Scholarship and Fellowship Department Aid

Frequently Asked Questions

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What processes are used at the University to pay scholarship and fellowship awards?

Depending on the type of payment, scholarship and fellowship awards are paid to students using any one or combination of these processes:

  • Third-party (internal) billing
  • Scholarship automation process (formerly known as BA25)
  • PV process
  • Non-service fellowship stipends through the payroll system

All funds provided to the students using these methods are for scholarship/fellowship payments only and are not intended for payments of services rendered by the students. Any funds provided to students for services should be paid through the payroll process. Contact your department's payroll staff to pay these students. For more help, email the OHR Contact Center at or call 612-624-8647 or 800-756-2363.

What's the difference between third-party billing and internal billing?

Third-party billing includes both internal and external funding sources. Although the terms can be used interchangeably, it is properly referred to as third-party billing.

When does a department use third-party billing to make scholarship/fellowship payment to a student?

A department will use internal billing to pay for tuition and fees for the student. The department can state the maximum amount to pay, or pay the student's actual amount owed for the tuition and fees, whichever is lower. Third-party billing will not reimburse the student for unused funds.

Can third-party billing be used for international students, and if so, under what circumstances?

For international students, internal billing can be used to pay for tuition and required fees only. Those required fees include all fees listed on the form except optional fees and other. The non-required fees (optional and other fees) must be paid through the scholarship automation process (formerly the BA25 process).

Are different processes used to pay charges for undergraduate students and graduate students?

The rules are the same for undergraduate and graduate students whether you're using third-party billing or the scholarship automation process, .

When is it appropriate to use the scholarship automation process?

The scholarship automation process is used to pay institutional scholarship, grant, or fellowship amounts that help the student defray the cost of attendance (COA). If the scholarship amount is more than the student's COA, a credit balance is issued to the student.

Cost-of-attendance expenses are:

  • Tuition and fees
  • Books and supplies
  • Room and board
  • Transportation (commuting to and from school)
  • Personal and miscellaneous

When is it appropriate to use non-service fellowship stipends paid through the payroll system?

Non-service fellowship payments that equal at least a 25% appointment should be paid via a non-service classification in company UNS. They are paid through the biweekly pay cycle. See job classification descriptions of the non-service classifications 9560, 9561, 9562, 9564, 9565, 9566, 9567, 9568, 9569, 9582, and 9583.

How are externally funded fellowships paid?

Externally funded fellowships that provide no services to the University are paid to students through non-service classifications 9562 graduate school trainee, 9565 professional school trainee, and 9566 graduate fellow—externally funded. These appointments are made into Company UNS in PeopleSoft job data and paid through the biweekly pay cycle.

Can departments use the scholarship automation process to pay students for externally funded scholarship/fellowships?

Yes, but only if the external funds are submitted to a department and deposited into a department account. However, we recommend that larger stipends be processed through the payroll system using the classification 9566. The payroll system spreads out the payments through the biweekly pay cycle for the academic year, allowing students to request that income taxes be withheld from their payments.

How is tuition paid from external funding sources?

The funding agency sends a check to the student's University department and the department sets up the student's payment through third-party billing.

Do the internal billing authorization or scholarship automation processes have limitations?

When using fund 1856 on an Internal Billing Authorization (pdf), the UMF number is required. The scholarship automation process cannot be used if paying not-admitted students or paying a student scholarship after the expected grad term has past.

Are scholarships and fellowships taxable?

Only scholarship and fellowship payments that meet IRS requirements of qualified education expenses (such as tuition and required fees) would be considered tax-free. IRS Publication 970 defines the types of scholarship and fellowship payments that are both taxable (non-qualified) and tax-free (qualified). For more information, refer the student to Education Tax Benefits.

Why are taxes withheld from scholarship automation payments made to international students but not payments made to domestic students?

Even though non-qualified scholarship or fellowship payments are taxable to the domestic student, the IRS does not require the University to withhold tax or report the payments to the IRS. Students, however, are required to report non-qualified scholarship and fellowship payments to the IRS on their individual tax returns. The IRS requirements are different, however, for non-qualified payments to international students. The IRS generally requires taxes be withheld at the rate of 14% and the scholarship/fellowship amounts to be reported to both IRS and the student on IRS Form 1042-S. Only those international students who are eligible for tax treaty benefits are exempted from tax withholding on the non-qualified amounts. For more information, see Scholarship and Fellowship Grants.

Is it appropriate to pay awards and grants through the PV process?

You will use the PV process to pay awards that do not pay for any part of a student's cost of attendance, such as raffle winnings, best-paper prize competitions, travel awards, or any awards or fellowship grants to students who are not admitted to a degree or certificate program (for example, summer enrichment programs or seminars for non-University faculty or corporation employees).

Can a department pay the insurance premium percentage (5%) currently charged to a student on the Graduate Assistant Health Care Plan?

No, all students, regardless of financial support, are responsible for paying the 5%. The Board of Regents approved this policy in June 2004 as a way to stem the rising cost of health insurance to the University.

Whom do I call if I have questions or need more information?

  • For third-party billing questions, call the third-party billing Office of Student Finance at 612-625-8559 or email
  • For scholarship automation process questions, call 612-624-6043 or email
  • For PV process questions, call the FSS Helpline at 612-624-1617 or email
  • For graduate school fellowship questions, call the Graduate School Fellowship Office at 612-625-7579 or email
  • For non-service appointment and payroll related items, email the Office of  Human Resources Contact Center at or call 612-624-8647 or 800-756-2363.