A provision in the House of Representatives tax bill that could affect graduate students is in question pending a conference session following the passage of the Senate version last week. Graduate students could face significant tax increases if it becomes effective in 2018.
The House tax legislation would impact graduate students who receive tuition waivers and living stipends for teaching or research. Under the new bill, these waivers will become taxable income. According to the American Council on Education, about 145,000 graduate students receive this kind of benefit.
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.
Ravi Perry, a political science professor at VCU whose research areas include public policy said an impact of the bill may be a severe decrease in the number of international student applicants to the country’s graduate programs.
It could also disproportionately impact students of color, especially those in STEM programs who most often receive tuition waivers for teaching or research. If students will be taxed on their free tuition, stipends may be used to cover the cost of taxes, eliminating money available for living expenses.
“Every single grad student that’s in any program that has a waiver, whether you’re an international student or person of color or not, it’s going to affect you equally the same way,” Perry said. “Obviously because of what we know about the generational wealth gaps between people of color and whites historically, it is likely to have a bigger impact on people of color and international students because they don’t tend to have a safety net that allows them to cover these types of unexpected expenses.”
The House Republican plan provides a $1.5 trillion corporate tax cut. It seeks to raise the minimum income threshold that people become eligible to pay income tax and also reduce tax rates for individuals in general. President Trump has called the bill a “middle-class tax break.”
According to Perry, many universities will not be able to compensate for the money students will end up losing in taxes.
“It’s a state publicly funded university, we’re already dealing with significant budget cuts from the state,” Perry said. “Nearly 80 percent of the funding with have to come up with on our own. Public universities don’t have the funds to fill in the gaps. The VCU’s of the world won’t be able to do that.”
Alan Booth, a senior studying biology disagrees with the extent at which some students feel they will be impacted. He said the more serious issue facing graduate students is the rise in tuition costs at universities.
“It will make paying for grad school while in grad school a little more difficult because you’ll have to make those tax payments but so many grad students are on scholarships or loans or programs,” Booth said. “It’s still serious because you’re taxing income people don’t really have. But I also think it’s become a rallying cry that’s largely overblown.”
One provision in the House tax bill include a repeal of deductibles allowing students to reduce interest on student loans up to a certain point. Another allows students or parents paying tuition to deduct expenses for higher education. The three existing tax breaks given to those paying off student loans will be merged into one. In addition, under the new tax law, tuition paid for by employers will be taxed.
“That type of detail doesn’t matter,” Perry said. “The language that we use in taxes are these breaks and it gives the impression that somehow we’re going to be saving money on taxes that is actually not clear and every case is individually different. What matters is whether or not people are going to be paying more or less.”
If the House provisions concerning students end up in the final legislation, graduate students may end up paying a few thousand more in taxes each year.
“Having been a grad student myself, I know that’s going to be nearly impossible for international students but grad students entirely to be able to handle and American education will suffer severely,” Perry said.
SaraRose Martin, Staff Writer