Abstract

According to the National Service Fellow Report, The Effective Education Award by Brandon Rogers, simple misunderstandings about the use and reporting of the AmeriCorps Education Award, and related benefits, may result in a significant reduction of financial aid opportunities. Donna Gedeon, of the National Service Trust, featured this report in her presentation at the 2002 Southwest Cluster AmeriCorps Program Directors Conference in Albuquerque, New Mexico.

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Issue

AmeriCorps members and alumni who do not understand the financial aid and tax implications of their AmeriCorps living allowances and education awards risk losing thousands of dollars they may otherwise be entitled to.

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Action

This effective practice provides a basic overview of some of the more critical issues when considering the potential effects of AmeriCorps service on educational financial aid and taxation. For a more thorough and up-to-date exploration of the many variables involved in such matters, consult the Segal AmeriCorps Education Award Tutorial, provided by EnCorps.

What should AmeriCorps programs know about the education award?

• AmeriCorps members have up to seven years to use the education award;
• AmeriCorps members may choose to use their education award in any of the following ways:
  • repay qualified student loans;
  • pay toward the Cost of Attendance at Title IV institutions of higher education, which may include tuition, fees, books, transportation, or other educational necessities;
  • pay a combination of current expenses within the Cost of Attendance and repay qualified student loans.
• The education award, unlike most other forms of scholarships and fellowships, is fully taxable in the year it is redeemed.
• The education award should be viewed as a supplement, and not a replacement of, existing forms of federal student aid. AmeriCorps program directors should encourage their members to apply early for any other financial aid by completing the Free Application for Federal Student Aid (FAFSA) in January or February of the year when the member plans on attending college.
• Use financial aid offices as a resource for meeting the costs of college. AmeriCorps programs should endeavor to invite financial aid office representatives to give presentations to members on how to correctly complete the FAFSA and search for local scholarships. College financial aid offices typically do this on a pro bono basis.
• Understand that neither the education award nor the living allowance should count towards a member's Expected Family Contribution.
  • Most students and parents do not generally understand the role of the FAFSA Worksheets in the Federal Methodology, the formula used to determine a student's Expected Family Contribution. The 1998 Amendments to the Higher Education Act ensured that both the education award and the living allowance should be considered as excludable income, which is a tremendous benefit.
  • In terms of eligibility for need-based financial aid, serving in AmeriCorps is analogous to having no income. This is one of the hidden ways that AmeriCorps has increased access to higher education. Program directors who have a basic understanding of this concept are further adept at recruiting potential members.

Though it is beyond the scope of this report to discuss taxation issues, program directors should know that taxation is somewhat of a factor in morale, and to a lesser extent recruitment and retention, of AmeriCorps members.

• Many members feel that they have been short-changed by the Corporation regarding taxation. The decision to tax the education award does not fall with the jurisdiction of the Corporation; it is a determination made by the Internal Revenue Service. It is worth mentioning this fact to members so that they understand that the Corporation is not disregarding their voices.
• Any money earned (or in the case of the education award, redeemed) between January 1 and December 31 serves as a member's tax base. One way that members have avoided singularly large tax bills is by redeeming half of their education awards in one year, and the other half of their education awards after January 1 of the following year. This approach can be applied whether paying for tuition or repaying student loans.
• Though neither program directors nor current AmeriCorps members should engage in lobbying efforts, both may want to be aware that there is a growing number of former members who are active in promoting service and improving the lives of those who serve. One such group is AmeriCorps Alums, Inc.

What about matching awards?

• There is no industry wide standard when it comes to matching awards. Some schools offer to match the amount of the education award, while some schools offer scholarships in set amounts that remain constant regardless of the amount of education award earned. Some institutions offer the scholarships on a continuing basis, while others offer one-time only awards.
• In many cases, attending a college simply because it offers a 'matching scholarship' may not offer a financial benefit. If a college with tuition of $24,000 per year offers to match a member's $4,725 education award, that member would still be better off financially by attending her/his state college, where tuition may only be $5000 per year.
• The education award is meant to be a tool to help people achieve the dream of a higher education, not the means to an end in itself. Members would be better served by planning out their dreams and seeing how their education awards can help them get there.

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Context

The information in this report is the result of research conducted by Brandon Rogers through the National Service Fellowship Program. The recommendations within are based on quantitative survey and an analysis of the federal regulations that govern financial aid. It is informed by both Corporation for National and Community Service and Department of Education policies. However it is intended only as a guide in assuring that AmeriCorps lives up to its ideal of ensuring educational opportunity, and does not represent a replacement of current CNCS guidelines or regulations.

The Effective Practices Collection presents this effective practice for informational purposes only. It should not be considered official legal or financial advice.

The sections in the United States Code that make all appropriate references to the AmeriCorps education awards are located within Title 20 – Education

Rogers, an AmeriCorps*VISTA alumnus, and former financial aid and admissions counselor at Evergreen State College, was the AmeriCorps*VISTA Project Coordinator for the Northwest Regional Educational Laboratory at the time this effective practice was posted.

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Citation

Rogers, Brandon. "The Effective Education Award." [Washington, D.C.]: Corporation for National and Community Service National Service Fellowship Program, July 2001.

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Outcome

The direct primary beneficiaries of this research are the AmeriCorps members, who should wind up with an increased financial ability to matriculate to college. Indirectly, AmeriCorps programs should benefit by being better able to work with colleges and universities, thereby expanding their recruiting opportunities. If all of the recommendations are implemented, the Corporation for National and Community Service should benefit from improved member morale.

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Evidence

According to the National Service Fellow Report, “The Effective Education Award,” (Rogers, 2001) dissemination of information about the AmeriCorps Education Award makes a significant impact. Simply reading relevant e-mails that were distributed via the AmeriCorps e-mail discussion list (ACList) doubled the likelihood that AmeriCorps members correctly completed their FAFSA worksheets. Of the members who attended workshops that covered similar information, 90 percent correctly completed the FAFSA. Comparatively, in the 2000-2001 academic year, only 16 percent of all AmeriCorps members who submitted a FAFSA completed the worksheets correctly.

Presentations delivered in the State of Washington as a result of this research have vastly improved the situation on a local level.

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Posted On

February 20, 2002

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For More Information

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Resources

If you have questions about the processing of your individual award, please direct your inquiries to the National Service Trust at 1-800-942-2677. The Trust is staffed by live operators from 8:00 a.m. - 6:00 p.m. EST.

Segal AmeriCorps Education Award Tutorial
An online tutorial for AmeriCorps members and alumni, from the Corporation for National & Community Service.

Federal Student Aid Information Center
Phone: 1-800-4-FED-AID (1-800-433-3243)

Source Documents

Related Practices

• Addressing members' higher education goals and encouraging use of the education award
• Preparing an education award training
• Transitioning from AmeriCorps to education or employment

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Related sites

AmeriCorps Alums

Corporation for National & Community Service: Alumni: Segal AmeriCorps Education Award

Find Title IV Schools (FAFSA federal school code search)

Topic Areas

• Development
• Supervision
• Training
• Financial management
• AmeriCorps
• AmeriCorps VISTA
• Member
• Program management

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