Educational Income and Expenses
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This section includes information about educational income and the treatment of educational expenses.
Policy
Effective 06/2026, dividend income, educational income, interest payments, and royalty income are no longer countable. See the Urgent Bulletin for additional information.
Educational income may be countable or not countable depending on the source of the income and the programs for which the participant has applied. The net countable educational income is established by deducting allowable educational expenses from the gross countable educational income.
Countable income is used to determine an income budget. (See Income Budgeting to see how FAA determines the income budget.) FAA needs to know about income that is both countable and not countable to determine whether a budgetary unit’s expenses are exceeding their income. (See Income Eligibility for more information about how FAA uses countable and not countable income.)
Educational income can be earned or unearned income. A participant may receive financial aid (educational income) for enrollment in or for attending any of the following:
●Colleges
●Universities
●Schools for the handicapped
●Technical and trade schools
●Programs that provide for completing either a high school diploma or a General Educational Development (GED) diploma
Types of Educational Income
Educational income includes, and is not limited to, any of the following:
When a provider of a countable educational income source pays a third party for living expenses, all of the following apply:
●Countable as unearned educational income for the NA benefit.
●Not countable as income for CA benefits. The income is considered a vendor payment.
American Indian Education Funds
American Indian Education Funds are not countable. These funds include and are not limited to any of the following sources:
●Title IV funds.
●Title XIII funds.
●Funds excluded by Public Law.
●Bureau of Indian Affairs Funds.
Income paid to the participant as a Tribal Loan for educational purposes under Title XIII is not countable.
BIA Education Assistance Program
Any funds received from the BIA Educational Assistance program are not countable.
Grants, Loans, Awards and Scholarships
A loan that requires repayment to begin within 60 days after receiving the loan is not considered deferred and is counted as income.
Grants, deferred payment loans for education, and scholarship payments provided by Title IV of the Higher Education Act are considered Educational Income and are not countable. These payments include, and are not limited to, any of the following:
●BEOG/PELL Grant-Basic Education Opportunity Grant
●CAMP College Assistance Migrant Program (Special Migrant and Seasonal Farm Work Programs)
●Carl D. Perkins Vocational and Applied Technology Education Act
●FDSLP Federal Direct Student Loan Programs (formerly known as GSL, #ADDCOMMA and FFELP, and Stafford Loans)
●HEP High School Equivalency
●Income Contingent Direct Loan Demonstration Project
●NDSL (Perkins Loan) Direct Loan to Students in Institutions of Higher Education.
●National Early Intervention Scholarship and Partnership Program
●Robert C. Byrd Honors Scholarship Program
●Super PELL Grant-Presidential Access Scholarship
●SEOG Supplemental Educational Opportunity Grant
●SSIG State Student Incentive Grant
●TRIO Grant-Special Disadvantaged Student Programs
●Work Study Program (Not all federal work study funds are under Title IV of the Higher Education Act)
IDA Deposits and Withdrawals for Education
Educational income from any source deposited into an IDA is countable as unearned educational income.
Money withdrawn from an IDA is not countable when it is used to pay educational costs from an accredited institution of higher education(g).
Allowable educational and training costs that an IDA withdrawal would not count as income include all of the following:
●Tuition and other fees required for enrollment or attendance at the institution.
●Lab fees, books, uniforms, rental and purchase of any equipment, materials and supplies required for the course of study.
●Transportation.
●Miscellaneous personal expenses that may include, and are not limited to, any of the following:
Dependent care necessary for the student to attend school.
NOTE Do not use any part of the dependent care expense that is also used as an educational expense in the childcare deduction.
Recorders.
Computers.
Auto repairs when necessary for school attendance.
NOTE Service fees withdrawn by the financial institution are not countable.
Indian General Welfare Benefits (Public Law 113-168) for Education
Indian general welfare benefits include various types of payments made, or services provided, to or on behalf of a member of an Indian tribe. This includes, and is not limited to, any of the following:
●Navajo Veterans
●Gold Star Parents
●Surviving Spouses of Navajo Veterans
This income is not countable, and the Navajo Nation Veterans Administration (NNVA) determines eligibility for Navajo tribal members. Eligibility is subject to the availability of funds that are appropriated annually. The amounts vary and may be issued for educational expenses limited to any of the following:
●Books
●Course fees
●Lab fees
●Supplies
NOTE Expenses are not to exceed $500 per fiscal year.
Tribal Loans for Education
Tribal Loans for Education are paid to the participant under Title XIII and are not countable.
Tuition and School Fee Refunds
When a student who quits school receives a refund of tuition or mandatory fees, all of the following applies:
●Funds originally determined not countable that are refunded are not countable.
●Funds retained by the institution are not countable.
●The countable educational income budgeted and prorated during the period, remains countable and continues to be budgeted.
●When the refund is for an expense allowed as a deduction from countable educational income, the amount is prorated over the remainder of the period it is intended to cover.
Veterans Administration Educational Income
The Montgomery GI bill Chapter 30 and other income paid to the participant by the Veteran's Administration for educational purposes are not countable unearned income.
