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Payments to Vendors and Students

Payments to Students within the University of Illinois System

This information provides guidance to University of Illinois System units for making payments to students. The payment types below include detailed information and may consist of an introduction, reporting and regulatory requirements, processing instructions, and information for students.

Select the Payment Type and navigate the information to learn more.

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Assistantships

Assistantships or payments for teaching are considered compensation for services, and are paid by University Payroll and Benefits.

  • For U.S. Citizens, Permanent Residents, and Resident Aliens for tax purposes, Assistantships are reported to the IRS and the student employee on IRS Form W-2 as wages.
  • For Nonresident Aliens, Assistantships are reported on either IRS Form 1042-S or Form W-2.

Graduate Level Tuition and Fee Waivers

For information on graduate level tuition and fees waivers, please go to University Payroll & Benefits (UPB).

Payments from Gift or Endowment Income Funds

When making payments from gift or endowment income funds, units must be aware that the language used in donor fund agreements has varied over time. This can make interpretation of the language and restrictions as they apply to student payments difficult.

The University of Illinois Foundation (UIF) has final authority in determining how gift and endowment fund agreements are interpreted. Once the true intent of the fund agreement has been determined, UIF’s interpretation must be enforced based on the definitions provided within each payment type on this Payments to Students webpage, not necessarily as worded in the fund agreement.

For example, an older fund agreement may use the term “award”, whereas the true intent as determined by the UIF is a scholarship as defined in the Scholarships, Fellowships and Educational Assistance Grants payment type. Payments from this fund must therefore be processed as scholarships, not as awards.

Payments to Non-Matriculated Students

Since non-matriculated students are not yet enrolled in a degree program, the University of Illinois System has no U.S. Department of Education (ED) Title IV financial aid and no IRS Form 1098-T reporting requirements for these payments to non-matriculated students. Therefore, these payments are either:

  • Wages for services rendered to the U of I System, in which case they are processed through University Payroll and Benefits (UPB) and reported on IRS Form W-2; or

  • If the recipients are not expected to perform services for the U of I System:

    • Payments to U.S. Citizens and Resident Aliens for Tax Purposes are processed through TEM and reported as taxable income on IRS Form 1099-MISC

    • Payments to Non-Resident Aliens – refer to Foreign National Payments Resource Page for job aids and training materials.

Prizes and Awards

Introduction

Recipients of Prizes and Awards are typically selected through a contest or competition, or in recognition of some sort of charitable, scientific, educational, artistic, literary, or civic achievement, and are not restricted to educational purposes.

Though not related to employment services, a prize or award is generally taxable income to the recipient regardless of the funding source. Typically, no restrictions are placed on how the student can use the award money. If restrictions are imposed (e.g., the donor stipulates that funds must be used for education expenses, travel, or room and board), then the payments are no longer considered prizes or awards, and must be processed as scholarships or educational assistance grants. See Scholarships, Fellowships and Educational Assistance Grants. If the source of the prize or award is gift funds, the donor of the prize or award may set the criteria for recipient selection, but may not select the recipient.

The Banner account code used for prizes and awards is generally 181700; the program code should generally roll up to NACUBO function 1789.

IRS Reporting

Prizes and awards are reported to the IRS and the recipient on Form 1099-MISC, Miscellaneous Income, by University Payables (UPAY). A SSN is required for IRS Form 1099-MISC reporting. Therefore, payment of prizes and awards will be suspended if no valid SSN record exists in Banner. Before submitting prize and award requests, units are strongly encouraged to check Banner form SPAIDEN for asterisks in the SSN field and to instruct recipients whose SSN field is blank to present documentation of their SSN to their Registrar’s Office.

Note: the IRS imposes different tax requirements for Nonresident Alien recipients of prizes and awards; for details please visit Award, Prize and Human Subject Payments.

U.S. Department of Education (ED) Compliance

Prizes and awards are reported to the Office of Student Financial Aid (OSFA) and considered a resource when determining the student's financial aid eligibility. Therefore, these payments may have an impact on the type and amount of financial aid the student is eligible to receive.

