Payments to Students

The following questions may be considered to determine if a payment to a student is considered employment compensation for services rendered. If the answer is “yes” to any of the questions, the payment is considered employment related and will need to be processed through Human Resources Payroll.

• Does and employee/employer relationship exist?
• Does the department directly control what services this person will do and how it will be done, and is it part of the regular business activity of the University?
• Would the individual be subject to University personnel policies, discharged at the University’s discretion, and payments only made for services already rendered?

Payment is considered wages and reported on Form W-2. Any wages reported to the student on a W-2 are reported as income on the student’s Financial Aid application (FAFSA) for the next academic year.

Educational-related awards include scholarships, tuition, grant awards and stipends. The payment to a student is considered an educational-related award if the purpose is to support the student’s pursuit of an educational program. Educational-related awards should be processed through the KSU Office of Student Financial Assistance. The financial aid is applied to the student’s account and any excess aid (aid exceeding the student’s charges) is issued as a refund payment by the KSU Cashier and Student Account’s Office. Types of payments that are considered educational-related awards include:

• Payments to assist enrolled KSU students with financing their education including tuition, fees, books and supplies
• Payments that are educationally related with the primary intention of personally benefiting the KSU student (research award, dissertation research)

When evaluating the type of payment made to the student, it is important that departments understand the relationship of this payment in regards to grants and contracts to ensure the regulations of the type of award are met. It is also important for students to understand the impact that the type of award may have on the student’s financial aid package.

Payments to a student are considered a reimbursement when the expenses incurred are on behalf of the University and when there is a direct connection between the expense and the mission of the University. The primary beneficiary of the activity is the University. These payments should be processed through the General Accounting Office on the corresponding Accounts Payable Voucher. Payments are considered expense reimbursements under the following types of conditions:

• The student is representing the University as a presenter at a conference or on a competition team.
• The primary purpose of student’s travel is to obtain useful results from a project or research the student is conducting on behalf of the University.
• The results of research related to expenditures will be used directly by KSU.
• Research is performed to fulfill obligations to an outside funding agency (grant).
• Activity is required of ALL students in a degree or course; that is, activity impacts the student’s grade in a required course for the student’s degree or is a requirement for graduation. The requirement to travel based on the dissertation topic does not qualify the travel as business travel. Rather, the degree program must state that all students are required to travel to conduct their dissertation research.

In some cases, a payment may be made to a student in the form of a “stipend,” an honorarium, or prize or award. Treatment of each of these is outlined below.

• A “stipend” is another term for a payment. It is important to understand the intent and the circumstances for a student receiving a stipend in order to determine if the stipend is employment compensation, an educational award, or payment for non-employment services rendered.
• An honorarium is a gratuitous payment of money to a person for their participation and facilitation in an academic activity for which no fee is legally required to be paid. It is provided as a token of appreciation for the individual’s participation and contribution to the activity or event and not as a contractual obligation to pay for services rendered.
• A prize or an award is payment made to a student in recognition of religious, charitable, scientific, educational, artistic, literary, or civic achievement or as the result of entering a contest. Generally prizes and awards are paid through Accounts Payable and reported on form 1099-Misc if the total award is $600 or greater. If the student is an employee, the prize or award would need to be evaluated to determine if it should be processed through Human Resources Payroll as employee compensation. If restrictions related to the student's educational achievement or participation are placed on the prize or award, it would be considered a scholarship and should be awarded through the Office of Financial Assistance.

Scholarship, fellowship, and participant payments are amounts paid to an individual to aid and support that individual in the pursuit of study, training, or research. Scholarship recipients include undergraduate or graduate students. For recipients who are not degree-seeking students, such as post-doctorates or faculty members, the funding may be referred to as a fellowship. For discussions of tax treatment, the Internal Revenue Service (IRS) uses the terms scholarship and fellowship interchangeably. Payments to support various categories of individuals involved in learning or training activities supported by federally sponsored agreements may be designated by the sponsor as participant payments. Participant payments share many of the attributes of scholarship or fellowship payments and are subject to similar tax treatment.

Beginning July 1, 2015, the Scholarships/Stipends/Participants Payment Using Object Codes E56xx will no longer be used. PPM Chapter 6320.070 provides an overview of how to process scholarship, fellowship and participant payments for Grant and Non-Grant purposes.

Description of 56XX Object Codes