Work Study
Earnings from a college work-study program funded by any of the following are not countable as earned income:
●Title I of the National and Community Service Act of 1990
●Title IV of the Higher Education Act
●Title XIII of the Indian Higher Education Program
Earnings from a college work-study program funded by one of the following are countable as earned income:
●Federal work study when the funds do not come under Title IV of the Higher Education Act.
●Veterans Administration.
WIOA Summer Component Programs (SCP) and Job Corps Educational Income
The Workforce Innovation and Opportunity Act (WIOA) Summer Component Programs (SCP) and Job Corps Educational income (earnings and living allowances) are not countable educational income.
Types of Educational Expenses
Educational expenses include, and are not limited to, any of the following:
●Books and Supplies, and other necessary items.
●Mandatory Educational Fees, including any of the following:
Tuition
Lab fees
Uniforms
Equipment
Materials
Educational Supplies
●Miscellaneous educational and personal expenses are allowable for NA, including and not limited to any of the following:
Personal care, such as haircuts, laundry expenses, clothing, personal hygiene items
Recording equipment, data processing equipment, software
Auto repair, when necessary for school attendance
NOTE For CA, personal educational expenses are not an allowable education deduction from education income.
●Student Dependent Care
For NA, dependent care is not an allowable educational expense.
For CA, dependent care is an allowable educational expense when dependent care is necessary for the student to attend school.
When educational dependent care expenses exceed countable educational income for a given month, all of the following apply:
●FAA uses the excess educational childcare expense to determine the CA dependent care deduction.
●FAA deducts dependent care expenses from the countable educational income last to provide the greatest advantage to the student. For more information about the allowable dependent care deduction, see CA Dependent Care Deduction.
●Educational Transportation expenses are an allowable expense only for NA.
NOTE When the participant can verify the mileage for transportation, see Mileage Standard for the current mileage standard.
Verification
The participant has the primary responsibility for providing verification. (See Participant Responsibilities – Providing Verification for additional policy.)
For NA, income is required to be verified for all of the following before eligibility is determined:
●When reported on a new application, during the interview of a new application, or changes reported before the eligibility determination of a new application.
●For changes reported after an eligibility determination of a new application (e.g., a renewal application, mid approval contact, etc.) and any of the following apply:
The source of the income has changed.
The income is questionable(g) or unclear(g).
The reported income amount has changed by $51 or more.
The previous verification in the case file is more than 59 calendar days(g) old.
For CA, all income is required to be verified before determining eligibility.
Examples of verification that can be used for educational income and expenses include, and are not limited to, any of the following:
●All IDA deposits (including amounts, interest) and the source of the deposited funds.
●All IDA withdrawals, including the manner and reason for the withdrawals.
●Assistance payment records.
●Award letter.
●Bank loan funds.
●Bank records.
●Benefit award letters from SSA, Statement of Earnings VA, and other agencies.
●Contracts.
●Current check reflecting gross income.
●Expense receipts.
●Federal or state tax forms.
●For Work Study any of the following:
A copy of a paycheck stub.
A copy of checks when the gross earnings are listed.
A printout from a third-party payroll verification source provided by the participant.
Third-party payroll verification sources when the employer uses the verification source as its legal agent to provide payroll services or respond to inquiries about employee records. (See Third-Party Payroll Verification Sources(g) for FAA approved sources, additional information, and instructions for requesting additional sources.)
A New Employment Verification (C005) notice that is completed, dated, and signed by the employer or their payroll authority. To be considered complete, the statement has to include all of the following:
●Name, address, and telephone number of the employer.
●Gross pay for the periods needed.
●Frequency of pay (e.g., weekly, monthly, quarterly, etc.)
●Day of the week or day of the month pay is received (e.g., Fridays, 5th and 20th of the month, first of the month, etc.)
●Any expected change in pay.
For new or current employment verification, a completed Verification of New/Current Employment (FAA‑0053A) form that includes a date and the signature of the employer or their payroll authority.
For terminated employment verification, any of the following completed items that include a date and the signature of the employer or their payroll authority:
●Verification of Terminated Employment (FAA-1701A) form.
●Verification of Terminated Employment (C019) notice.
●A collateral contact with the employer or their payroll authority.
NOTE Collateral contact is not used when contacting the employer would jeopardize the participant's employment or when the employer does not accept telephone verification.
●Insurance policies.
●Loan paper.
●School budget sheet or computer printout.
●School statement.
●Signed statement from the agency or payer providing the income.
●Student expenses.
●System interface(g) when the participant agrees that the information is accurate.
Legal Authorities
7 CFR 273.5(b)(6)
7 CFR 273.8(e)(20)
7 CFR 273.9(b)(1)(iii)
7 CFR 273.9(b)(1)(vi)
7 CFR 273.9(b)(2)(iv)
7 CFR 273.9(c)(1)(iv)
7 CFR 273.9(c)(3)(i)
7 CFR 273.9(c)(3)(ii)
7 CFR 273.9(c)(3)(iii)
7 CFR 273.9(c)(4)
7 CFR 273.9(c)(8)
7 U.S.C. 2014(d)(3) a-c
7 U.S.C. 2014(d)(16)
AAC R6-12-501 – 503
AAC R6-12-503
AAC R6-12-503(2)(a-h)
A.R.S 46-292-P01
last revised 12/29/2025