall college experience of students.
“It only adds to the crushing financial burden many students face. Our tax system is harming college students and potentially preventing them from being successful,” Ballard added.
Providers called on members, scholarship recipients, and their families to get in touch with congressional representatives to seek a change in the law.