Taxes

The GOP Tax Bill Will Bankrupt Graduate Students

JM Ashby
Written by JM Ashby

It's unfortunate that we're still learning things about the House Republican tax cut bill after they've already passed it, but that's what happens when you ram a bill through with virtually no debate or hearings.

Under the House Republican bill, students who receive a stipend from their university will be taxed on the full value of their benefits rather what they're actually living on.

In these instances, graduate students will work for the university by teaching classes and/or conducting research in exchange for free tuition. According to the American Council on Education, roughly 145,000 graduate students receive this kind of tuition reduction.

Some programs provide graduate students with a modest stipend for food and housing. For instance, Ryan Hill, a fourth-year Ph.D. student at MIT, receives a $30,000 living stipend and a tuition waiver allowing him to forego paying $50,000 in tuition. He currently pays taxes on his $30,000 stipend, but under the proposed House tax bill, his tuition waiver would also be taxed — meaning he would be taxed as if he was earning $80,000 a year.

With slightly different language, this could just as easily apply to college athletes from football to basketball players. That will never happen because we Americans love our "amateur" sports so much, but this is what will happen to students who pursue higher degrees or a doctorate.

According to the congressional Joint Committee on Taxation, this provision along with the elimination of deductions on interest would increase the cost of college by at least $71 billion.

Another hotly contested House proposal involves the elimination of the student loan interest deduction, which lets people repaying their student loans reduce their tax burden by as much as $2,500. Getting rid of the deduction would cost borrowers more than $21 billion in the next 1o years. More than 12 million people took advantage of the deduction in 2015, according to the Internal Revenue Service. That’s about 3 in 10 of the 44 million Americans with student loans.

Millions of Americans also take advantage of the three higher-education tax credits — the American Opportunity Tax Credit, Lifetime Learning Credit and Hope Scholarship Credit — that House Republicans want to consolidate. The government would get $24.1 billion in revenue by repealing the Lifetime Learning Credit. But that money would come at the expense of graduate students who under the proposal would be largely shut out of the consolidated tax credit.

Although policy analysts agree that tax credits should be streamlined, many worry that consolidating them without a meaningful increase in funding or expansion of the criteria would prove detrimental to people paying for college. They also worry that House Republicans are discouraging workforce development by proposing the repeal of an exemption that prevents the federal government from taxing tuition assistance provided by employers. Eliminating that statute would yield $20.6 billion over a decade, which taken with the other three repeals amounts to $71.5 billion.

Again, House Republicans have already passed this. Only 13 House Republicans voted against it.

It remains to be seen what Senate Republicans will do, but it won't be good.

  • Draxiar

    I would love to know how many R’s benefitted from these tax deductions while they were in school.

  • muselet

    If anyone doubted the Rs were contemptuous of book-learnin’ and smart people generally, here’s proof.

    –alopecia

  • Badgerite

    What was that that Sanders supporters thought they were getting when they decided to vote for trump? Free tuition?
    That worked out well.

    • Aynwrong

      They were voting against the man, maaannnn….

  • Aynwrong

    Where the hell is anti tax demigod Grover Norquist (Rhetorical question of course. I’m in no way surprised that Norquist couldn’t care less)?

  • This would have really screwed me in graduate school. Now, there are millions of college grads with huge student loan debts, which can be deferred so long as they are in school. This will only make it harder for them to stay in school. What a mess.