Graduate student tuition waivers would be taxable income under GOP tax reform package

So the plan to make America great again is to further dismantling access to education? As it stands, the legislation is a real punch to the gut for higher education

The proposal would also eliminate a provision of the tax code used by many universities to waive the cost of tuition for graduate students filling positions like teaching assistantships. If the proposal were to go through, those institutions wouldn't be able to waive tuition costs without imposing new taxable income on grad students, said Steven Bloom, director of government relations at the American Council on Education.

Among other things...

The plan would impose a 1.4 percent excise tax on college endowments at private universities valued at $100,000 or more per full-time student. The National Association of Independent Colleges and Universities said Friday it estimated more than 150 institutions would be affected by the proposed tax based on 2014-15 endowment values.

The bill would double the standard individual tax deduction, meaning much weaker incentives for charitable contributions to colleges, higher education groups say. Phasing out the estate tax, they say, would also have a negative impact on charitable contributions.

The GOP plan would end student loan interest rate deductions and eliminate state and local income tax deductions, potentially encouraging spending cuts in states that are among the biggest supporters of public higher education.

Students -- especially older, part-time and graduate students -- would also see negative consequences from provisions of the Republican proposal, higher ed advocates said. The bill restructures the American Opportunity Tax Credit, eliminating tax benefits for students who take more than five years to graduate, as well as part-time and graduate students. And it repeals the Lifetime Learning Credit, which is used by grad students, workers who need retraining and part-time students and nontraditional undergrads who take more than four years to graduate.

The legislation would kill another provision that is deeply important to college faculty members and administrators personally: Section 117(d) of the tax code allows employees of nonprofit universities and colleges to exclude from taxable income qualified undergraduate tuition reductions they, or their dependents, receive from their employer (or other colleges with which their institutions have reciprocity). This provision has long been a valued benefit colleges can offer that enables them to recruit employees at lower salaries than they might otherwise need to to compete.

https://www.insidehighered.com/news/2017/11/03/gop-tax-overhaul-would-eliminate-tax-breaks-used-colleges-and-students#.WfzHZjDec-M.twitter

The same yahoo's developing the plan are working under the premise that $450K for married filing jointly is middle income.

Guess you could classify them as low income since they are near the bottom of the top 1% of earners.

Two articles about how GOP tax reform could be detrimental to higher education. This is not how you make America great.

The annual stipend for a PhD student in Carnegie Mellon's school of computer science is about $32,400. The university covers the student's $43,000 tuition, in exchange for the research she conducts and the courses she teaches. Under current law, the government taxes only a student’s stipend; the waived tuition is not taken into account. But under the GOP bill, her annual taxable income would rise from $32,400 to $76,234. Even factoring in new deductions also included in the proposal, the CMU document estimates her taxes would amount to $10,209 per year—nearly four times the amount under current law. That would slash her net annual stipend by 25 percent, from $29,566 to $22,191.

"It was just such a shock," says Coston, who expects her degree will take another five years to complete. If the repeal were to become law, it would take effect in 2018–2019. "It really changes the calculus on my finances. This suddenly makes a lot of things like rent, car payments, groceries, all that stuff, no longer affordable."

https://www.wired.com/story/grad-students-are-freaking-out-about-the-gops-tax-plan-they-should-be/?mbid=social_twitter_onsiteshare

The second reason is subtler, but perhaps equally significant. To pay for a permanent tax cut on corporations, the plan raises taxes on colleges and college students, which is part of a broader Republican war on higher education in the U.S. This is a big deal, because in the last half-century, the most important long-term driver of wage growth has arguably been college.

The House bill would reduce benefits for higher education by more than $60 billion in the coming decade. It would shock graduate students with sudden tax increases, punish student debtors, and force schools to raise tuition at a time when higher education already feels unaffordable for many students. On balance, the GOP plan would encourage large corporations to invest in new machines in the workplace, while discouraging American workers from investing in themselves.

https://www.theatlantic.com/business/archive/2017/11/republican-college/546308/?utm_source=feed

I'll have to find the link, but I read somewhere over the weekend that private school education would be tax deductible and I'm pretty sure that meant K-12. It makes no sense unless you're rich.

Paving the way for generations of RDK’s (rich dumb kids) to get into graduate programs

Does the Bennett Hypothesis Still Matter?

To quote Bennett:

If anything, increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions, confident that Federal loan subsidies would help cushion the increase. In 1978, subsidies became available to a greatly expanded number of students. In 1980, college tuitions began rising year after year at a rate that exceeded inflation. Federal student aid policies do not cause college price inflation, but there is little doubt that they help make it possible.

The theory is really just common sense. If the government gives money to students to spend on education, then students will be able and willing to spend more on that product. Universities, knowing that the funds are available, raise tuition without worrying about whether students can afford it. An ugly cycle ensues.

And now, we’re seeing the effects. The price of college tuition and fees has risen 1,335 percent since 1978: much faster than inflation and faster even than medical care (704 percent) and housing (511 percent). Too many students go to college for the wrong reasons and too few graduate. Almost 4 million students dropped out of college with debt in 2015 and 2016. Student borrowing has soared to more than $1 trillion with many graduates (and non-graduates) unable to pay back their student loans.

