To the editor:
Pres. Trump and Congressional Republicans are only a few steps away from achieving their long awaited goal of passing tax reform. While many opponents of tax reform cite potentially negative effects it could have for middle class incomes and blue state incomes, college students are another demographic that should be concerned over these changes.
The part of the tax plan affecting college students the most are the changes the plan will make to how tuition waivers are treated. A tuition waiver is when a school reduces or eliminates the amount a graduate or doctoral student must pay in tuition in exchange for work for the school, such as research or teaching.
Under current law, this would be tax free. Under the House proposal, for example, if a university decided to reduce a graduate student’s tuition by $20,000, that would be treated as income. This is effectively a reduction of the amount a school waives from tuition because students never actually get to spend their waivers for other things. This means they’ll be forced to use some of the money they receive on tuition payments on paying taxes.
There are 461,000 graduate students in the United States that could potentially face a hefty tax increase; 7,800 of them are VCU students. Additionally, 27,000 undergraduate students would be affected because the House bill also eliminates waiver deductions given to the children of university employees and students whose employer covers tuition. This is because of the changes the Republicans might try to make on tax benefits given to students and employees of universities. The fate of these benefits will mainly depend on which aspects of the House and Senate version of the tax bill make it into the final version; the House version is much more aggressive towards tuition benefits for college students, while the Senate version is much more generous with regards to college students.
According to calculations done by Eric Bronnenkat, the Head of Tax for Betterment, an online investment firm, a student whose tuition is $10,000 per semester, the national average, could see their taxes raised by $3,765 a year. The Senate’s version, however, protects these deductions.
If a grad student needs to take out student loans when tuition waivers aren’t enough, they could also find themselves paying more in taxes. The interest a student pays on their student loans is currently allowed to be deducted from what that student owes from their federal income taxes by as much as $2,500, but this deduction is eliminated under the House version.
But wait, there’s more. The House bill kills the Lifetime Opportunity Credit, which offers financial assistance to those who attend undergraduate studies for more than five years. And both versions eliminate student loan forgiveness in the event that the student has become disabled or has passed away. Under the new tax reform, parents or someone else would have to pay back the student loans of the disabled or dead student.
President Trump is scheduled to meet with Senate Republicans on Tuesday to discuss the details of their reforms and the Senate will hold a vote as early as Thursday. After that, the two bills will most likely be consolidated into the final version. Until then, all we can do is wait.