What Is a Stipend?

Ever heard the term stipend and thought to yourself, what does that mean? In simple terms, a stipend is a fixed, regular payment made to individuals, often in educational or training settings, to support their living expenses while they focus on their work or studies.

But there's more to stipends than just a paycheck. They can be a crucial part of internships, research positions, and various training programs, offering financial support while you gain valuable experience. So, what makes a stipend different from a regular salary or wage? And how can you make the most of it if you're offered one?

Whether you're considering an internship that offers a stipend or just curious about this unique form of compensation, we've got you covered. Our team at Bold.org, with extensive experience in student finances, will help guide you to understanding stipends and how to make the most of them. Let's get started and unravel stipends together!

Here at Bold.org, we are committed to helping students eliminate student debt. Don’t waste time. Apply for scholarships today!

What Is a Stipend? How Does It Differ from a Salary?

A stipend is a fixed, regular sum paid as a salary or allowance given by employers or schools. Different from wages for hourly work or a minimum wage salary that is tied to a specific job role, stipends serve unique purposes. They are offered, in addition to or as a bonus, to work as financial support to those who need it.

It’s not calculated by any hours worked or deliverables given but rather provided to cover living expenses and facilitate focus on professional or academic growth. They are assessed based on the living costs of a particular area.

In other terms, stipends are employee compensation reserved specifically for students with a predetermined fixed amount of money. This fixed sum is usually given regularly, such as every month or every two weeks, and serves specific purposes that are different from traditional income sources.

How Stipends Differ from Regular Income

In greater depth, here are some components that might make it easier to separate the two concepts:

1. Fixed Nature: Stipends vary depending on the company or organization offering them but do not factor in the work required of the student. Recipients receive a consistent amount that reflects the purpose of the stipend rather than the time invested.
2. Purpose-Specific: Often linked to educational pursuits, internships, or training programs, stipends aim to defray expenses associated with these activities rather than serve as a primary income source. For example, moving to a new city or buying furniture can be expensive. In order to not force you to deduct it from your hard-worked regular salary, one will offer a monthly stipend instead.

Who Can Receive a Stipend?

Many different people can receive a stipend, and it often feels like a lifeline during important stages of their careers or education. Imagine you're a graduate student diving deep into research or an intern getting hands-on experience in your dream job—stipends help cover living expenses so you can focus on what matters most. They're common for fellows in educational programs, volunteers dedicating their time to meaningful causes, and even artists and writers pursuing their creative passions.

Common Types of Stipends

At the forefront, stipends might be the same, but where they come from are drastically different. Attributes like how much and where it comes from will be vastly different in everyone’s cases. Here are some common types of stipends:

Research Stipends

Research stipend payments are most prevalent in academic settings related to science. These funds are created to aid researchers cover costs associated with their projects, allowing them to expand the horizons of their work without worrying about financial constraints.

Health Insurance Stipends

Moving away from educational environments, companies also provide Health Insurance Stipends as part of their compensation packages. These stipends give autonomy for employees to purchase health insurance that best suits their needs rather than being restricted to the offerings of the company’s group plan. A health insurance stipend can completely change the benefits to make it more welcoming for each person.

Job Training Stipends

For interns and trainees, stipends can almost be necessary. As most people in this stage have a limited budget, they aren’t in the financial situation to pick up and move to where the job is organized. Many organizations offer this monetary support during internships or training periods, helping participants cover living expenses while they gain vital experience in their chosen career field.

Career Development Stipends

Many employers acknowledge that students have opportunities to grow outside of the work environment. In order to push students to seek this personal growth and continue professional development, career development stipends support employees in enhancing their skills and knowledge through courses, certifications, conferences, and more. Tuition reimbursement can also fall within this category, offering students money towards a graduate program.

Wellness Stipends

health and Wellness stipends serve a similar purpose but focus on activities that are related to helping students boost their physical exercise. They can be used for gym memberships, fitness equipment, mental health resources, and more. The intent is to foster a healthier work environment by encouraging employees to take care of their physical and mental well-being in their free time.

Lifestyle Spending Account

More modern organizations that are focused on pushing employers to seek greater opportunities outside of work will offer Lifestyle Spending Accounts (LSAs) - flexible stipends that employees can use on a wide range of lifestyle-related services from childcare to pet care, home cleaning to personal development courses, and beyond.

