Tax plan would drive up student debt
Several provisions in the tax bill being advanced by congressional Republicans target student loan borrowers, students, and the schools they attend. The impacts will be hurtful.
We don’t yet know how Congress will resolve the differences between the House and Senate versions of the “tax reform” plan. But the general outlines are clear: The interests of students, student loan borrowers, and investments in higher education are being sacrificed on the altar of trickle-down economics.
Under current versions of the proposed tax plan, graduate students could face massive tax hikes and student loan borrowers will no longer get a tax deduction for a portion of the interest paid on their debt. And to even more radically tip the economic scales toward the wealthy elite, funding for higher education and financial aid is on the chopping block.
According to estimates, the Senate version of tax cut legislation would add $1 trillion to the federal budget deficit while the House version would pile on up to $1.5 trillion. Make no mistake about what this means for discretionary federal spending like support for student financial aid: cuts, cuts and more cuts. And, as we have seen, reductions in the financial aid for eligible students has been a prime driver of the growing student loan debt crisis that now burdens 44 million Americans with nearly $1.5 trillion in debt.
The billions in profits the federal government makes from the interest it charges on student loans will be relied on to help offset the windfall that goes to the wealthiest. That makes Republicans more likely to rebuff a bill proposed by Democrats to allow people to refinance their federal student loan, just like can be done with a mortgage.
Even worse are the specific provisions targeting students, borrowers, and universities.
Under current law, a portion of the interest middleclass student loan borrowers pay on their loans can be deducted on their federal taxes. Under the guise of simplifying the tax code, this modest, targeted deduction is being eliminated. Nationally, the deduction was claimed by more than 12 million Americans in tax year 2015.
The House version of the bill contains another onerous and damaging provision calling for tuition assistance for graduate assistants to be taxed as income. This would represent a massive tax hike on the students pursuing advanced degrees, who currently receive a break on the cost of their education in exchange for working as faculty at universities across the country.
If this provision passes, experts predict it will worsen the already significant racial disparities that exist on college campuses. Advanced degrees will become even more the exclusive province of those wealthy enough to finance their own educations, or those willing to consign themselves to repaying back massive student loans for the rest of their lives.
Even employers who care about a well-trained workforce and the employees seeking to upgrade their skills are targeted. Much like the grad student provisions in the House bill, current law exemptions for employer provided tuition assistance to employees would be eliminated and the aid would be counted as taxable income.
Across the board, the tax schemes of Donald Trump and the Republicans in control of Congress are unfair, cruel and short-sighted. Nowhere is this more evident than in the shameful attacks on student loan borrowers and higher education.