From what I see and read in this thread, others who have replied are not sure how to interpret your post. It's your terminology that's not clear. Two words basically - "LOAN ASSISTANCE".
If the money received is borrowed money that you are required to pay back, then you will not receive any type of tax reporting document requiring you to report it as any type of income. Borrowed money is not your money. It never was, is not now and never will be. It would also appear that the money does not come from a "qualified student loan". If that's the case, then any interest you pay on the loan is not deductible either. If you have a qualified student loan then the interest is deductible and the lender will send you a 1098-E for the first year when you start paying back the loan.
If this is not a loan that you are required to pay back, then it's a grant or scholarship. All grants/scholarships are reportable on your tax return as taxable income *INITIALLY*. the taxability of that money is offset by the "qualified" education expenses it is used to pay for. The only qualified education expenses for a scholarship are tuition, lab fees and books. That's it. There are no exceptions.
Now the same holds true for a grant. But with a grant, other things such as room and board can be deductible is unqualified but allowed expenses if *and only if* the grant specifically designates what the money can be spent on for education outside of the qualified expenses. But even then, it must be *in* *direct* *support* of the education.
For example, if the grant states that it can be used for housing, then you can use that money tax free to pay rent only for the period of time you are actually enrolled. So if you do not take any classes over the summer break, you can't use that money tax free to pay for housing during those months you are not enrolled in classes.
My overall impression is that you have a grant from the state dental board. That being the case, the money is fully reportable and fully taxable *INITIALLY*, with the taxability offset by the "qualified" education expenses it is used to pay for.
Please note the following:
- All scholarships, grants and 529 distributions are taxable income (initially) in the tax year they are recieved. It flat out does not matter what year that money may be designated *for*.
- All qualified education expenses are deductible in the tax year they are actually paid. It flat out does not matter what year you may pay *for*.
