Scholarship vs. Third Party

Departments have two methods for providing financial support to students: (1) departmental scholarships; and (2) internal third-party deferrals.

Departmental scholarships provide a fixed dollar award to the student. The amount is refundable to the student. Note that International students scholarships will need to be processed through payroll and may not receive the full scholarship amount since taxes must be deducted first.

Internal third-party deferrals are contracts that can specify the following: (1) type of tuition or fees; (2) the payment amount; and (3) the non-standard program or classes (if applicable). The type of tuition or fee can be broad, such as all tuition and fees, or specific, such as the non-resident tuition add-on (to the base resident tuition amount). The payment amount can be fixed, such as $1,000, or the total amount assessed (based on the type of tuition charges or fees identified).

Factors to Consider When Determining the Type of financial support
Third-party deferrals have more set-up options and more processing controls than scholarships. Here are some factors to consider.

Amount Applied: Departmental scholarships only pay fixed dollar amounts. A third-party deferral can pay either a specific dollar amount or an assessed (billed) amount. The latter amount will adjust as the types of charges it covers change (generally due to a credit load change).

Tuition and Fee Types: Third-party deferrals will allow the department to identify specific tuition and fee types (e.g., instructional/resident tuition, segregated fees, etc.). Scholarship amounts will apply to all charges.

Tuition Refund Processing: Changes to the student’s credit load may result in a refund. Departmental scholarships are refunded to the student while internal third-party deferrals are refunded to the department. Scholarships are considered to be the student’s money and are not returned to the department. A department must use a third-party deferral to receive refunds.

Eligibility of Student: Tax laws may impact whether a student is eligible to receive a scholarship or a third–party deferral and how much the student can receive.

  1. International students (Non-Resident Alien) must have taxes deducted from their financial award. Consequently, scholarships for NRAs are processed through payroll (and not by the Bursar’s Office) and go directly to the student. However, NRAs are eligible for third-party deferral because third-party payment is limited to tuition & fees only and is not refundable to the student. The student is expected to use the money for his or her bill but nothing guarantees this. Go to the Business Services web site for more information: Scholarship Payments to NRAs
  2. UW-Madison employees may be subject to tax law depending on the purpose of the education. Contact Laura Rader in the Bursar’s Office to discuss UW-Madison employee eligibility.

Comparison of Department Scholarships and Internal Third-Party Deferrals

Department (Internal)
Third-party Deferral
Set-up Process Submit "Item Type Request Form"
to Bursar's Office.
Submit "Internal Third Party
Authorization Form"
each term to Bursar's Office.
Department Administration (1) Each Term, submit electronic
file to Bursar's Office.
(1) Each Term, submit electronic
file to Bursar's Office.

(2) Submit an interdepartmental
billing form to pay the deferral invoice.
Types of Tuition Charges
and/or Fees That Apply
Does not distinguish.
Applies to all tuition types and fees.
Applies to any or multiple tuition
types and fees.
(Examples: resident tuition,
non-resident add-on tuition,
segregated fees, all tuition,
all tuition and fees, etc.)
Amount Applied to
Student Account
Specific (fixed) dollar amount. The assessed (billed) amount for the
identified tuition and fee type(s) or
a specific (fixed) dollar amount.
Timing for Posting on
Student Account
Applied Applied by the time
the student is billed if submitted
by the Bursar's Office deadline
for the term. Otherwise, the
Bursar's Office will try to process
scholarships daily
(subject to workload).
Applied during the initial billing process
if submitted by the Bursar's Office
deadline for the term. Otherwise, 3 to 5
business days after submitting.
Who Receives a Refund Unused amounts are refunded
to the student.
Unused amounts are refunded
to the department.
Eligibility of Student (1)International students:
disbursed to student through
payroll (not the Bursar’s Office)
Amount received is net of taxes.

(2)UW-Madison employee:
may have tax limits due to
purpose of education.
(Bursar’s Office Contact: Laura Rader)
<1>International students:
eligible because Third Party
is limited to tuition & fees
only and is non-refundable.

(2)UW-Madison employee:
may have tax limits due to
purpose of education.
(Bursar’s Office Contact: Laura Rader)