Jenny C. Bledsoe is a fifth-year Ph.D. candidate in English at Emory University, specializing in medieval literature. She was featured in a New York Times story last week that examined how the GOP House tax plan would impact a range of American students. In this essay, Bledsoe focuses on the change that makes graduate tuition waivers taxable income.
The tax plan is expected to come to the House floor today where passage is predicted. The Senate, however, is not expected to take up its own tax bill until after Thanksgiving. And then House and Senate conferees will have to hammer out their differences and come up with a compromise plan.
Under the House plan, Bledsoe and other doctoral students would be hurt by a new provision that would tax graduate students on tuition wavers granted them in exchange for working as teaching assistants or researchers. The tax accountants hired by The New York Times estimated Bledsoe and her husband would pay an additional $7,194 in taxes under the House tax bill.
When I wrote about this last week, some readers contended the increase in the standard deduction will offset the eliminations of these education deductions. However, some reviews found that not to be true for graduate students.
Nearly 50,000 graduate and professional students are now enrolled in the University System of Georgia. Some students say they’ll have to take on more debt to continue their studies if the tax plan is passed. You can read their concerns here.
By Jenny C. Bledsoe
The House GOP tax bill makes graduate school inaccessible for anyone who is not independently wealthy, and it will likely cause current graduate students to drop out of doctoral programs and/or declare bankruptcy.
A single line in the 429-page bill effects this change: 26 U.S. tax code § 117 (d) allows students conducting research or teaching for a university (usually Ph.D students on fellowship) to receive tuition waivers tax free. Any stipends are taxed.
The House “Tax Cuts and Jobs Act,” however, will repeal this provision, meaning that a Ph.D student making a stipend of $24,000 will be taxed as if they are making $85,200. This would have been my situation two years ago. During the first three years of Emory’s Ph.D program, a student currently receives a tuition waiver amounting to $61,200. Once you reach “tuition-paid” status after your third year, the annual tuition is $30,600.
Tax experts hired by The New York Times estimated that my husband’s and my tax bill would increase by $7,194 — despite the increase in the standard deduction — because of the newly taxable tuition waiver.
Tuition amounts vary widely depending on the institution, and the situation may be worse (or better) for some individuals, depending on tuition rates and stipend amounts. At Georgia Tech, full-time graduate student tuition for one semester is $6,894 in-state and $14,284 out-of-state. Georgia State’s tuition is $4,680 in-state and $15,012 out-of-state for one semester.
Graduate students will clearly owe much larger federal income tax bills, and in some states, including Georgia, they will also have to pay more due to the proposed changes to the federal tax credit for state and local income taxes. Those at private colleges and universities will be responsible for larger taxable amounts (given the higher tuition at private institutions).
Those at public universities will pay the taxes on their relatively lower tuition waiver amounts, but they will have to do so with already significantly smaller stipends than Ph.D students receive at private universities.
This is an issue across the disciplines. It will affect any graduate student pursuing a Ph.D on a research or teaching fellowship, which common for those pursuing doctorates in STEM, the social sciences, and the humanities. In addition to graduate students suffering personally, universities will experience the effects of their graduate students’ tax burdens in multiple ways (in addition to the bill’s other deleterious effects on higher education).
Graduate students will have less time for research because they will have to work additional jobs. Humanities Ph.D students, who provide essential labor as instructors, will have less time to devote to the classes they teach to undergraduates.
Long-term effects are difficult to measure, but surely many lower-income students will no longer attend. It’s unlikely that international students will be able to maintain a decent standard of living since they are often forbidden from taking on additional work.
The House GOP tax bill will lead to a “brain drain,” with international students and Americans alike seeking graduate study elsewhere or not all. In terms of personal finance, it will be extremely challenging (if not impossible) to meet one’s basic needs—food, shelter—while pursuing a higher degree.
Unless … you’re independently wealthy. This single line in a massive tax bill destroys lower- and middle-class young Americans’ ability to pursue a professional career in academia, industry, or government. The bill reduces other education tax credits, which will adversely affect access to undergraduate as well as graduate education. The GOP will effectively end class mobility, return the academy fully to the so-called one percent, and reduce charitable donations to universities by de-incentivizing itemized deductions.
Even if you don’t believe in the value of academic study, eliminating section 117(d) of the U.S. tax code would be bad for the economy. Those who were not independently wealthy and who chose to pursue graduate studies anyway would have to do so with the help of student loans. Student loans are with you forever; student loan debt is not forgiven even when bankruptcy is declared. Young Americans are already saddled with too much debt, causing many opinion pieces to complain about the latest store or product that “millennials have killed” by not spending enough money.
Eliminating this line of tax code effectively condemns those who pursue higher education to a life of debt servitude. How is our economy, our country, our world to progress with these barriers against access to education, an essential asset in our dynamic world?