OSFA will make the necessary adjustments to the student’s financial aid upon notification of the payments. These adjustments may create or increase a balance due on the student’s university account. Students are encouraged to view their Financial Aid Award letter and their billing statement periodically throughout the semester.

The University of Illinois System's reporting responsibility with respect to Federal Student Aid (FSA) and any other financial assistance received by students is outlined in the FSA Administrative & Related Requirements (Chapter 3), specifically page 2-33, "Coordinating Official".

How to Process

U.S. Citizens, Permanent Residents, and Resident Aliens for tax purposes (Resident Aliens)

  • UIC and UIS
    Process Prize and Award payments using the Student Account Payment Request Form.

  • UIUC

  • Note: Prizes and awards paid to U.S. Citizen, Permanent Resident, and Resident Alien students are disbursed to the student's university account and will be applied to any outstanding charges on the student’s account unless the student or unit emails aroperations@uillinois.edu to request the prize or award be refunded to the student. 

Nonresident Aliens - Please refer to Foreign National Payments Resource Page for job aids and training materials.

Gift Cards

Prizes and Awards paid as gift cards equal to or greater than $200 must be emailed to University Payables and the recipient’s campus Office of Student Financial Aid (OSFA) using the Protected Email Attachment Application (PEAR) system. The PEAR email must include the dollar value, along with the student's name, UIN, address and Taxpayer Identification Number (TIN).

For security purposes, this information is sent through PEAR to the group UPAY1099 (in PEAR, the group name will appear as UPAY1099.PearApplication.aits.uillinois.edu), and depending on the university to:

If unfamiliar with PEAR, consult the following resources for information and instructions:

For additional information see Tax Implications for Payments.

What to Inform Students

When offering a prize or award to a student, units are strongly encouraged to provide the following information to the recipient:

  • All prizes and awards are considered a resource when determining the student's eligibility for financial aid. Therefore, they are reported to the Office of Student Financial Aid (OSFA), and may have an impact on the type and amount of financial aid the student receives. OSFA will make the necessary adjustment to the student’s financial aid award upon notification of the prize or award. This adjustment may create or increase a balance due on the student’s U of I System account. The student is responsible for reviewing her/his Financial Aid Award letter and student account billing statement after the prize or award has been paid in order to understand the impact of the payment.

  • All prizes and awards paid to U.S. Citizens, Permanent Residents, and Resident Aliens are taxable income and reported to the IRS and the student on Form 1099-MISC. A SSN is required for IRS Form 1099-MISC reporting, so payment of the prize or award will be suspended if no valid SSN record exists in Banner. Students whose SSN field in Banner is blank must present documentation of their SSN to the Office of the Registrar.

  • All prizes and awards are disbursed to the student's university account and applied to any outstanding charges on the student’s university account unless the student or unit emails aroperations@uillinois.edu to request the prize or award be refunded to the student; the student must be enrolled in direct deposit to receive the refund.

Click here for a sample email template to send students who are U.S. Citizens or Resident Aliens for tax purposes, when offering them a prize or award.

Research and Travel Payments

Introduction

Many units have funds that may be used to pay student research and travel expenses. Before paying a student’s research and travel expenses, the unit must determine and document whether and why the student or the University of Illinois System is primary beneficiary of the payment. When the U of I System and the student seem to derive equal benefit, units are strongly encouraged to designate the student as primary beneficiary.

When paying U.S. Citizen and Resident Alien students for travel and other research expenses that primarily benefit the student, these payments must be paid as Scholarships or Fellowships, and units must be aware of the following requirements:

  • When making research and travel payments from sponsored research funds, receipts documenting the full amount of the expenses must be forwarded to Sponsored Programs Administration (SPA) Post-Award for UIUC students, or Grants & Contracts (GCO) for UIC and UIS students; sponsor funded travel and research expense payments may be delayed or reversed until or unless SPA Post-Award or GCO receives all necessary receipts.

