Graduate students are typically absorbed in their teaching and research, but this week they have their eye on Washington, where the Republican tax plan could bring a new financial burden that could force some out of school.
On Thursday, the U.S. House of Representatives could vote on its version of the tax overhaul that would count graduate students’ tuition waivers as taxable income. If it becomes law, graduate students’ tax bills would increase dramatically even though many live on stipends that barely cover living expenses. Some would find themselves borrowing money to pay taxes.
Universities waive tuition for graduate students who work as teaching and research assistants but under the House bill, the tuition break would be taxed.
That would spell disaster for Matthew Taft, a Ph.D. student in English at Duke University, putting him in a higher tax bracket with an annual tax bill of about $12,000. He gets about $20,000 a year in his stipend, and he’d end up paying half or more of his paycheck in taxes.
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“It would completely price me out. It would be impossible to continue my studies in graduate school,” Taft said.
Because Taft, 29, is an international student, from Australia, his other work options are limited and he’d have to leave the country.
“It would unfortunately mean that it’s only possible for students who are independently wealthy to attend graduate school,” said Taft, whose expertise is in contemporary literature.
The implications go beyond the individual, said Barmak Nassirian, director of federal relations and policy analysis for the Washington-based American Association of State Colleges and Universities.
“This could literally end STEM research in the United States, for starters,” he said, referring to science, technology, engineering and mathematics.
“The graduate students you’re talking about may be your kid’s future doctor, maybe the person who’s going to address the climate change challenge, maybe the one who designs the next drone that’s going to protect us,” Nassirian added. “So even if you don’t go to college, as a matter of national economic competitiveness and defense posture, we should all care about the state of research in this country, the notion that we want to be at the forefront of innovation and economic development, and that you certainly need cutting-edge research for that to be possible. This really is a form of cutting off the nose to spite the face.”
The provision that would affect graduate students is not in the Senate tax plan. But there are other structural changes that are threats to public higher education, Nassirian said. Increasing standard deductions would mean that most people would stop itemizing deductions, and therefore not have the incentive for charitable giving to colleges and universities.
Private-college presidents in North Carolina wrote to members of Congress this week, calling the House bill “an attack on private, non-profit colleges and universities,” particularly because of a proposed new tax on endowments – the invested funds with earnings that are earmarked for scholarships and other priorities. In a letter signed by 15 private-college presidents, the N.C. Independent Colleges & Universities raised concerns that changes aimed at higher education would ultimately raise the cost of college for students and families.
They cited the proposed elimination of the student loan interest deduction and the loss of tax-free bonds that are used by private colleges for construction.
The changes add up to disincentives to students to pursue higher education, said Hope Williams, president of the private college group. “It’s going to make college more expensive,” she said.
U.S. House Speaker Paul Ryan, in advocating the plan, has said the goal is to simplify the tax code and cut taxes for families.
“First, we are going to throw out these loopholes,” he said in a video. “Then we’ll use that money to lower everyone’s taxes.”
At UNC-Chapel Hill, graduate student leaders are asking their classmates to contact their representatives and convey their concerns about the proposed change that would count tuition waivers as taxable income.
“We’re all quaking in our boots over this one,” said Madelyn Percy, a doctoral student in geological sciences and president of UNC’s Graduate and Professional Student Federation. “This is something that would have a truly egregious effect on graduate and professional student education across the entire country.”
Percy said if the bill becomes law, people will choose other career paths instead of pursuing advanced degrees.
“Many of them do have other opportunities, many of which pay a heck of a lot better than going to graduate school,” she said. “At that point economics comes into play.”