Essentially, scholarships are free money – a form of financial aid that does not have to be repaid.
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Note: If you receive a scholarship or fellowship, you may have to pay tax on the amount you do not use to pay for tuition and course-related supplies (books, lab fees, etc.). This does NOT, however, include federal or state grants nor does it include federal loans.
EXAMPLE: Suppose you receive a $4000 scholarship. You spend $1500 for tuition and $300 for books. You spend the remaining $2200 for room and board. The $2200 is taxable and must be reported when filing your tax returns.