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2860.25.00 SCHOLARSHIPS AND FELLOWSHIPS (MED 3) A scholarship is an amount paid to or for the benefit of a student (undergraduate or graduate) at an educational institution to assist in the pursuit of a degree. A fellowship is an amount paid to a student to assist with the pursuit of study or research. Qualified scholarship and fellowship payments may be excluded from taxable income and will not be included in the calculation of MAGI for household income. A qualified scholarship or fellowship consists of any payment an individual receives that is for tuition and fees for enrollment in an eligible educational institution or course related expenses, such as required fees, books, and equipment. Any scholarship or fellowship amount used for non-educational expenses (e.g., room and board, travel, research, or clerical help) or any amount in excess of educational expenses is considered taxable income so will be included in the calculation of MAGI for household income. If any part of a scholarship or fellowship that represents payment for teaching, research or other services required to receive the scholarship or fellowship is considered taxable income it will be included in the calculation of MAGI. Exceptions to this rule include any scholarship or fellowship amounts received from the National Services Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance Program. Example: An individual receives a scholarship of $5,000.00, and the scholarship was not received from the National Services Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance Program. The individual is required to work as a teaching assistant in order to receive the scholarship. $2,000.00 of the scholarship represents payment for teaching, $2,000.00 is used for qualified educational expenses, and $1,000.00 is used for rent payments. The $2,000.00 for qualified educational expenses would not be taxable income, so it is not counted in the calculation of MAGI. The $2,000.00 for teaching and the $1,000.00 for rent are considered taxable income and will be included in the calculation of MAGI for household income.

Scholarship prizes won in a contest that do not require the winner to use the prize for educational purposes are considered taxable income so will be included in the calculation of MAGI for household income. Pell grants and other Title IV need-based education grants are treated the same as scholarships and fellowships. Any amount received for qualified educational expenses as explained above is not considered taxable income and will not be included in the calculation of MAGI. Any amounts received from the Department of Veterans Affairs for education are not considered taxable income and will not be included in the calculation of MAGI. 2860.30.00 QUALIFIED TUITION REDUCTION (MED 3)