House GOP Tax Plan Could Increase Grad Student Taxes

The U.S. House of Representatives GOP tax plan would make graduate school less affordable for some students and tax some university endowment returns and could cause Emory to lose millions from the endowment tax.

The Tax Cuts and Jobs Act bill, introduced by House Republicans Nov. 2, would remove tax exemptions on “qualified tuition reductions,” which include tuition remissions, waivers and grants, which graduate students receive when universities pay part or all of their tuition bills in exchange for teaching or research.

Section 117 of the Internal Revenue Code does not currently count qualified tuition reductions for graduate students at nonprofit universities, such as Emory, as taxable income.

Under the House plan, student loan interest would no longer be deducted from taxable income.

The Senate’s version of the tax bill, released Nov. 9, would preserve deductions on student loan interest and does not mention taxation of tuition waivers. If a tax bill is passed, it will probably more closely resemble the Senate’s version of the bill, due to the House’s delicate GOP majority, according to The Washington Post.

But some Emory graduate students are still worried about the possibility of having to pay more in income taxes under the GOP plan.

The annual stipend at Laney Graduate School (LGS) for 2017-2018 ranges from $23,844 to $30,000. For the 2017-2018 academic year, tuition for a full-time student taking at least nine credit hours is $20,400 per semester, according to the LGS website. Doctoral students who have completed six semesters pay $10,200 in tuition fees per semester. Graduate students in Emory’s professional schools, including Emory’s School of Medicine, School of Law and Goizueta Business School, do not receive stipends for researching or teaching.

Elizabeth Minten, president of the Laney Graduate Student Council (LGSC) and third-year graduate student in the Biochemistry, Cell and Developmental Biology Graduate Program at LGS, said that the proposed tax plan would increase the financial burden on LGS students because it would essentially cut graduate students’ income in half.

“We currently … pay perhaps about $3,500 in taxes per year,” Minten said. Under the House’s bill, Minten said that she would pay about $12,000 to $14,000 a year.

Minten expressed frustration toward paying taxes on money that some LGS students “never see” since it goes toward tuition.

Minten encouraged people to speak out against the House’s legislation.

“[LGSC] recommends getting involved by contacting your Georgia and home-state representatives,” Minten said.

Jenny Bledsoe, a fifth-year English Ph.D. student in Laney, said she is mostly concerned with tax bill because it makes tuition waivers taxable income.

“[Graduate students] never see this money [from the] tuition waiver — it’s something that the University takes care of,” Bledsoe said. “Our stipends, which are low, are already taxable … but under the new House plan, we would be taxed the full tuition of $60,000, even though we aren’t making that money.”

Graduate students in the humanities and liberal arts are already at a disadvantage because the professor tenure-track job market has shrunk in relation to the growing number of Ph.D. candidates, Bledsoe said.

“Given that you’re already taking a gamble that [your education] will pay off, you start to think … ‘I’m already going to take a pay cut,’ but this is more than a pay cut,” Bledsoe said. “This now becomes, ‘Can I even live on this? How can I get by for five to seven years because of these taxes?’”

Low-income students may be forced to make difficult choices between pursuing higher education or entering the workforce, Bledsoe added.

“Ultimately, the people who can make it work are the ones who have help from their families … which means [lower income] people would have to make harder choices,” Bledsoe said.

Nearly 145,000 graduate students in the United States received a tuition reduction in the 2011-2012 academic year, according to the American Council on Education.

Under both the proposed House and Senate tax plans, the tax on university endowments returns would apply to private colleges with endowments of at least $100,000 per full-time student. About 155 schools, including Emory, could be subject to the tax, according to an American Council on Education study.

University President Claire E. Sterk sent an Oct. 31 letter to the Georgia congressional delegation to outline the “deleterious effect [of the tax bill] on Emory’s students, employees and patients.”

Our ability to retain faculty and staff is strengthened by the benefits we can provide, including Section 127 employer­-provided educational assistance, which allows Emory to provide up to a set amount in tax-free tuition assistance at the graduate or undergraduate level for its employees,” Sterk wrote. “[It also affects] Section 117(d) qualified tuition reductions, which allows Emory to provide tax-free undergraduate-level tuition waivers to its employees and their dependents.”

Colleges build their endowments by raising funds from alumni, companies and other donors. Endowments are used to fund student financial aid, faculty salaries and scientific research.

Assistant Professor in the Practice of Accounting Usha Rackliffe said that Emory could lose millions if the tax bill is passed.

“At Emory’s endowment of $6.5 billion — let’s say [Emory earns] 10 percent — that would be $650 million, and if [Emory] paid a tax of 1.4 percent, [Emory] would give up 9.1 million,” Rackliffe said. “That’s a lot of money. Think about how many students that could benefit … every nickel and dime that takes away from furthering education and diversity on campus is that much less that a university has.”

Emory’s endowment provides long-term income for University operations and capital projects.

The House plan would also no longer allow people to itemize student loan interest as a deduction. Under Section 221 of the Internal Revenue Code, people may currently itemize student loan interest as a deduction up to $2,500. In addition, people whose employers cover a portion or all of their college costs must declare that money as taxable income. The proposal would also remove a tuition tax break for university employees and their families.

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