November 20, 2017

Tax Reform Bill will be Disastrous for Graduate Students

Posted by Jenna Zink

On 16 November, the House passed a tax reform bill, the “Tax Cuts and Jobs Act”. The bill contains several provisions that would strip critical tax benefits that support graduate students. Specifically, the bill would:  

  1. increase taxes for graduate students and others by making tuition waivers (tuition fees waived by schools) count towards taxable income. ​ Changing this law​ ​has​ ​the​ ​potential​ ​to​ ​push​ ​graduate​ ​students​ ​into​ ​higher​ ​tax brackets. ​ ​Taxing​ ​these​ ​waivers​ ​puts​ ​an​ ​undue​ ​burden​ ​on​ ​graduate​ ​students, ​ ​requiring student to pay taxes on​ ​those​ ​funds, which never​ ​actually​ ​enter ​students’​ ​bank​ ​accounts. 
  2. ​strike​ ​the​ ​Student​ ​Loan​ ​Interest​ ​Deduction​ ​from​ ​the tax code.​​Graduate​ ​students​ ​make​ ​up​ ​14%​ ​of​ ​the​ ​student​ ​population​ ​in​ ​the​ ​United​ ​States,​ ​but​ ​carry​ ​40%​ ​of​ ​the debt​ ​load.​ ​Terminating​ ​this​ ​deduction​ ​would​ ​strain​ ​the​ ​finances​ ​of​ ​individuals​ ​and​ ​families 
  3. eliminate​ ​tax​ ​free​ ​employer​ ​paid education​ ​assistance.​ ​Many​ ​graduate​ ​students​ ​can​ ​only​ ​afford​ ​to​ ​conduct​ ​their​ ​research​ ​because​ ​their employer​ ​provides​ ​funding.​ ​This change​ ​would​ ​reduce​ ​incentives​ ​for​ ​employers​ ​to​ ​seek continuing​ ​education​ ​for​ ​their​ ​employees,​ ​for​ ​the​ ​employees​ ​to​ ​pursue​ ​that​ ​education,​ ​and​ ​force​ ​thousands of​ ​graduate​ ​students​ ​nationally​ ​to​ ​choose​ ​between​ ​taking​ ​on​ ​perilous​ ​levels​ ​of​ ​debt​ ​or​ ​abandoning​ ​their education. 
  4. consolidate​ ​the​ ​American​ ​Opportunity​ ​Tax​ ​Credit with​ ​a​ ​five​ ​year​ ​limit.  ​The​ ​tax​ ​bill​ ​also​ ​eliminates​ ​the​ ​Lifetime​ ​Learning​ ​Credit.​ ​Both​ ​of​ ​these​ ​are programs​ ​non-traditional​ ​students​ ​often​ ​rely​ ​on​ ​to​ ​ease​ ​the​ ​financial​ ​burdens​ ​of​ ​education. 

These tax provisions would increase​ costs​ ​to students, reduce access to education, and diminish​ ​their​ ​ability​ ​to​ ​contribute​ ​positively​ ​to​ ​the​ ​nation’s economy​ ​in​ ​the​ ​future. 

While the Senate version of the bill does not include these provisions, it does contain provisions that would place a significant burden on universities and their ability to support students – a move that has been condemned by universities.  

If​ ​the House and Senate pass their separate bills, legislators will need to work to reconcile the differences. Together, we must ensure that the final tax bill does not include these harmful provisions, which​ would​ ​be​ ​disastrous​ ​for​ ​both​ ​graduate​ ​students​ ​and​ ​higher​ ​education​ ​as​ ​a​ ​whole.​ Take a few minutes to help amplify our voice to policymakers and urge your legislators today to reject these harmful tax provisions.