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Accounts Payable - Procedure 20310h

Procedure 20310h: Student Payments

Contacts and revision dates:

  • Date: 03/14/2025
  • Status: Final
  • Last Revised: 03/14/2025
  • Last Reviewed: 3/14/2025
  • Department: Accounts Payable
  • Procedure Owner: Accounting Manager 

Table of Contents

  1. Overview
  2. Financial Assistance as defined by the US Department of Education
    1. Scholarship or Grant
    2. Student Recognition
    3. Training/Travel Support - Required for Degree Program
  3. Accounts Payable Payments
    1. Human Subjects
    2. Reimbursements - Under the IRS Accountable Plan (Non-Taxable)
    3. Reimbursements - Outside the IRS Accountable plan (Taxable)
    4. Prizes
  4. Terminology
  5. Summary of Student Payments Table

Overview: 

This procedure covers non-employment payments to students that are processed through the Office of Financial Aid or Accounts Payable. Specifically, the procedure documents the types of payments that are considered financial assistance to students that should be processed through the Office of University Scholarships and Financial Aid, along with various Accounts Payable transactions including, but not limited to, human subject payments, reimbursements, and prizes. Student compensation follows established human resource and payroll procedures. 

Each payment type includes information describing relevant forms and procedures for processing transactions, available funding sources, and the applicable IRS reporting requirements.    

Financial Assistance as defined by the US Department of Education

The Office of University Scholarships and Financial Aid is responsible for managing student financial assistance programs by assessing financial need, reviewing student eligibility, and awarding aid. Funding sources include the government (federal, state, or local), private organizations such as the Virginia Tech Foundation, charitable foundations, or university approved resources. It is imperative that payments to students are processed within regulatory requirements and that the purpose and eligibility of student payments are clearly reviewed and documented. Payment is processed to the student’s account by the University Bursar’s Office.  (Federal Code Reference:  34 CFR 685.102(b) and 34 CFR 673.5(c)).

If the student is a U.S. resident, the payment is reported on IRS Form 1098-T. Non-resident students do not receive the IRS Form 1098-T unless requested by the student. However, nonresident students may receive student recognition awards or other scholarships that would be reportable on IRS Form 1042-S with applicable taxes withheld at the time of payment or billed to the student. 

Scholarship or Grant

Any scholarship or grant payment made to a student enrolled at the university counts towards the student’s cost of attendance. Aid can be awarded based on merit, financial need, community involvement, etc. The purpose is to aid student study and does not represent compensation for personnel services. 

Student Recognition

Payment made for student recognition, including winning or participating in a contest or competition only open to students or related to their degree program. Examples include Outstanding Student Awards, Master’s Thesis Awards, Outstanding Graduate Service Excellence Awards, Undergraduate Student Leader of the Year Awards, Poster/Writing Contest winners, etc. Payment is applied to the student account and included as a resource towards the student’s cost of attendance.

Training/Travel Support - Required for Degree Program

Payment made to offset the student’s cost for training programs, travel, supplies, etc. When the purpose of the student’s training/travel is to further their own education or training, the student is considered the primary beneficiary and the award is considered financial assistance. These awards may be provided to students on sponsored programs or private funds and are processed through the Office of University Scholarships and Financial Aid.

Accounts Payable Payments

Accounts Payable reimburses students for travel and non-travel operational expenses, processes human subject payments, and disburses prize payments that are not considered financial assistance. The Office of University Scholarships and Financial Aid determines if payment should be included in the student’s financial assistance package, which could require adjustment to other aid types if the student’s cost of attendance has already been met.  

Human Subjects

Students who participate in a research study may receive a human subject payment.  Human subject payments are most often paid from sponsored research, but can be paid using other university resources with Controller’s Office approval. These payments are reportable on IRS Form 1099-MISC or IRS Form 1099-NEC for U.S. residents, and on IRS Form 1042-S for non-U.S. residents. For payments made to non-U.S. residents, taxes are withheld at the time of payment. Advance planning is recommended as the student must submit a W9 or W-8BEN for payments exceeding $75.  For additional information on human subject payments, please see Controller’s Office Procedure 23715c, Human Subject Selection & Payment.

Reimbursements - Under the IRS Accountable Plan (Non-Taxable)

Compliance with the IRS accountable plan rules requires the university to document the business-related activities of all university-funded travel. When a student travels or makes a purchase to conduct university business, Virginia Tech is considered the primary beneficiary. As a result, the travel or non-travel reimbursement is non-reportable to the student and may be processed from any appropriate funding source, including E&G funds. These reimbursements must be substantiated by receipts and are processed through Chrome River.