In short, student borrowing is on an unsustainable path. Understanding the Bennett Hypothesis and examining the evidence is the first step in getting back on course.

And as usual the Liberal answer will be to make it worse by throwing even more $$ at it.

LooseGoose wrote:Does the Bennett Hypothesis Still Matter?

To quote Bennett:

If anything, increases in financial aid in recent years have enabled colleges and universities blithely to raise their tuitions, confident that Federal loan subsidies would help cushion the increase. In 1978, subsidies became available to a greatly expanded number of students. In 1980, college tuitions began rising year after year at a rate that exceeded inflation. Federal student aid policies do not cause college price inflation, but there is little doubt that they help make it possible.

The theory is really just common sense. If the government gives money to students to spend on education, then students will be able and willing to spend more on that product. Universities, knowing that the funds are available, raise tuition without worrying about whether students can afford it. An ugly cycle ensues.

And now, we’re seeing the effects. The price of college tuition and fees has risen 1,335 percent since 1978: much faster than inflation and faster even than medical care (704 percent) and housing (511 percent). Too many students go to college for the wrong reasons and too few graduate. Almost 4 million students dropped out of college with debt in 2015 and 2016. Student borrowing has soared to more than $1 trillion with many graduates (and non-graduates) unable to pay back their student loans.

In short, student borrowing is on an unsustainable path. Understanding the Bennett Hypothesis and examining the evidence is the first step in getting back on course.

And as usual the Liberal answer will be to make it worse by throwing even more $$ at it.

Unless the GOP is magically going to reduce the cost of tuition while raising taxes on grad students, I'm not sure I get your point. This issue is about how the federal government taxes tuition stipends, not federal funding of education.

This tax impacts a small group and won't raise much revenue, for what purpose? Seems like just a middle finger to spite liberals to be honest because I have yet to see any decent argument for this tax change.

The final tax bill did not include the tax on tuition waivers. The GOP thinking that was a good idea is troublesome. Tuition waivers are not loans, and are awarded selectively - to attract quality graduate students - compared to federal financial aid. It is hard not to think the GOP is trying to gut public education when you see a tax on money that is awarded competitively.

While this hypothesis does have merit, it misses something important: infrastructure costs. I would suggest colleges and universities, to accommodate past years of growing enrollment, had to spend money on costly infrastructure projects. More students created a need for new dorms, additional classrooms and labs, and larger libraries just to name a few infrastructure projects common across campuses. Not all of these projects could be capital projects, which meant increased costs to students. The continued operations and maintenance of new infrastructure would also mean increased costs to students. Beyond infrastructure, technology costs - not including the necessary personnel - are constantly on the rise as well.

Of course all of this construction ended up creating a bit of an "arms race" between colleges and universities. The competition for students remains intense, and meant lots of spending to provide the best student life experience possible. For example, the lazy river at LSU. LSU invested in this project despite being nearly broke at the time.

I would ask this: if it is because of financial aid, why are community college also hurting right now? Community college tuition remains incredibly affordable even though a large number of community college students use federal financial aid. The reason might be, that while the hypothesis has merit, it is just once piece to a larger puzzle. Other contributing factors might include decreased state aid and rising administrative costs. Whatever it is, it is an interesting conversation.

Also, if the GOP is serious about this, they would crackdown on for-profit schools. This is not happening under the current administration. These schools often charge exorbitant tuition rates yet do not have the the infrasture or operations and maintenance costs. If we want to talk about greed, I suggest taking a hard look at for-profit institutions.

One thing I will add is that enrollment is trending downward. Which means even fewer tuition dollars. This is like having a city built for 3 million people but only having 1 million taxpayers to contribute to its maintenance. My guess is that the colleges and universities hardest hit will be the smaller, more regional public institutions.

In fall 2015, female students made up 56 percent of total undergraduate enrollment at 9.5 million, and male students made up 44 percent at 7.5 million. Between 2000 and 2015, enrollment for both groups showed similar patterns of change: female enrollment increased by 29 percent and male enrollment increased by 30 percent. Most of these increases occurred between 2005 and 2010, when female enrollment increased by 20 percent and male enrollment increased by 22 percent. However, between 2010 and 2015 both female and male enrollment decreased by 7 percent and 4 percent, respectively. Between 2015 and 2026, female enrollment is projected to increase by 16 percent (from 9.5 million to 11.0 million students), and male enrollment is projected to increase by 11 percent (from 7.5 million to 8.3 million students).

https://nces.ed.gov/programs/coe/indicator_cha.asp

Glad to hear the grad student tax didn't make it into the final bill. I feel a little bit better about taking my tax cut now.

AnomanderRake wrote:Glad to hear the grad student tax didn't make it into the final bill. I feel a little bit better about taking my tax cut now.

If the guilt gets to be too much, I will take it off your hands.

AnomanderRake wrote:Glad to hear the grad student tax didn't make it into the final bill. I feel a little bit better about taking my tax cut now.

I was glad to hear they didn’t include it in the final bill. Although the GOP will always prefer to penalize the educated any chance they could get.

I was one of those grad students that had a stipend and tuition waiver. I would have been fucked. You know, I was making so much money at $1200/month to easily afford grad school out of state.