Award vs. Scholarship

Lewis1212
Mon, 03 Apr 2006 16:40:37 +0000

My DD won a Leadership award from our state that came with a large amount of money ($10K). While we thought it was a scholarship and was going to be sent to the college she chooses to attend, we were surprised when they actually presented her with a check for $10,000! It came with a letter that said that the money would be tax-free if used for college education expenses (we were actually out of town when she got it so thank goodness we didn’t come home and find a new car in the driveway <g>). </g>

Is anyone familiar with this tax/financial aid situation and have any advice on how we should handle this money? Basically, we are unsure whether we should use it all this year, or if we can invest it and spread it over 4 years. We would ask a tax or financial professional, but honestly we don’t even have one----we have very simple taxes that we have always done ourselves.
As for her tax status, she has nothing in her name beyond an interest-free checking account and no income other than typical minimum wage type summer employment (she just received her tax refund of $45 for '05

She’s already gotten a merit scholarship (non need-based) at the college of her choice, but there is still about $25K left to pay and our EFC is beyond that, so either way it won’t cut into any need-based aid.

Advice or experience in this area is welcome! Thank you!!