  • Research and travel expenses are not generally part of the student’s standard Cost of Attendance (COA) as established by OSFA in accordance with U.S. Department of Education (ED) guidelines; therefore, to minimize the risk of a travel or research scholarship or fellowship reducing the student’s eligibility for other financial aid, the unit must notify OSFA that the scholarship or fellowship is for travel or research expenses that exceed COA, and provide OSFA with a description of the expenses being covered by the scholarship or fellowship.

  • Research and travel scholarships or fellowships are disbursed to the student's university account and will be applied to any outstanding balance on the student’s account unless he student or unit emails aroperations@uillinois.edu to request the scholarship or fellowship be refunded by direct deposited into the student’s bank account to pay the student’s travel or research expenses.

  • Upon notifying students of scholarships and fellowships, units should inform the students that the scholarship or fellowship will be disbursed to the student’s university account, that it may impact the student’s other financial aid, and that the U of I System will report it to the IRS on Form 1098-T. If the unit requests aroperations@uillinois.edu to refund any scholarships or fellowships to students, the unit must also inform those students that they may still owe an outstanding balance on their student account which must be paid by the due date to prevent a financial hold of registration and transcripts.

How to Process

How research and travel payments are processed depends on whether the student or the U of I System is the primary beneficiary. The following guidance is provided to assist units in determining primary beneficiary:

  • Doctoral Dissertation Research - The U of I System has determined that students are the primary beneficiaries of Doctoral Dissertation Research grants such as the National Science Foundation's (NSF) Doctoral Dissertation Research Improvement Grants (DDRIG), even though the university also receives significant benefit from these grants.

  • Research Experience/Opportunity funds - The U of I System has determined that students are the primary beneficiaries of programs that support active research participation (generally by undergraduates during the summer). Thus even though the U of I System also receives significant benefit, student participants are the primary beneficiaries of research and travel payments funded by the respective programs such as Research Experiences for Undergraduates (REU), Summer Research Opportunity Program (SROP), Summer Undergraduate Research Fellow (SURF), Summer Pre-Doctoral Institute (SPI), Research Experience and Mentoring (REM), Undergraduate Research and Mentoring (URM), etc. Student participants in these programs are not hired as student or university employees, so payment is considered a form of student aid, not wages for work performed.

  • Research Traineeships - Research Training Grants funded by the National Institutes of Health (NIH), graduate research fellowships funded by the American Heart Association (AHA), and other research training grants are educational grants, so the student recipients are primary beneficiary of these payments. Trainees must fulfill the research and teaching requirements as detailed by the grantors, but trainees do not perform services as student or university employees.

  • Scholarship/Fellowship funds - When the source of research or travel payments is a fund designated for scholarships or fellowships, the student is primary beneficiary.

  • University of Illinois System as primary beneficiary - Examples:

    • Student A is asked to travel to a conference held in San Francisco to present a paper on behalf of a U of I System's department.

    • Student B travels to Germany to perform research for the U of I System, which happens to be the same topic related to student B’s dissertation. The U of I System would perform research on this topic regardless of student B’s dissertation topic.

    • Student C is asked to travel to New York City to represent the U of I System in a Scholastic Bowl competition (in this example, the student is not required to be employed by the unit paying for the travel).

    • Student D submits a travel proposal in which the U of I System’s business purpose is effectively described, receives departmental approval that requires a clearly stated deliverable upon the student’s return, and the student presents that deliverable to the department’s satisfaction.

  • When the above criteria do not apply, review General Guidelines for Processing Payments to Students.

  • When the U of I System and the student seem to derive equal benefit, units are strongly encouraged to designate the student as primary beneficiary.

Student as primary beneficiary

Research or travel payments must be processed as a scholarship, fellowship or grant (see Scholarships, Fellowships and Educational Assistance Grants). The only exceptions to this rule are:

  • Research expenses for human subject payments,

  • Wages paid to student workers, and

  • Purchases of the U of I System property or equipment that retains functional value after the student’s research is complete and remains in the U of I System’s possession.

Payments for these exceptions are submitted through TEM or iBuy.

