I don't think it really matters if the stipend is wages or financial aid. Unfortunately, the school is saying that DS and/or your family can afford to pay a certain amount. They are keeping that amount constant and they are reducing the aid by the amount of the stipend. I would assume they would do the same if he had another job. I know, it sucks.
A stipend by definition is fee for wages. If the stipend (or scholarship) is used to offset tuition or required fees it is exempt from federal income tax. If the stipend or scholarship is used to offset room and board it is taxable. ROTC scholarships and the service academies are specifically exempted from this requirement in the tax code, even though they could be considered payment for services. So the tuition, books, and the monthly stipend students receive from ROTC are exempt from tax. Pay for summer training, however, is taxable, and the student will receive a W2 for this work. Unfortunately none of this makes a difference to your DS school.
The question is not if the stipend is taxable, but whether it counts toward the schools Cost of Attendance as financial aid, which limits the amount of other aid the cadet can receive. It appears the answer to the question is no, it cannot legally be counted as financial aid.
37 U.S. Code § 209 - Members of precommissioning programs
(a)Senior ROTC Members in Advanced Training.—
(1) Except when on active duty, a member of the Senior Reserve Officers’ Training Corps who is selected for advance training under section 2104 of title 10 is entitled to a monthly subsistence allowance at a rate prescribed under paragraph (2) beginning on the day he starts advanced training and ending upon the completion of his instruction under that section, but in no event shall any member receive such pay for more than 30 months.
(2) The Secretary of Defense shall prescribe by regulation the monthly rates for subsistence allowances provided under this section. The rate may not be less than $250 per month, but may not exceed $674 per month.
(3) A subsistence allowance under this section may not be considered financial assistance requiring additional service within the meaning of the third sentence of section 6(d)(1) of the Military Selective Service Act (50 U.S.C. App. 456(d)(1)).
Source: https://www.law.cornell.edu/uscode/text/37/209
SOURCE:http://www.financialaid.iastate.edu/students/veteran.phpThe Higher Education Act Technical Corrections Bill (H.R.1777) changed how federal student aid eligibility is determined for Veteran, National Guard, and ROTC students. Among the provisions included in the bill is an updated definition of the term 'Veterans Education Benefits'.
- Previously, Veteran, National Guard, and ROTC Education Benefits were counted as part of a student's overall financial aid package. This legislation exempts these benefits, resulting in the potential for expanded eligibility for various types of federal financial aid programs including but not limited to the Supplemental Educational Opportunity Grant, Federal Work-study, and Federal Direct Student and Parent Loans.
No it is very much relevant. The school cannot legally count that as financial aid. What is more relevant the Higher Education Act Technical Corrections Bill (H.R.1777), which amended the original act to make exemptions for veterans benefits, including ROTC.
SOURCE:http://www.financialaid.iastate.edu/students/veteran.php