Grad students fear more taxes
Proposal from U.S. House would reclassify their tuition waivers as taxable income
Lietsel Richardson is pursuing her master’s degree in biomedical engineering at the University of Central Florida, balancing classes, research, her job as a graduate assistant and living on a $20,000 annual stipend.
Like many graduate students who work at their schools, Richardson doesn’t pay tuition, nor does she pay taxes on that benefit.
But that would change under the $1.5 trillion tax cut approved Thursday by the U.S. House because the bill reclassifies tuition waivers for graduate students as taxable income.
If the Senate goes along with the plan, Richardson said she fears the new tax burden will stretch her already-thin budget even further.
“When they say graduate students live off ramen noodle soup, it’s not that much of a joke,” said Richardson, 24, who does pay taxes on her stipend.
The tax bill students would have to pay depends on several factors, including the value of their waivers and other income.
The Senate’s version of the tax cut bill so far does not call for taxing tuition waivers. The two measures will have to be reconciled before President Donald Trump could sign the tax cut into law.
As president of UCF’s Graduate Student Association, Richardson said she’s hearing from classmates who fear they’ll have to stop or delay school if the proposal passes.
UCF awarded 964 tuition waivers for the fall 2017 semester, with a typical value of $6,916, spokesman Chad Binette said.
Chase Barrett, in his second year of the physics Ph.D. program at UCF, said he envisioned a “brain drain” if students have to pay taxes on the waivers.
He said he’s helping to organize a rally against the proposed taxes at UCF that will start at noon on Monday outside the John C. Hitt Library, near the reflecting pond.
“A lot of people would have to find additional sources of funding or drop out of their program because of cost,” Barrett said.
Nationwide, nearly 145,000 graduate students received tuition waivers during the 2011-12 academic year, according to the American Council on Education. About 57 percent of students who receive this benefit are studying fields in science, technology, engineering and math, according to the U.S. Department of Education.
Students at private institutions could be hit with an even bigger tax bill because the amount of tuition money waived is often higher than at public universities.
And people earning less than $80,000 and repaying student loans would no longer be able to deduct up to $2,500 of loan payments each year, according to the House proposal.
The House legislation “would discourage participation in postsecondary education, make college more expensive for those who do enroll, and undermine the financial stability of public and private, two-year and four-year colleges and universities,” according to a letter signed by the American Council on Education and nearly 50 other educational and professional organizations.
These days, graduate degrees aren’t just for students who want to pursue careers in academia. More employers want job candidates to have master’s degrees or doctorates, said Liz Klonoff, vice president of research and dean of graduate studies for UCF.
Telling students they’d have to pay taxes on waived tuition would be “daunting” for many potential graduate school applicants, she said.
“It’s just a bad idea, all the way around,” she said.
Samantha Hernandez, director of legislative affairs for the National Association of GraduateProfessional Students, said taxing tuition waivers could discourage students, particularly minorities and first-generation college attendees, from pursuing graduate school.
She said she thinks many people don’t realize the contributions of graduate students, from teaching undergraduates to conducting research.
“When you limit what we’re able to do, effectively, you limit the innovation and improvement in the United States,” said Hernandez, who is 29 and working toward her doctorate in political science at Arizona State University.
Both the House and the Senate bills would also create a new excise tax of 1.4 percent on endowments at certain private colleges and universities, reducing the value of these endowments, according to the American Council on Education. The waiver change and excise tax are designed to raise tax revenues that will help offset tax cuts for businesses and individuals.