As Republican tax proposal moves through Congress, impact on graduate students is assessed

Version of a tax cut, which passed the U.S. House of Representatives and Senate Finance Committee weeks ago, will affect students paying off loans.

Deductions on loan interest will be eliminated under the bills, which are based on President Donald Trump’s proposal released in September, and tuition paid for by employers will be taxed. The three existing tax breaks given to those paying off student loans will be merged into one.

This means that grants covering tuition may be viewed as taxable additional income. The tax bill will most heavily impact graduate students, who often receive tuition waivers for teaching or research. The waivers may be taxed as income — money grad students never actually receive.

The tax bill also seeks to raise the minimum income threshold that people become eligible to pay income tax and also reduce tax rates for individuals in general. Trump calls the bill a “middle-class tax break.”

According to The New York Times, the bill itself could either reduce income taxes for nearly all middle-class Americans, or it could raise them by getting rid of deductions, prior tax breaks and by a failure to reduce rates enough to make up for it.

Under the current tax law, students can deduct interest on student loans up to a certain point. Students or parents paying tuition can deduct expenses for higher education. Both of these deductibles will be repealed in the House tax bill.

The Senate bill does not include any changes to tax credits or tuition waivers. However, it does include provisions that would put an extra tax on some private colleges with large endowments and eliminates certain state and local deductions.

If passed, the House will have to either attempt to pass an identical bill or go through a conference process where compromises are made.

President of the Association of American Universities, Mary Sue Coleman, said the bill doesn’t seek to benefit students.

“Congress seems eager to redirect these funds to the federal government’s coffers, with no clear benefit to America’s hardworking students and their families,” Coleman said to Chemical and Engineering News.

Senators Mark Warner (D-Virginia) and Tim Kaine (D-Virginia) released a statement on expressing concerns about the bill’s plan to eliminate the Federal Historic Tax Credit, “a provision that Virginia uses to draw in new business, create jobs, and revitalize cities and towns.”

In the past, Gov-elect Ralph Northam (D) said raising taxes in general would hurt the state’s bottom line.

In a tweet Trump said, “If Democrats were not such obstructionists and understood the power of lower taxes, we would be able to get many of their ideas into Bill!”

The 52-seat Republican majority Senate will vote on their version of the tax bill Thursday or Friday. Trump will meet with Republicans Tuesday to go over the agenda in the hopes for a major legislative victory. At least six Senate Republicans have not yet formally supported the tax cut package.

SaraRose Martin, Staff Writer