The following information will help keyholders and data users understand finance concepts that will make reporting and using IPEDS data clearer and easier. This document explains scholarships, fellowships, grants, discounts, and allowances in layman's terms covering the following questions:
IPEDS defines scholarships and fellowships as outright grants-in-aid, trainee stipends, tuition and fee waivers, and prizes awarded to students by the institution, including Pell grants. Regardless of the source of funds, it is considered a scholarship or fellowship if the institution awards it. They may be need-based or merit-based and still fall into this category. Awards to undergraduate students are most commonly referred to as "scholarships" and those to graduate students as "fellowships." These awards do not require the performance of services by the recipient while a student (such as teaching) or subsequently. The term does not include loans to students (subject to repayment), College Work-Study Program (CWS), or awards granted because of faculty or staff status. Also not included are awards to students where the selection of the student recipient is not made by the institution. Examples of this would include Lions Club scholarships where the club selects the recipient and Wal-Mart scholarships where the company names the recipient.
A common misconception regarding scholarships and fellowships is to include work-study as scholarships in reporting in IPEDS. Because work-study requires the student to work to earn these wages, it cannot be considered an outright grant or scholarship. Expenses related to work-study are wages to be classified within the function that benefits from the student's work. For example, if the student works in the library, the wages should be classified as academic support. If the student works in the student aid office, their wages should be classified as student services.
Credits applied to students' accounts may come from many sources. Some originate within the institution, referred to as institutional scholarships. Some come from the federal government in the form of Pell grants or SEOG grants. Others are from outside private sources such as local clubs and organizations. State scholarships may come to the institution in the form of tuition exemptions. Still others are payments from the students or their parents and other family members on the students' behalf. The accounting treatment of the credit determines whether it is a scholarship (or fellowship) or a pass-through transaction.
One characteristic that often affects how the credit is handled from an accounting standpoint is what role the institution plays in determining the recipient of the payment. In the case of payments from students or their families, the person paying determines who the recipient is. In the case of some state scholarship programs, the state determines the student is eligible at any institution the student attends. Similarly, private clubs and organizations may send the payment with the student specifically named. In these cases, the institution has no input as to the recipient. The payment is simply applied to the student's account and no revenue or expense is recorded. This is considered a pass-through transaction. The payment simply passes through the institution for the specific student's benefit. When the institution names the recipient, as in institutional scholarships, SEOG, and privately donated scholarships, it is a scholarship from the institution's perspective, generating an expense (or allowance as discussed later in this document). When the institution receives the private donation or federal funds, it is treated as revenue.
Different institutions may classify certain funds differently as a scholarship or fellowship or as a pass-through. One common area of differences is Pell grants. Private institutions (and a few public institutions) operate under accounting standards adopted by the Financial Accounting Standards Board (FASB). The vast majority of public institutions use accounting standards adopted by the Governmental Accounting Standards Board (GASB). Public institutions using current GASB accounting standards are required to treat Pell grants as scholarships, using the logic that the institution is involved in the administration of the program (as evidenced by the administrative allowance paid to the institution). FASB standards give private institutions the option to treat Pell grants as scholarships or as pass-through transactions, using the logic that the federal government determines who is eligible for the grant, not the institution. Because of this difference in requirements, public institutions will report Pell grants as federal revenues and as allowances (reducing tuition revenues), whereas FASB institutions may do this as well or (as seems to be the majority) treat Pell grants as pass-through transactions. The result is that in the case where a FASB institution and GASB institution each receive the same amount of Pell grants on behalf of their students, the GASB institution will appear to have less tuition and more federal revenues, whereas the FASB institution treating Pell as pass-through will appear to have more tuition and less federal revenues. This is the reason why FASB institutions are asked to answer the General Information question about how the institution treats Pell grants. The answer to this question will make selection of peers easier for private institutions.
Scholarships and fellowships may be used to pay tuition and fees and other institutional charges such as room and board or bookstore charges. Under GASB and FASB accounting standards, the amounts used to pay tuition and other institutional charges are considered discounts or allowances, reducing the amount the student actually pays to attend the institution. The amount of any aid left over, usually refunded to the student, would be considered an expense. The following example may help to understand this concept:
Suppose a student is charged $3,000 for tuition and fees, and $1,500 in room and board charges. The student receives an institutional room and board scholarship of $1,500 and a Pell grant for $2,000. Below is a summary of how this situation would be represented.
|Room and Board||$1,500|
|Pell grant (not treated as pass-through)||$2,000|
If the institution treated Pell grants as pass through, tuition revenues would be $3,000 and there would be no federal revenue.
Discounts and allowances have been netted against the amounts reported in the above representation of the accounting treatment. The institution should maintain records of the amounts of these allowances for each revenue source against which they are applied (tuition and fees or auxiliary enterprises).
When reporting on IPEDS, scholarships appear in two different areas of the survey. One is on a part where the institution is required to report amounts of each type of scholarship, categorized by source, such as Pell grants, other federal grants, state, local and institutional grants. They should be reported at the full amount of the grant or scholarship. This is Part E for GASB institutions and Part C for all others. On this screen, the keyholder is also required to report the amount of discounts and allowances applied to tuition and fees and to auxiliary enterprises, such as room and board charges. The other part is on the expenses part of the survey. The amount here is that part that was not considered pass-through and not applied to tuition and fees or auxiliary enterprises. Generally this is the amount refunded to the student.
Once keyholders and data users understand these finance concepts, reporting and using IPEDS data should become clearer and easier.
For information on treatment of discounts and allowances for public institutions, refer also to NACUBO Advisory Report 2000-5. For private institutions, refer to NACUBO Advisory Report 1997-1. For more information, contact the IPEDS Finance Survey Director.