Reimbursements - Outside the IRS Accountable Plan (Taxable)

Reimbursements processed to students outside of the IRS accountable plan represent reportable income to the student. When the reimbursement is to further the student’s education or training with no related university business activity, the student is considered the primary beneficiary. Reimbursing the student for registration fees or travel expenses associated with attending a conference or conducting research to improve their understanding of a particular field or subject, including theoretical concepts, principles, and broader knowledge does NOT fall under the university’s accountable plan. These transactions must be processed from sponsored or private funding and they represent reportable income to the student.  For additional information on student travel payments, please see Controller’s Office Procedure 20335m, Student Travel Support. 

Prizes

Payments made to a student for winning a contest that was open to the public (faculty, staff, students, general population, etc.). These prizes are not won because of the student status and are typically defined as a reward as opposed to an achievement. These payments are reportable on IRS Form 1099-MISC or IRS Form 1099-NEC for U.S. residents, and on IRS Form 1042-S for non-U.S. residents. For payments made to non-U.S. residents, taxes are withheld at the time of payment. Advance planning is recommended as the student must submit a W9 or W-8BEN for payments exceeding $75.

Terminology

  • Accountable Plan - Term utilized by the Internal Revenue Service that determines if a payment is considered a reimbursement as opposed to reportable income. Travel and non-travel reimbursements fall under the accountable plan if they are a valid business expense. These reimbursements must be made in a timely fashion. If the requirements of the accountable plan are not met, then the transaction is considered reportable.
  • Compensation - Payment for employment services processed by payroll.
  • Cost of Attendance -The estimated direct and indirect costs for a student to attend a higher education institution such as Virginia Tech. Includes tuition and fees, housing and food, books, supplies, equipment, etc.
  • Fellowship - Award payment made to a student to assist in a field of study or research area that does not require the individual to perform a service (past, present, or future). These payments are typically made on a routine basis for an established period. It is important to note that employment requires performance of a service and fellowship does not. Fellowships must be paid with private, local, or sponsored funding.
  • Financial Assistance - Payment made to a student that is not a loan and does not have to be repaid that supports their educational mission. Includes scholarships, fellowships, grants, work-study, student recognition, and travel/training grants related to the degree program.
  • Financial Need - Federally defined calculation based on the cost of attendance less the Student Aid Index (SAI).
  • Human Subject Payment - Payment to an individual who participates in a research study. Human subject payments are handled as payments to independent contractors, not payment to employees for work performed.  
  • IRS Form 1042-S - Internal Revenue Service (IRS) tax form reports income subject to withholding paid to foreign nationals. The income must have been earned from services performed within the United States or to report scholarship and fellowship for nonresident students.
  • IRS Form 1098-T - Internal Revenue Service (IRS) tax form that reports payments made during the calendar year for tuition and related expenses and scholarships and/or grants (gift aid) received by a student during a tax year. The form documents information needed to claim educational related tax credits.
  • IRS Form 1099-MISC - Internal Revenue Service (IRS) tax form used to report miscellaneous income made to individuals that are not employees. Items reported on this form would include prizes/awards or gifts.
  • IRS Form 1099-NEC - Internal Revenue Service (IRS) tax form used to report nonemployee compensation subject to a $600 threshold.
  • IRS Form W2 - Internal Revenue Service (IRS) tax form used to report wages, salaries, and other compensation paid to employees.
  • Prizes - One-time payments made to a student as a reward for winning a contest that is not obtained because of their student status. For example, a contest open to the entire university community (faculty, staff, students, visitors).
  • Reimbursement - Amount repaid to a student that has a.) incurred travel or non-travel business expenses that are not reportable under the Internal Revenue Service (IRS) accountable plan or b.) for conference registration fees or travel fees associated with traveling to a conference or to conduct research to improve their understanding of a particular field or subject, including theoretical concepts, principles, and broader knowledge that are NOT made under the IRS accountable plan rules and are reportable transactions.
  • Scholarship - Amount paid on behalf of a student enrolled at the university that may be need based or merit based. The purpose is to aid study, training, or research, and does not represent compensation for personnel services. Payments from winning a contest that is open only to students, is related to the course of study, or is used towards educational purposes would be considered scholarship. 
  • Stipend - Payments made to students to reduce the cost associated with completing an educational or training program. Typically, these funds are used towards living expenses and are paid directly to the student. The goal of a stipend is to defray costs to the individual.
  • Student - A person studying at a higher education institution.
  • Student Recognition Awards - An award is provided to a student based on achievement, financial need, or other criteria that assist them in their academic endeavors. The payment acknowledges an achievement. Examples include an Outstanding Student Award, Master’s Thesis Award, Outstanding Graduate Service Excellence Award, Undergraduate Student Leader of the Year Award, Poster/Writing Contest winners, etc.
  • Training Support - Award made for specific training or educational programs that enhance the skills of the student but are not part of their formal degree program. These can be program costs or living expenses.
  • Travel Support - Funds allocated to support student travel with a university business purpose.  

Summary of Student Payments

For a summary of payment types and reporting requirements, refer to the Student Payment Summary page.

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