Exactly what to do
- The limit is 300% of area median gross income, computed the way HUD’s Section 8 program does it, adjusted for family size, for the calendar year before the application. The household is the student plus everyone living with the student; with shared custody, it’s the home where the student lives longest during the year (a tie goes to the higher-income household). Under the proposed regulations, income follows HUD’s definition (24 CFR 5.609) except that the imputed return on assets is ignored (an unrealized gain on a house or stock isn’t income); it includes child support and alimony even when they aren’t taxable, and leaves out non-cash receipts. The IRS will publish the area figures each year; they aren’t out yet. You may set a lower limit of your own (Treasury’s example is 80% of area median), never a higher one.
- Use one or more of these four, and no others; section 2 of the award policy in step 2.1 already lists them.
1. Direct verification. Pay stubs, prior-year federal or state tax returns, IRS transcripts, Forms W-2, and evidence of other income such as untaxed child support or alimony (or a certification that there is none), or other relevant data sources.
2. Categorical eligibility. Written documentation, such as an award letter dated within the last 12 months, showing someone in the household currently gets SNAP, TANF, WIC, Section 8 housing, or SSI. Only those five: school-wide free or reduced-price lunch status doesn’t count (Treasury asked for comments on adding state and tribal programs).
3. The low-income-area tutoring safe harbor. For individual academic tutoring, or special-needs services for a special-needs student, where the school selects the students based on need, and the school is in a HUD qualified census tract or certifies that at least 80% of its students live in one. No household income check is needed, but you must get an annual third-party audit certifying the school’s eligibility, the need-based selection, qualified providers, need diagnosed by a professional unaffiliated with the provider, and the services’ quality, duration, and impact, and give it to the state.
4. Foster children. A foster child is treated as meeting the income test without verification.
Keep the documents in an access-limited verification file, out of anything public, and destroy them on your written schedule (stage 5).
Questions people actually ask
Does a student have to be enrolled in a school when they apply?
No. The student must be eligible to enroll in a public elementary or secondary school, not already enrolled anywhere. Treasury’s example is a scholarship awarded the summer before the school year for expenses tied to enrolling later that year.
Whose income year do we use for a January application?
The calendar year before the application. An application dated in January 2027 measures calendar-2026 household income, so early in the year, before 2026 tax returns are filed, year-end pay stubs and W-2s do most of the work.
Primary sources: Treasury proposed regulations, October 2026 (our summary) · The income rules explained · HUD qualified census tracts