University of Illinois System as primary beneficiary

Research and travel payments must be processed via TEM including a clear and comprehensive description with supporting documentation of the U of I System business purpose and benefit. Research and travel payments that primarily benefit the U of I System are not reportable to the IRS as taxable income. All U of I System policies and procedures apply to these payments, including the requirement that payment or reimbursement requests be entered in TEM within 60 days of the date the expenditure was incurred, to avoid being reported to the IRS as taxable income. The unit is responsible for documenting why the U of I System is primary beneficiary, and retaining this documentation for audit purposes.

Scholarships, Fellowships and Educational Assistance Grants

Introduction

As defined in IRS Publication 970 Tax Benefits for Education, scholarships, fellowships and educational assistance grants are amounts paid for the benefit of an individual to aid in the pursuit of study or research. They are generally paid to or for the benefit of students at an educational institution, to aid in the pursuit of their studies or related research. No past, present or future services are expected in return for these payments, nor are recipients expected to repay them. These payments typically support educational needs, such as, tuition, fees, room, board, supplies and travel, primarily for the benefit of the student's academic development.

Scholarships, fellowships and educational assistance grants designated for qualified expenses (i.e., tuition and mandatory fees, books, or supplies) are not taxable income to the recipient. However, scholarship, fellowship and grant payments for unqualified expenses (e.g., room, board, travel, research, non-mandatory fees, books or supplies) are taxable income to the recipient. It is the student’s responsibility to determine and report to the IRS taxable scholarships, fellowships and/or grants received.

Scholarship and grant recipients may be undergraduate, graduate or professional program students; fellowships are typically paid to graduate students, though there are exceptions (e.g., see Research Experience/Opportunity funds in the Research and Travel Payments section). If the scholarship, fellowship or educational assistance grant is funded by a gift, the donor may set the criteria for recipient selection but may not select the actual recipient(s).

  • For scholarships, the Banner account code generally used is 181100, and the program code should generally roll up to NACUBO function 1787.

  • For fellowships, the Banner account code used for educational expenses is 181300, the Banner account code used to pay living expenses is 281300, and the program code should generally roll up to NACUBO function 1788.

IRS Reporting

All scholarships, fellowships and grants paid to U.S. Citizen and Resident Alien students are reported to the IRS and the recipient on Form 1098-T, Tuition Statement, by University Student Financial Services and Cashier Operations (USFSCO). A Social Security Number (SSN) is required for IRS Form 1098-T reporting. See IRS Publication 970 Tax Benefits For Education for additional information regarding taxability of these payments.

Scholarships, fellowships and grants paid to Nonresident Alien students are not reported on Form 1098-T unless the student requests USFSCO to do so. However, with the exception of qualified scholarships, qualified fellowships, and W-2 reportable wages, all payments to Nonresident Alien students are reported to the IRS and the recipient on Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, by University Payroll and Benefits (UPB). Withholding may be required on these payments. For additional information, see Payments to Foreign Nationals.

U.S. Department of Education (ED) Compliance

All scholarships, fellowships and grants are reported to the Office of Student Financial Aid (OSFA) and considered a resource when determining the student's financial aid eligibility. Therefore, these payments may have an impact on the type and amount of financial aid the student is eligible to receive.

OSFA will make the necessary adjustments to the student’s financial aid upon notification of the payments. These adjustments may create or increase a balance due on the student’s university account. Students are encouraged to view their Financial Aid Award letter and their billing statement periodically throughout the semester.

The university’s reporting responsibility with respect to Federal Student Aid (FSA) and any other financial assistance received by students is outlined in the FSA Administrative & Related Requirements (Chapter 3), specifically page 2-33, "Coordinating Official".

How to process

Preliminary notes regarding student travel and other research scholarships or fellowships:

  • When paying scholarships or fellowships from sponsored research funds, units must forward to Sponsored Programs Administration (SPA) Post-Award for UIUC students, or Grants & Contracts (GCO) for UIC and UIS students; sponsor funded travel and research expense payments may be delayed or reversed until or unless SPA Post-Award or GCO receives all necessary receipts.

