Do You Have to Pay Work Study Back?
Get clear on federal work-study. Find out if you need to pay back your earnings and understand the financial realities of this aid.
Federal Work-Study (FWS) is a financial aid program designed to help eligible undergraduate and graduate students earn money to cover their educational expenses. This program offers part-time employment opportunities, allowing students to contribute to their college costs while gaining valuable work experience. It is important to understand that money earned through the Federal Work-Study program does not need to be repaid.
Understanding Work-Study Funds
Federal Work-Study funds represent earned income, distinguishing them from other forms of financial assistance such as student loans. Unlike loans, which are borrowed funds that must be repaid with interest, work-study earnings are a direct payment for work performed. Students participating in the program are compensated for the hours they work, similar to a regular job.
The program is rooted in the principle of self-help aid, where students actively contribute to their educational funding through employment. This contrasts with grants or scholarships, which are typically awarded without an expectation of work or repayment. The financial aid package a student receives may include FWS as part of a comprehensive strategy to meet their demonstrated financial need.
How Work-Study is Awarded and Received
To be considered for Federal Work-Study, students must complete the Free Application for Federal Student Aid (FAFSA) and indicate their interest in the program. If eligible based on financial need, FWS will be included as part of the student’s financial aid offer from their college or university. This award specifies the maximum amount a student can earn through the program for the academic year.
After accepting the FWS award, students must seek and secure an eligible work-study position. These positions can be on-campus, working for the school, or off-campus, with non-profit organizations or public agencies. Once hired, students work a set number of hours and receive regular paychecks, on a weekly, bi-weekly, or monthly basis. The earnings are paid directly to the student or can be applied to their student account for education-related charges.
Taxability of Work-Study Earnings
Earnings from Federal Work-Study jobs are taxable income for federal and state income tax purposes. Students must report these earnings when filing their annual tax returns. Employers, the college or university, issue a Form W-2, Wage and Tax Statement, to report the total wages earned during the calendar year.
While federal and state income taxes apply, work-study earnings are exempt from Federal Insurance Contributions Act (FICA) taxes for students enrolled at least half-time. Students should review their W-2 form and consult tax resources to ensure proper reporting of their work-study income.