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What is a College Stipend and How Do They Work?
By
Gabriel Jimenez-Ekman
Gabriel Jimenez-Ekman is a content editor and writer at Scholarships360. He has managed communications and written content for a diverse array of organizations, including a farmer’s market, a concert venue, a student farm, an environmental NGO, and a PR agency. Gabriel graduated from Kenyon College with a degree in sociology.
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Cece Gilmore is a Content Writer at Scholarships360. Cece earned her undergraduate degree in Journalism and Mass Communications from Arizona State University. While at ASU, she was the education editor as well as a published staff reporter at Downtown Devil. Cece was also the co-host of her own radio show on Blaze Radio ASU.
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Annie has spent the past 18+ years educating students about college admissions opportunities and coaching them through building a financial aid package. She has worked in college access and college admissions for the Tennessee Higher Education Commission/Tennessee Student Assistance Corporation, Middle Tennessee State University, and Austin Peay State University.
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Maria Geiger is Director of Content at Scholarships360. She is a former online educational technology instructor and adjunct writing instructor. In addition to education reform, Maria’s interests include viewpoint diversity, blended/flipped learning, digital communication, and integrating media/web tools into the curriculum to better facilitate student engagement. Maria earned both a B.A. and an M.A. in English Literature from Monmouth University, an M. Ed. in Education from Monmouth University, and a Virtual Online Teaching Certificate (VOLT) from the University of Pennsylvania.
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As you apply to research positions, internships, and scholarships, you may see the term “stipend” come up a lot. But what is a stipend, and how do they work? Stipends are a bit different from wages, although they both end up paying you money. It’s a good idea to have a comprehensive knowledge of the term so you know all of the rules for how you’re receiving your money.
Here, we’ll go over the technical definitions of the term compared with salary. We’ll discuss where you’re most likely to encounter stipends versus salaries. Finally, we’ll close with the most important piece: what that means for you. You’ll get a good idea of how the two types of payment can be taxed and used differently.
Related: Are work study earnings taxed?
What is a stipend?
Stipends are paid to people who are performing positions that do not function under the typical wage system. This could be because the primary function of their position is to educate them or because they are volunteering. They can also be offered as part of a scholarship reward. In all of these circumstances, an organization is paying an individual for a reason other than services rendered. In these cases, you don’t have an employer-employee relationship.
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What is the purpose of a stipend?
The purpose of a stipend is not to compensate someone for their work, but rather, to allow them to satisfy living expenses while they perform their duty. For example, nonprofits may offer stipends for at-risk youths to learn work skills. This allows them to put food on the table while learning skills to land a job. They are not getting paid for their work, but rather to allow them to work.
College stipends typically come as part of scholarship rewards. They are especially common for recipients of full-ride scholarships. Once the tuition and fees are all paid, there are still living expenses that come along with college. This is where a stipend comes in; a scholarship organization will pay the student a flexible amount of money to pay for things like books and basic living expenses.
Also see: Tuition reimbursement: What it is and who offers it
Stipend versus salary
So, while both stipends and salaries put money in the recipient’s pocket, they serve different purposes. If you receive a salary, you are being compensated for a service that you perform. For example, you earn money for your company or help fulfill the mission of your nonprofit. This is the primary function of your job. You may gain skills from your work, but that is not the intention behind your employment.
On the other hand, stipend earners are occupying a position where their own development is the main objective. This could be for an apprenticeship or an internship. It could even be through volunteer opportunities like the Peace Corps. And, most relevantly for college students, it could be through scholarships. When you win a scholarship, the organization is not paying you for the services you provide to them. They are paying you to ensure that you can afford to attend school and benefit from their assistance.
Also see: The Peace Corps and college loans: What you need to know
How college stipends differ from others
College stipends are unique because, rather than taking the place of a salary, they are basically just an extra source of income. After winning a scholarship, you’ll automatically receive your stipend as long as you continue to satisfy internship requirements and attend college. Some scholarships may require you to submit documentation that your stipend is being used on approved expenses. However, most of the time, the money is used at your discretion.
Related: What are internships and why are they important?
Where you’ll see stipends offered
Here are some situations in which you may expect to see stipends offered instead of salaries:
- Scholarships
- Unpaid internships
- Research opportunities
- Apprenticeships
- Volunteer opportunities
- Summer programs
What this means for you
If you are receiving a college stipend, congrats on winning a scholarship! You should be sure to check in with your scholarship organization about any rules around your stipend. Also, check whether you need to document how you spent your stipend to satisfy requirements. Finally, make sure you ask about how taxes will interact with your stipend. Some college stipends won’t be taxed at all, but others will. Check beforehand that you are filling out the right tax information and that you know how much you’ll owe in taxes before tax-day rolls around.
Related: Everything you need to know about graduate assistantships
Key Takeaways
Frequently asked questions about college stipends
Can a college stipend be used for anything?
Do stipends affect financial aid?
