Q & A: Eligibility Rules for College Financial Aid

How does receiving college financial aid affect one’s eligibility to claim the EIC and CTC?

There are several circumstances in which parents or children may be college students able to receive financial aid:

  • College students who work and are raising children may be eligible to claim the EIC and CTC.
  • Parents of full-time students under age 24 (or students of any age who have total and permanent disabilities) may be able to claim the EIC.
  • Students between ages 25 and 64 who are not raising children and who work may also be eligible for the EIC.

Non-taxable scholarships and grants are not considered income in determining eligibility for the EIC or CTC. Taxable grants and scholarships are not considered “earned income,” but are included in determining “adjusted gross income,” which may affect eligibility for the EIC and CTC.

Will claiming the tax credits impact the amount awarded in a college financial aid package?

The EIC is counted as family income in determining financial aid eligibility, but CTC refunds are not counted as family income. However, for many low-income students who work, or their parents, the EIC will have no effect on financial aid amounts or eligibility. Adding the tax credit refund amounts to other income often will not cause income to reach the threshold at which the student or family is required to contribute to the cost of education. For more information, contact your college’s financial aid office.

For information on which scholarships and grants are taxable or non-taxable, call the IRS at 1-800-829-1040. For ideas on outreach to students, see the handout, “Ten Ways Your College or University can Promote the EIC,” in Outreach Tools>Materials>10 Ways to Promote the Tax Credits Series.