Do You Have to Pay Back Work-Study Earnings?

Federal Work-Study is a financial aid program that helps students earn money to cover their education expenses. This program provides part-time jobs for undergraduate and graduate students who demonstrate financial need. Unlike student loans, the earnings from a Federal Work-Study position do not need to be repaid.

Understanding Work-Study Earnings

Federal Work-Study is a form of earned income, not a loan. Students work a job, which can be on or off campus, and are paid for the hours they complete. Payments are received through regular paychecks, directly from the employer or the university. Students can use these funds for educational costs, such as books and supplies, or for personal expenses like food and transportation.

The amount a student can earn through Federal Work-Study is limited by their award amount, which is determined by their financial need and the available funding at their institution. Once a student reaches this earning limit for the award period, they can no longer earn work-study funds. Reaching this maximum earning amount simply means the work-study portion of their financial aid package has been fully utilized.

Work-Study and Financial Aid

Federal Work-Study is included as part of a student’s comprehensive financial aid package, alongside other forms of aid like grants, scholarships, and loans. Earning work-study funds for hours worked does not reduce other grants or scholarships a student receives for the current academic year.

However, work-study earnings are considered income and can influence a student’s eligibility for financial aid in future academic years. When students complete the Free Application for Federal Student Aid (FAFSA) for subsequent years, reported income, including work-study wages, may affect the calculation of their Student Aid Index (SAI), which determines financial need. Students should understand their institution’s specific financial aid policies and how work-study earnings are reported to ensure continued eligibility.

Tax Treatment of Work-Study Income

Earnings from Federal Work-Study positions are considered taxable income by the Internal Revenue Service (IRS), similar to wages from any other employment. Students receive a Form W-2 from their employer, which could be the university or an approved off-campus organization, detailing their annual earnings and any taxes withheld. This W-2 form is then used to file federal and state income tax returns.

Students may need to file a tax return if their total income, including work-study earnings, exceeds certain thresholds set by the IRS, or if they had federal income tax withheld and want to claim a refund. Many students’ work-study earnings, when combined with other income, may fall below standard deduction amounts, potentially reducing or eliminating their taxable income and tax liability. While work-study income is subject to federal and state income taxes, it is often exempt from FICA taxes (Social Security and Medicare) if the student is enrolled at least half-time.