  • Because travel or research costs are generally not part of the student’s standard Cost of Attendance (COA) as established by OSFA in accordance with ED guidelines, units must notify OSFA that the scholarship is for travel or research expenses that exceed COA, and provide a description of the expenses being covered by the scholarship. This will minimize the risk of the scholarship reducing other financial aid the student received.

  • Because travel and research payment scholarships are disbursed to the student's university account, they will be applied to any outstanding charges on the student’s university account unless the student or unit emails aroperations@uillinois.edu to request the scholarship or fellowship be refunded to pay the student’s travel or research expenses.

U.S. Citizens, Permanent Residents, and Resident Aliens for tax purposes (Resident Aliens):

  • UIC and UIS

    • Process non-recurring scholarships and fellowships for educational expenses payments (i.e. payments to less than 10 students that are tied to a C-FOAP that is valid for only one academic year) using the Student Account Payment Request Form

    • Process non-recurring scholarships and fellowships for educational expenses payments to 10 or more students through the Office of Student Financial Aid (OSFA)

    • Process recurring scholarships and fellowships for educational expenses payments (i.e. payments tied to a C-FOAP that will remain the same year after year) through OSFA

    • Process fellowships for living expenses through the Graduate College (UIC) or Graduate Studies Office (UIS); payment will be issued by University Payroll and Benefits (UPB)

    • Process travel payment scholarships through OSFA; include an email to the applicable address below, noting that the scholarship is for travel expenses that exceed standard Cost of Attendance (COA) as established by OSFA in accordance with ED guidelines, and provide a description of the expenses covered by the travel scholarship. This will minimize the risk of the scholarship reducing other financial aid

  • UIUC

Nonresident Aliens – Please refer to Foreign National Payments Resource Page for job aids and training materials.

What to Inform Students

When offering a scholarship, fellowship or grant to a student, units are strongly encouraged to provide the following information to the recipient:

  • All scholarships, fellowships and grants are considered a resource when determining the student's eligibility for financial aid. Therefore, they are reported to the Office of Student Financial Aid (OSFA), and may have an impact on the type and amount of financial aid the student receives. OSFA will make the necessary adjustment to the student’s financial aid award upon notification of the scholarship, fellowship or grant. This adjustment may create or increase a balance due on the student’s university account. The student is responsible for reviewing her/his Financial Aid Award letter and student account billing statement after the scholarship, fellowship or grant has been paid in order to understand the impact of the payment.

  • All scholarships, fellowships and grants paid to U.S. Citizens, Permanent Residents, and Resident Aliens will be reported to the student and the IRS on Form 1098-T for the calendar year in which the payment was made. The University of Illinois System does not report Form 1098-T for Nonresident Aliens unless requested.

  • Scholarships, fellowships and grants for unqualified expenses, i.e. room, board, travel, research, non-mandatory fees, books or supplies, are taxable income (refer student to IRS Publication 970). It is the student’s responsibility to determine and report to the IRS taxable scholarships, fellowships and/or grants received.

  • When scholarships and fellowships designated for travel or research expenses are disbursed to the student’s university account, they may be direct deposited to the student’s bank account if the student is enrolled in direct deposit and the student or unit emails aroperations@uillinois.edu to request the scholarship or fellowship be refunded to pay the student’s travel or research expenses.

Click here for a sample email template to send students who are U.S. Citizens or Resident Aliens for tax purposes, when offering them a scholarship, fellowship or grant.

Tangible Items

Purchasing tangible items (e.g. laptops, computers, I-Pads, research equipment) for students is not allowed due to the complex tax, property accounting, and financial aid implications.

Units that wish to use available resources to provide funding for these types of tangible items must do so in the form of Scholarships paid to the student’s university account. These scholarships will reduce or create a credit balance on the student’s account, thereby enabling the recipient to use this additional funding to purchase the tangible items themselves.

Exceptions to this rule require University Accounting and Financial Reporting (UAFR) and Financial Aid approval. For additional information, see Determine the Allowability of Gifts, Prizes, and Awards to Individuals.

Who to Contact

For questions about a particular type of payment, please contact the appropriate office:

Last Updated: November 8, 2018

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