First, Republican tax reform came for homeowners and New Yorkers. Now, it’s coming for graduate students.

The GOP has two tax plans. One is making its way through the House while the other travels through the Senate. Both reveal a significant disconnect between how the government and students view the value of graduate school.

There’s a proposed tax on university investment income if the school’s endowment exceeds more than $250,000 per student, per The Washington Post. There’s another proposal to streamline three college tax credits and eliminate the college loan interest deduction of $2,500, which can be valuable to recent graduates whose entry level jobs may not pay much.

But the most concerning detail affirms that lawmakers consider scholarships a gift instead of the only way many graduate students can pursue higher education. The House wants to eliminate a tuition waiver that allows graduate and Ph.D. students to exclude scholarships from their taxable income — a waiver that saves them thousands in taxes.

Some graduate and Ph.D. students receive scholarships that cover more than just tuition. As part of their graduate scholarships, students are often hired for research or teaching positions and receive a stipend. These stipends would become taxable under the GOP’s new plan.

For example, if a graduate student in the S.I. Newhouse School of Public Communications at Syracuse University qualifies for a fellowship, they can receive a full tuition abatement — which is similar to a scholarship — in addition to a $14,000-per-year stipend to cover living expenses. Those graduate students are required to work as teaching assistants.

Under the new bill, those students would have to pay taxes on their stipend and tuition as if they were income. Tuition for graduate students costs $1,500 per credit, per SU’s website. Most Newhouse graduate degrees require 36 credits, meaning they’ll have to pay about $54,000 for their degree.

Anna Henderson | Contributing Design Editor

But if it’s covered by a scholarship, it’s taxable under the new GOP plan. Newhouse graduate students with a fellowship would pay income tax on that tuition plus the $56,000 they make from a stipend over four years — a total of $110,000. SmartAsset calculates that these students would actually have to pay more than $35,000 in taxes over four years, making 62.5 percent of their stipend useless.

This plan would likely hurt enrollment in SU’s graduate programs, said Leonard Burman, a co-founder of the Tax Policy Center and a professor in the Maxwell School of Citizenship and Public Affairs at SU.

“A large tax on SU grad students would either require Syracuse to increase its financial support significantly or would greatly reduce the number of students who could pursue graduate study here,” Burman said. “Given that SU is not a rich university, the latter is the far more likely outcome.”

There is no doubt that if the House plan is adopted, universities would have to change their graduate student pay structures. They might consider eliminating stipends since a big chunk of them wouldn’t even end up in students’ pockets. Or, they may be forced to dip into financial aid funding to help grad students make ends meet. Top private colleges like Harvard University and Yale University could use their large endowments and make it work. But the plan would squeeze middle-tier universities and their students.

Thankfully, the House tax plan nearly double the standard deduction for single filers, which would help bring down how much of students’ income can be taxed. That would allow graduates to pay less taxes and net some income, but not enough to make their wages livable.

Even with today’s untaxed scholarships, graduate school isn’t completely affordable. One in ten students graduated with more than $153,000 in debt, according to a 2014 study from New America.

With more money going to the government and less going to students, debt will likely climb and education will become less accessible. GOP lawmakers must stop seeing scholarships as handouts and start seeing them for what they really are: a pathway to better education and better careers.

Adam Friedman is a junior broadcast digital journalism and economics dual major. His column appears biweekly. He can be reached at arfri100@syr.edu and followed on Twitter @friedmanadam5.

Published on November 16, 2017 at 12:19 am