NASFAA AskRegs: Are Stimulus Checks Considered Taxable Or Untaxed Income For Title IV Purposes, Including PJ?

This AskRegs Knowledgebase Q&A was updated on May 4, 2021 to include U.S. Department of Education (ED) confirmation of guidance previously provided by NASFAA, particularly as it relates to untaxed income.

No. NASFAA has confirmed with ED that Economic Impact Payments (also known as stimulus checks, stimulus payments, or recovery rebates) are neither taxable income nor untaxed income for Title IV purposes. They are also not estimated financial assistance (EFA). They are ignored for all Title IV need analysis and packaging purposes.

The IRS does not consider stimulus payments under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the 2021 Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA, Section 314 of the Consolidated Appropriations Act, 2021), or the American Rescue Plan Act of 2021 (ARP) to be taxable income. ED does not consider stimulus payments to be untaxed income either.

While professional judgment (PJ) discretion is solely that of the financial aid administrator and the school, NASFAA does not believe it would be appropriate to include stimulus payments in the calculation of taxable or untaxed income when exercising PJ for a student or parent for any award year or 12-month period. This is because stimulus payments are earmarked to assist students and parents with expenses and financial needs directly related to the COVID-19 pandemic. It is also consistent with ED's treatment of stimulus payments for the 2009-10 award year during the "Great Recession" when they were excluded entirely from need analysis.

Reference the IRS Economic Impact Payment Information Center, which states:

"Is the Payment includible in my gross income?

No, the payment is not includible in your gross income. Therefore, you will not include the payment in your taxable income on your federal income tax return or pay income tax on your payment. It will not reduce your refund or increase the amount you owe when you file your 2020 federal income tax return. A payment also will not affect your income for purposes of determining eligibility for federal government assistance or benefit programs."

ED references this statement in the April 3, 2020 Electronic Announcement: "Any aid (in the form of grants or low-interest loans) received by victims of an emergency from a federal or state entity for the purpose of providing financial relief is not counted as income for calculating a family’s Expected Family Contribution (EFC) under the Federal Methodology or as estimated financial assistance for packaging purposes."

Notes:

Economic Impact Payments technically are refundable tax credits and will appear on 2020 and 2021 tax returns accordingly.
The above guidance only applies to stimulus payments and not to Higher Education Emergency Relief Fund (HEERF) grants to students or institutions under the CARES Act, CRRSAA or ARP.