Academic Scholarships and Stipends

Similar to stipends, academic scholarships provide financial aid to students attending college or university. These funds can be used for a range of college costs, including tuition, textbooks, housing, and other education-related expenses. Bold.org is one such organization that offers numerous scholarships every year to students pursuing various fields of study. If you have the time, I encourage you to familiarize yourself with the platform today.

What Sets College Stipends Apart

College stipends are primarily designed to support students in their educational journey. This means they often help cover costs like tuition, books, supplies, and even living expenses. Unlike general stipends, college stipends are closely tied to academic and research activities. For instance, you might get one if you're involved in a research project or if you're working as a teaching assistant.

One of the key things about college stipends is who can get them. They're typically reserved for students—whether you're an undergrad, grad student, or working on your PhD. Often, you need to show some academic merit or promise in your field of study to be eligible. These stipends can come from the university itself, funded through endowments or departmental funds, or from external sources like government grants and private foundations.

The duration and amount of these stipends can vary. Many follow the academic calendar, so they might cover a semester or an entire academic year. Some are renewable if you continue to meet certain academic standards. The amount can range significantly, too—some might fully cover your tuition and living costs, while others might offer partial support.

Are Stipends Taxable Income?

Understanding how taxes work can be overwhelming on its own, but imagine that in conjunction with stipends. The Internal Revenue Service (IRS) has provided guidelines to determine whether you must pay taxes on your stipend or not. Following these regulations will help you figure out whether your stipends are taxable. Let’s take a closer look at these rules.

Stipends and Taxes

The IRS generally considers stipends to be a form of income, meaning they may be subject to taxes. So, depending on your employer, the type of stipend, or research opportunity, you may have to withhold income taxes. It’s important to understand the specific factors that determine this to avoid any unexpected tax obligations.

How Stipends Are Classified for Tax Purposes

According to IRS Publication 15-B, here’s how stipends are classified for tax purposes:

1. Taxable Income: If a stipend is used for living expenses or other costs while participating in work-related activities or studies, it is likely to be considered taxable income. An income tax will then be placed on all funds acquired.
2. Non-Taxable Income: However, if a stipend is specifically designated for qualified educational expenses such as tuition fees, books, or supplies required for coursework, it may not be treated as taxable income.

Conditions for Non-taxable Stipends

These are the certain conditions that a stipend must meet in order to be classified as non-taxable:

• The recipient must be pursuing a degree.
• The funds must be used solely for qualified education expenses.
• The stipend should not be payment for teaching, research, or any other services.

For more specific and up-to-date tax information, consult a tax advisor and/or the IRS website.

Scholarships as an Alternative

Platforms like Bold.org offer scholarships that can help alleviate the financial burdens of college without the same tax implications as stipends. As long as the money is going straight to the institution or organization it’s being used for, you typically won’t have to worry about being taxed as a college student. However, it is important to consult a tax advisor for more specific and up-to-date information.

Frequently Asked Questions About Stipends

How often are stipends paid to an employee?

Stipends typically follow a regular payment schedule, much like a typical salary. However, the frequency can vary based on the terms of the agreement. Some stipends are paid monthly, while others might be distributed on a semesterly or yearly basis.

What can I use a stipend for?

The usage of stipend funds largely depends on the stipulation set by the provider. Generally, stipends are intended to cover basic living expenses, such as housing, food, and transportation costs. In an educational context, it can also be used to pay for items directly related to your studies.

Can you refuse a stipend?

Yes, you can refuse a stipend for various reasons, such as conflicts with personal or ethical beliefs, securing alternative funding, negative tax implications, interference with other employment or contractual obligations, or adverse effects on financial aid for students. To refuse a stipend, first review the offer carefully, then draft a polite and professional letter or email clearly stating your decision and, if appropriate, providing a brief reason. Always express gratitude for the opportunity and the offer.

Are stipends treated the same as overtime pay?

Stipends and overtime pay are both taxable but serve different purposes. Stipends provide financial support in educational or training settings and are not tied to hours worked, often reported on forms like a W-2 or 1099. In contrast, overtime pay compensates employees for extra hours beyond their regular schedule, calculated at a higher rate and reported on a W-2 along with regular wages.

At Bold.org, we are committed to helping students. Check out our Scholarship Blog for more information and learn how to apply for scholarships today!