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The Republican tax plan could financially devastate graduate students

The Republican tax plan could financially devastate graduate students


The bill would tax tuition waivers as income

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Kathleen Farley, a graduate student in biological sciences, paid $2,824 in taxes on her stipend of $25,969 last year. If President Donald Trump’s tax plan takes effect, she calculates that she’ll have to pay $5,174 — almost double what she’s paying now. The unexpected financial burden might force her to drop out of Rutgers University-Newark. “If you walk away, you have nothing,” she says. “I would have just lost four years.”

“If you walk away, you have nothing.”

Farley is one of the thousands of graduate students who would be hit especially hard by Trump’s Tax Cuts and Jobs Act. If it were to pass unchanged, roughly 145,000 graduate students could be responsible for suddenly paying taxes on the thousands of dollars in waivers that cover their tuition, but that never appear in their bank accounts. A House Ways and Means Committee spokeswoman told The Verge in an email that "the Tax Cuts and Jobs Act is focused on providing tax relief," but then confirmed in a subsequent response that the bill would do the exact opposite for graduate students by taxing their tuition reductions: "This compensation would no longer be excluded from taxable income.”

Academic research relies on PhD students. They’re more like apprentices who teach and conduct research than like students in school. Many are paid a small stipend to live on, and their tuition is also typically waived by their university or paid by their faculty advisor’s grants. Right now, those tuition waivers aren’t taxed. But one terse line in the proposed tax bill could change that by taxing these waivers as additional income. “This is a fake number that is suddenly becoming real, and that’s why people are panicking,” says political scientist Robert Paul Musgrave at the University of Massachusetts, Amherst.

“This is a fake number that is suddenly becoming real.”

Some, like Farley and fellow Rutgers student Nicole Dykstra, suspect they’ll have to drop out if the bill passes. “The new proposal will be a sudden, unforecasted expense for us,” says Dykstra, an Army Reservist who served in Iraq with the National Guard. Dykstra currently splits her time between Connecticut, where her husband works and lives with their six-year-old son, and New Jersey, where she’s spent more than two years working towards her PhD. “If I were to leave right now, I would leave empty handed.”

The unexpected increase in taxes could change the rules mid-game for current graduate students, more than half of whom made less than $20,000 during the 2011-2012 academic year, according to the College and University Professional Association for Human Resources. Students who started PhD programs understanding that they may not make much money for the next four to eight years could now have to face going into unanticipated debt.

For Taryn Black, a PhD student at the University of Washington, Seattle, the new proposal more than doubles the taxes on her stipend of $29,592, from roughly $1800 to $4,230 per year. It might be enough to drive Black, a geoscientist, into the private sector. “I love what I do but I’m not going to go into debt for a job,” she says. “To be forced out of it because our government thinks that I should pay taxes on my ability to even have this education, it’s really frustrating and it would be really disappointing.”

“It essentially dismantles the entire system.”

Graduate students are the cheap engine of academic research. By driving prospective students away, “it essentially dismantles the entire system,” says Claus Wilke, a computational biology professor at the University of Texas at Austin. When students ask him if they should accept a graduate school’s offer, he tells them there’s a simple rule of thumb: “You shouldn’t have to pay tuition, and your living costs should be covered. If that cannot be guaranteed, then the PhD program isn’t really worth it,” Wilke says. “If this tax law went through then essentially every PhD program in the US would not meet this bar anymore.”

The damage could reach farther than this generation of PhD students: “When you attack higher ed, you also attack the ability to have a functioning country — your teachers are coming out of higher education, your policy makers, your doctors, the people who are designing your infrastructure and your airplanes,” Farley says.

Graduate education in the United States isn’t perfect, of course; students are training for a dwindling supply of academic jobs and many consider themselves under-compensated for valuable work they perform. Roughly 12 percent of PhDs already graduate with more than $70,000 in debt from student loans for college and graduate school, The Atlantic reports. “Reform is necessary,” says Farley, who’s active in the Rutgers graduate student union. “But a system that breaks and breaks everyone with it isn’t the ideal way to reform.”

“A system that breaks and breaks everyone with it isn’t the ideal way to reform.”

Musgrave doesn’t think that the tax increase will ultimately fall to graduate students, but to universities. “Universities will be weakened in one way or another as they seek to get out from under this mandate,” he says. One possible workaround could be for universities to cut the tuition bill by reducing the number of units graduate students are required to enroll in. Another could be to raise student stipends to cover the tax hike, which would make graduate students more expensive to employ. That could hit public universities especially hard, since they might be less financially and legally able to maneuver by reducing tuition costs, Musgrave says. “If the best people aren’t going to come to your university because they’ll be bankrupted by doing so, you’ll lose not only your graduate students but also your faculty,” he says.

It’s also possible that the tax bill could still change. “It’s very much a draft at this point,” says Robert Kelchen, an expert in higher education finance at Seton Hall University. The senate will draft its own bill, and both bills will have to make their ways through committees. But Kelchen suspects that the higher education provisions will stay in the House’s bill through the revision process. “If they take away some of these cuts to education, that messes up the math for the rest of the tax bill,” he says. “And frankly the higher education lobby isn’t as strong as some of the other lobbying groups.”

Many of the students view the tax bill as an attack on higher education. But Patrick Thomas, director of the tax clinic at the University of Notre Dame, suspects that something less malicious, but equally insidious may be behind it: a screw up. “I almost get the sense that this provision with respect to graduate students was unintentional or an oversight,” Thomas says. “I just can’t imagine enacting such a large policy change, that affects so many individuals and so many institutes of higher education without somehow talking about it,” he says. But, he adds, “Maybe that’s me being hopeful.”

Update November 7th, 4:30PM ET: Updated to include a quote from a House Ways and Means Committee spokeswoman.