The tax overhaul passed Thursday by House Republicans could cost graduate students thousands of dollars, prompting a backlash from students and university leaders who say the proposal could make graduate degrees unaffordable, especially for low-income students.
A provision tucked away in the House’s bill would count the tuition discounts given to many grad students as income, meaning that students would pay taxes on tens of thousands of dollars that they never see. The bill would double or even triple many students’ taxes.
The provision isn’t included in the Senate’s version of the bill, which has yet to pass. But the fact that the provision is included in the House bill, which would be part of negotiations between the two chambers of Congress should the Senate bill pass, has stoked many students’ fears.
“I’m getting my master’s degree, and I’d like to stay for my Ph.D., but I may not be able to do either of those things if the House’s version of this bill passes,” Michael Foist, a first-year graduate student in communications at the University of Utah, told BuzzFeed News.
Foist is living on an annual stipend of $15,000 in take-home pay, he said, and has medical bills to maintain his prosthetic leg. As a first-generation college student, he said, he can’t turn to his family for financial support.
The the bill passed Thursday would increase his taxes by 84%, according to calculations his university sent him, reducing his take-home stipend to $13,000. If that happens, he said, he fears he wouldn’t be able to afford to finish his degree.
“I’d have to go home to Indiana,” Foist said.
Many graduate students, especially those studying for doctoral degrees, don’t pay the sticker price of their programs. Instead, they receive “waivers” for the cost of tuition, and are paid stipends by the university to teach and conduct research. Until now, students have paid taxes only on the income they actually receive, their stipends. But that would change under the House’s bill.
“We never see that money,” Foist said. “It doesn’t make sense to tax it.”
Conservatives have long argued that the government does too much to subsidize higher education, particularly when it comes to large, wealthy research institutions and their graduate students. The House’s tax bill would also tax some elite schools with massive endowments.
The Wall Street Journal’s editorial board argued earlier this month that allowing tuition waivers to be untaxed was another example of unnecessary government subsidies. The waivers, the Journal wrote, “effectively let colleges employ teaching assistants as indentured servants and have contributed to a surfeit of graduate degrees in fields for which there are few jobs beyond academia.”
“Maybe colleges could try paying TAs a better wage,” the Journal wrote.
An analysis compiled by graduate students at Carnegie Mellon University showed students’ taxes skyrocketing under the new plan. A hypothetical student at the Pittsburgh college’s public policy school, Heinz College, would see their taxable income leap from $13,600 to $59,704 when their $46,000 tuition waiver was factored in — increasing the taxes they paid by 476%. They’d lose $7,500 of their stipend, the analysis said.
Universities have warned that the tax bill would also force them to slash the number of graduate students they admit. L. Rafael Reif, the president of the Massachusetts Institute of Technology, said the school would have to step up financial subsidies to its graduate students, warning in an open letter on Thursday that it “would lead to a sharp cut in the size of the student body.”
For MIT’s nearly 7,000 graduate students, Reif said, “A tax burden on that scale would be devastating.”
Corey Welch runs a program for science and technology students at Iowa State University, where he works mostly with low-income, first-generation, and minority students. The House’s bill, he said, might change his calculus about whether to recommend they pursue graduate degrees.
“I cannot in good conscience send them toward a PhD system that only supports the independently wealthy,” Welch said.