Academic scholarships are considered "Gift-Aid" and are funded by corporations, non-profit organizations, and individual donors. Recipients are typically determined through a competitive application process based on academic achievement, financial need, and/or criteria established by the donor. Donors may elect to defer the determination of the criteria to the school. Proceeds of the scholarship are used to help offset recipients' cost of education.
Scholarship funds used to pay for qualified expenses, such as tuition, books, and fees, are not taxable income. However, any amount exceeding qualified expenses is considered taxable income for both U.S. and international students.