Here’s THE WAY THE New Tax System Could Hurt Graduate Students
Enlarge this picture Hanna Barczyk for NPR Hanna Barczyk for NPR
The brand new tax plan, introduced by House Republicans, could have negative implications on universities, graduate students and the ones with student loans.
Many grad pupils – especially in Ph.D. applications – receive tuition waivers in exchange for teaching classes or doing research. Under current law, that cash isn’t taxed as income. But the new bill demands those tuition waivers to get counted as income and be subjected to income taxes.
That means graduate students would be paying taxes on cash they never receive.
Kelly Balmes is concluding a master’s degree – on her approach to a Ph.D. – in Atmosphere and Sciences at the University of Washington in Seattle.
Balmes, 24, is from Chicago – so her out-of-point out tuition is $30,000 a year. It’s payed for through grants; cash she never sees.
The University pays her a yearly stipend around $30,000 in exchange on her behalf work in research and as a teaching assistant. That’s considered minimum amount wage in Seattle – about $15/hour.
In 2016, she paid out income taxes on her teaching stipend and she ended up owing the government $2,334.
If the tax bill passes – the grant that covers tuition will be viewed as additional income. If the figures remain the same, Balmes’ total income before deductions becomes $61,398 – nearly double what she filed last year.
She’d owe $7,488, about $5,000 more.
“This makes graduate university unattainable for those who not already very well off,” Balmes says. “It also creates a diversity issue, which graduate STEM applications already have.”
Of the 145,000 students in graduate applications receiving these tuition waivers, about 60 percent are in STEM programs, in line with the Department of Education.
If the House bill passes, Kelly Balmes says she may need to reconsider getting her Ph.D. and prevent her education at a Masters.
“It’s upsetting because it wouldn’t really be my decision,” she says.
She’s hoping that the Senate’s tax approach be approved instead because under that approach there are no changes to tax credits or perhaps tuition waivers.
And it’s not just students. Universites and colleges have raised concerns over the House’s costs.
Carnegie Mellon University, a private school in Pittsburgh, Pa., referred to for programs in science and technology, is among the many universities – including Boston University – concerned about the bill.
What else will be damaged if the costs is passed: Endowments: The tax bill would levy a taxes of just one 1.4 percent on net investment income for well-endowed private colleges. After an outcry from some universities, the terminology was adjusted so the taxes would apply only to well-endowed colleges with $250,000 or more in the bank per full-time student. Student loan interest, tuition reductions and education assistance: If you make significantly less than $80,000 and so are paying again your student loans, you won’t be able to deduct up to $2,500. Also, companies who cover some of their employees’ college costs could have that cash taxed. College tax credit consolidation: Three taxes credits – American Opportunity Tax Credit, Lifetime Learning Credit rating and Hope Scholarship Credit rating – would be consolidated into one credit. This would add a $2,000 credit for families investing in college tuition, books, and supplies. Coverdell Education Cost savings Accounts: The costs would period out Coverdell Education Cost savings Accounts, which allow family members to invest money for college without the money being taxed. Tax bills for death and disability: THE HOME plan would end forgiving student debt due to death or disability.
CMU sent faculty a contact saying these were monitoring the way the bill would impact pupils and faculty.
“Any provision that would make higher education more expensive for students, effectively lessening access, will harm American family members and undermine the objective of higher education and CMU,” wrote Interim President Farnam Jahanian. “That includes proposals to taxes graduate student stipends, remove taxes deductions for student loans, or lessen incentives for companies to contribute to tuition.”
He said there are long-term benefits to investing in graduate students.
“The education we offer undergraduates and graduate pupils is among the most powerful engines for their future success and ability to contribute to society.”