How the GOP Tax Plan Could Hurt Graduate Students — and American Research

Buried in the details of the 400-page tax-reform plan unveiled on Thursday by House Republicans is a proposal that, if enacted, would leave many graduate students wondering if they could afford to continue their studies.

Under current law, college employees are allowed to get a break on tuition without counting that break as taxable income. Graduate students who work as research or teaching assistants are among the chief beneficiaries of that policy.

But the bill released last week recommends that tuition waivers be counted as income and be subject to taxes. If that provision becomes law, graduate students could find themselves paying taxes on a far greater amount of money than they actually receive in paychecks from their college.

“Unless this can be circumvented, it would be a major disincentive for people to go to graduate school,” said Claus O. Wilke, a professor of integrative biology at the University of Texas at Austin. And the impact of the measure, he said, would fall mostly on students who go into fields that provide a benefit to society without offering high pay.

Nationwide, about 55 percent of all graduate students had adjusted gross incomes of $20,000 or less, according to federal data cited by the Association of Public and Land-Grant Universities, and nearly 87 percent reported incomes of $50,000 or less. At the same time, master’s-degree students received tuition waivers averaging nearly $11,000, and doctoral students got waivers averaging more than $13,600, the association found.

Vetri Velan, a doctoral student in particle physics at the University of California at Berkeley, is worried enough that he has run the numbers for a paper that assesses the tax plan’s potential impact. Mr. Velan, who is not an expert on income taxes, outlines the expected income of graduate students at his institution and concludes that the tax plan “would have a negative impact on Ph.D. students by increasing their federal income-tax burden.”

A typical teaching assistant at Berkeley, Mr. Velan said, earns a little more than $24,000 a year for working 20 hours a week on the campus, and receives a tuition waiver of nearly $14,000. He estimated that such a person could see his or her federal taxes go up by 63 percent, from $2,229 to $3,641. A research assistant like him would see a tax increase of more than $1,100, he said.

That is not life-changing money, he said. But rent is not cheap in Berkeley, and an extra $100 a month makes him worry a little less about his grocery budget. And it makes it a little easier for him to go home to his family, in New Jersey, for holidays.

But other graduate students could have a tougher time, Mr. Velan said. Students paying nonresident tuition, or those at private colleges, could wind up paying taxes on amounts that are far greater than what they are paid for their work teaching or in the lab. Mr. Velan noted that graduate-student tuition at the Massachusetts Institute of Technology is close to $50,000 — more than the university offers graduate students for their teaching and research stipends.

Education Equals Taxable Wealth

Carlo Salerno, vice president for analytics at the Strada Education Network (formerly the student-loan company USA Funds), said there are a few other cases in which Congress has decided to tax money that is not actually paid to someone. For example, student-loan amounts that are forgiven under the federal Revised Pay as You Earn program, known as Repaye, are taxed as income, Mr. Salerno said.

“Repaye offers as good an example as any where Congress has shown a willingness to treat the value of an education as a taxable wealth transfer, even for people who may struggle to afford it,” he said.

Randi Weingarten, president of the American Federation of Teachers, said graduate students are already poorly paid. The proposal to tax tuition benefits, she said, will undermine the research mission of higher education.

“Today, by allowing grads to deduct the value of their tuition benefits, the tax code recognizes the value of their labor,” she said in a written statement.

Mr. Wilke, who moved to Texas from Germany to pursue his research, said the bill in the U.S. House of Representatives could push more American students out of the country to seek their advanced degrees.

“The people who are really good will go to Canada or Germany,” he said. “Does the United States want the best scientists moving away?”

Eric Kelderman writes about money and accountability in higher education, including such areas as state policy, accreditation, and legal affairs. You can find him on Twitter @etkeld, or email him at eric.kelderman@chronicle.com.

Correction (11/8/2017, 12:19 p.m.): Because of an editing error, the picture caption accompanying this article originally misidentified the people shown in the photograph. Because their identities are not germane to the article, the caption has been rewritten to focus on what the House Ways and Means Committee did this week.