On Thursday, November 16, the House of Representatives passed their tax plan, known as the Tax Cuts Job Act. On a broader scale, the tax plan impacts every household and business in the country, cutting taxes for most families as well as for businesses in order to keep them competitive. But like any plan passed through Congress, there are a variety of components that comprise the bill – and some may have negative implications for graduate students.
What’s in the new bill?
The new bill proposes that tuition waivers provided to employees of colleges be taxed as income. This includes those tuition waivers given to graduate students who work as teaching assistants and researchers at universities.
How will it affect graduate students?
Because the tuition waivers will be counted as income, they will be taxed. NPR points out that if the bill passes, grad students will be taxed on money that they technically never see. Tuition waivers go straight toward tuition bills – not into the pockets of the students that actually work for them.
The College and University Professional Association for Human Resources estimates that there are roughly 145,000 graduate and 27,000 undergraduate students that utilize tuition waivers to help pay for higher education expenses, according to The Chronicle of Higher Education. For some students, the new tax measure will bolster their income upwards of $50,000, when in actuality they make somewhere near $20,000 – give or take. Come tax season, graduate students could owe thousands more than what has been typical for them.
What are next steps for the bill?
As of last week, the bill has passed through the House of Representatives. The Senate is examining a similar tax bill; however, their bill does not feature this change to tuition waivers, as reported by The Chronicle of Higher Education. The Chronicle's take on the tax bill and tuition waiver states that both Houses of Congress must agree on a single piece of legislation before a resolution is sent to President Trump.
Is there a potential workaround?
If the tuition waiver component of the tax plan comes to fruition, it will be on universities to come up with a creative workaround to the issue. Otherwise, graduate students will no longer be able to afford to attend graduate school; and those that are able to continue will likely be wealthier students, which doesn’t allow for much diversity or opportunity for students that may be lower income.
One Forbes Contributor suggests that universities begin offering tuition waivers as scholarships, rather than as income. Scholarships are not considered income, and redefining tuition waivers as such would provide a loophole for graduate students and universities.
Another possible workaround is to contact members of Congress to petition the tuition waiver proposal. Graduate students, professors and administrators as well as advocates can contact their representatives in a variety of ways. One of the most effective ways to reach a Congressional representative is to call their district, or state, office. In most cases, calls go directly to a staff person, meaning a real conversation with a real person.
To recap, here is where things currently stand in regard to the tuition waiver income tax:
- A bill approving a tax on tuition waivers passed through the House of Representatives.
- The Senate’s version of the bill does NOT contain a tax on tuition waivers.
- Both Houses must agree on the measure before it can be signed into law by President Trump.
- Graduate students and advocates against the tuition waiver tax can voice their dissent by contacting their Congressional state office.
