Lesson 6.3 · 3 minInternships, paid and unpaidInternships, paid and unpaid
This lesson helps you weigh an internship offer by what it pays, what it costs you, and what you stand to learn. Paid and unpaid roles follow different rules, and knowing them lets you ask the right questions before you say yes.
How paid internships work
A paid internship is a job, and the intern is an employee with the same wage protections as anyone else on the payroll. You complete an I-9 and a W-4, tax is withheld from each check, and a W-2 arrives after the year ends. Hourly pay must meet the federal minimum wage and any higher state or local rate.
Some programs pay a stipend in place of an hourly wage. A stipend may come with no tax withheld at all, yet it can still be income you have to report. Ask in writing how you will be paid, how often, and whether any tax is taken out.
When an unpaid internship is allowed
A for-profit company may offer an unpaid internship only when the intern, rather than the company, is the main beneficiary of the arrangement. The US Department of Labor calls this the primary beneficiary test and lists the factors it weighs on its website. Signs of a lawful unpaid role include close ties to your coursework, training much like a classroom, and duties that do not replace paid staff.
Public agencies and nonprofit organizations follow different rules, and volunteer roles there are often unpaid. If the tasks in an unpaid role look like ordinary work for a business, ask the employer how the role meets the federal factors, or take the offer to your career center for a second look.
Counting the full cost
An unpaid summer can cost you the wages from a job you would otherwise hold, plus transport, work clothes and sometimes housing in a new city. Write those costs down next to what the role gives you, such as references, skills and experience to describe on a resume. Some internships are worth that trade and some are not, and the decision rests with you.
Internships taken for academic credit may carry tuition charges for those credits, depending on your school. Ask the registrar or your department what the credits cost and whether they count toward your degree. Some career centers also fund grants or stipends for students in unpaid roles, with their own application dates.
Wages from a paid internship are income on your tax return and, later, on the FAFSA. The last lesson of the FAFSA course shows where they appear.
Try this week
- Ask each employer how and how often interns are paid
- List the costs an unpaid role would add to your summer
- Ask the registrar what internship credits cost
- Check whether your career center funds unpaid internships
Takeaway. Before accepting an internship, compare in writing what it pays with what it costs you, and ask how any unpaid role meets the federal rules.