Any grant or scholarship money can be taxable income if it covers costs other than tuition, fees, books. But there might not be tax due on it because there is a standard deduction that applies (last year up to $6,300).
Even if there was tax due, it would most likely be less than 50%, right, so you would still get some of the benefit of the scholarship.
And I don’t know if CSS profile asks that question, but FAFSA asks if student reported taxable scholarships as part of their AGI on their tax return, that amount then gets subtracted from student income.
Each school might have their own policy.
This is what we do. D has a tuition scholarship from her college. We pay room and board, fees, books. She gets a state grant, and remaining need is covered by a subsidized loan.
In her first year she had some outside scholarships, those reduced need, and therefore subsidized loan was smaller.
A school that gives their own grant money, might reduce the grants first, or work study, or loans.
But you still don’t have to cover that amount out of your pocket, or borrow it and pay back with interest.
D’s tuition scholarship is tax free. We claim books and fees for AOTC, and she reports the state grant (which can be used for housing) as taxable scholarship on her tax return.
She has work income too, so some of the grant is taxed, but it is only $150, so we are very thankful to have the grant.
