How to Include Student Room & Board Expenses in Income Calculations

Q: Last year, the Insider published an article explaining the recent Housing Opportunity Through Modernization Act (HOTMA) changes regarding income calculations of students (How to Count Student Financial Assistance under New Rules). This topic has been of widespread concern given the inconsistency of local housing authorities in applying the HOTMA rules, particularly in recognizing room and board exclusions.

I am writing as an advocate to help student families in our community. Many students receive stipends while studying, and a significant number are married, living with their spouses and children in their own households, with some families receiving Section 8 housing assistance. Questions have therefore arisen regarding how these rules apply in practice. My understanding is that:

• Room and board expenses may still be treated as excluded education costs even when the student is the head of household or spouse living in the assisted unit;
• Room and board costs don’t need to be paid directly to the college or university to qualify; and
• Assistance used for off-campus housing may also be treated as an excluded education cost.

Can you please confirm whether these points are correct?

A: Your understanding is generally in line with how the rules are typically interpreted under HUD program guidance. The inconsistencies among PHAs that you, correctly, observe are likely the product of some important nuances in the rules.

HUD income calculations regulations for Housing Choice Vouchers (Section 8) and other programs exclude most financial assistance received by students from annual income to the extent it’s used for specific education expenses. Allowable exclusions typically include tuition, fees, books, supplies, equipment required for courses, and reasonable room and board.

Room & Board Income Exclusions

HUD guidance has long treated room and board as allowable education expenses for purposes of excluding portions of scholarships, grants, and stipends from annual income.

General rule: Educational assistance used for room and board may be excluded from income as long as:

• The assistance is actually used for room and board; and
• The expenses are reasonable and associated with the student’s educational attendance.

When Student Is Head of Household or Spouse

Things get tricky when the student is the head of household or spouse in an assisted unit. While the exclusion should be based on the nature of payment rather than household status, the head of household/spouse factor may cause confusion under other HUD rules. There’s also a common misperception, at least among some PHAs, that room and board can’t be excluded if the student in the assisted unit is paying rent. HUD guidance generally doesn’t support that categorical limitation.

How Student Income Should Be Calculated

In practice, the proper approach to calculating the income of students should be:

Educational assistance – allowable educational expenses, including room and board = amount counted as income

This calculation should apply regardless of whether the student lives on campus or in the assisted unit, assuming the assistance is legitimately allocated to those costs.

Practical Pointer: Go to the HUD Occupancy Handbook 4350.3 for guidance on how educational assistance exclusions should be applied in federally assisted housing programs.

Why PHAs Apply the Rules Differently

There are several reasons why different PHAs apply the same income rules in inconsistent ways:

• PHAs may rely on older HUD handbook interpretations or local policy manuals;
• Documentation of actual room and board costs is often unclear; and/or
• Agencies may interpret the student rules conservatively to avoid audit findings.

Takeaway

Room and board may still qualify as excluded educational expenses even when the student is the head of household or spouse living in the assisted unit, provided the financial assistance is legitimately attributable to those costs. To avoid mistakes and ensure compliance in calculating student income, require documentation of the records you use to determine the portion of the stipend that can reasonably be excluded, including:

• School cost-of-attendance statements;
• Financial aid award letters; and
• Institutional estimates for room and board.