Opinion: Only wealthy can afford grad school under House tax plan up for vote today

WASHINGTON, DC – NOVEMBER 14: Speaker of the House Paul Ryan (R-WI) attends a press conference following a weekly meeting of the House Republican caucus November 14, 2017 in Washington, DC. Republicans plan to bring their version of a tax reform bill to the House floor for a vote today. (Photo by Win McNamee/Getty Images)

Jenny C. Bledsoe is a fifth-year Ph.D. candidate in English at Emory University, specializing in medieval literature. She was featured in a New York Times story last week that examined how the GOP House tax plan would impact a range of American students. In this essay, Bledsoe focuses on the change that makes graduate tuition waivers taxable income.

The tax plan is expected to come to the House floor today where passage is predicted.  The Senate, however, is not expected to take up its own tax bill until after Thanksgiving.  And then House and Senate conferees will have to hammer out their differences and come up with a compromise plan.

Under the House plan, Bledsoe and other doctoral students would be hurt by a new provision that would tax graduate students on tuition wavers granted them in exchange for working as teaching assistants or researchers. The tax accountants hired by The New York Times estimated Bledsoe and her husband would pay an additional $7,194 in taxes under the House tax bill.

When I wrote about this last week, some readers contended the increase in the standard deduction will offset the eliminations of these education deductions. However,  some reviews found that not to be true for graduate students.

Nearly 50,000 graduate and professional students are now enrolled in the University System of Georgia. Some students say they’ll have to take on more debt to continue their studies if the tax plan is passed. You can read their concerns here.

By Jenny C. Bledsoe

The House GOP tax bill makes graduate school inaccessible for anyone who is not independently wealthy, and it will likely cause current graduate students to drop out of doctoral programs and/or declare bankruptcy.

A single line in the 429-page bill effects this change: 26 U.S. tax code § 117 (d) allows students conducting research or teaching for a university (usually Ph.D students on fellowship) to receive tuition waivers tax free. Any stipends are taxed.

The House “Tax Cuts and Jobs Act,” however, will repeal this provision, meaning that a Ph.D student making a stipend of $24,000 will be taxed as if they are making $85,200. This would have been my situation two years ago. During the first three years of Emory’s Ph.D program, a student currently receives a tuition waiver amounting to $61,200. Once you reach “tuition-paid” status after your third year, the annual tuition is $30,600.

Tax experts hired by The New York Times estimated that my husband’s and my tax bill would increase by $7,194 — despite the increase in the standard deduction — because of the newly taxable tuition waiver.

Tuition amounts vary widely depending on the institution, and the situation may be worse (or better) for some individuals, depending on tuition rates and stipend amounts. At Georgia Tech, full-time graduate student tuition for one semester is $6,894 in-state and $14,284 out-of-state. Georgia State’s tuition is $4,680 in-state and $15,012 out-of-state for one semester.

Graduate students will clearly owe much larger federal income tax bills, and in some states, including Georgia, they will also have to pay more due to the proposed changes to the federal tax credit for state and local income taxes. Those at private colleges and universities will be responsible for larger taxable amounts (given the higher tuition at private institutions).

Those at public universities will pay the taxes on their relatively lower tuition waiver amounts, but they will have to do so with already significantly smaller stipends than Ph.D students receive at private universities.

This is an issue across the disciplines. It will affect any graduate student pursuing a Ph.D on a research or teaching fellowship, which common for those pursuing doctorates in STEM, the social sciences, and the humanities. In addition to graduate students suffering personally, universities will experience the effects of their graduate students’ tax burdens in multiple ways (in addition to the bill’s other deleterious effects on higher education).

Graduate students will have less time for research because they will have to work additional jobs. Humanities Ph.D students, who provide essential labor as instructors, will have less time to devote to the classes they teach to undergraduates.

Long-term effects are difficult to measure, but surely many lower-income students will no longer attend. It’s unlikely that international students will be able to maintain a decent standard of living since they are often forbidden from taking on additional work.

The House GOP tax bill will lead to a “brain drain,” with international students and Americans alike seeking graduate study elsewhere or not all. In terms of personal finance, it will be extremely challenging (if not impossible) to meet one’s basic needs—food, shelter—while pursuing a higher degree.

Unless … you’re independently wealthy. This single line in a massive tax bill destroys lower- and middle-class young Americans’ ability to pursue a professional career in academia, industry, or government. The bill reduces other education tax credits, which will adversely affect access to undergraduate as well as graduate education. The GOP will effectively end class mobility, return the academy fully to the so-called one percent, and reduce charitable donations to universities by de-incentivizing itemized deductions.

Even if you don’t believe in the value of academic study, eliminating section 117(d) of the U.S. tax code would be bad for the economy. Those who were not independently wealthy and who chose to pursue graduate studies anyway would have to do so with the help of student loans. Student loans are with you forever; student loan debt is not forgiven even when bankruptcy is declared. Young Americans are already saddled with too much debt, causing many opinion pieces to complain about the latest store or product that “millennials have killed” by not spending enough money.

Eliminating this line of tax code effectively condemns those who pursue higher education to a life of debt servitude. How is our economy, our country, our world to progress with these barriers against access to education, an essential asset in our dynamic world?

Reader Comments 0

49 comments
Manzy Byrd
Manzy Byrd

The end of graduate education... America will lose lots of its future scientists.

Piet Strydom
Piet Strydom

20% of stem graduate students are foreigners, many of whom start new businesses after graduation. Now tax them on the student assistance they get, refuse them visas, and you severely cripple your long term competitiveness. That's not how to MAGA....

Habrams01
Habrams01

"Graduate students will have less time for research because they will have to work additional jobs. Humanities Ph.D students, who provide essential labor as instructors, will have less time to devote to the classes they teach to undergraduates."

When getting a Bachelor Degree is worth an income of for a teacher in Cherokee County, 4 years is $ 44,247.20, with a Master's at 5 years, it is $49,688.80.  For a Doctorate in 7 years it is $67, 016.80.  I fail to see where the fact that MOST won't aspire to a Master's let alone a Doctorate are being ill treated.  Their GROSS income more than offsets any discrepancy in perceived income.

To have clearly "cherry picked" assertions without facts is disturbing.  I would suggest perhaps that instead of a degree in Poetry or your broad term "humanities" (a multitude of disciplines) that each individual work at their individual pace without my seeking unknow generalites to place them in a slot.


Astropig
Astropig

@Habrams01


You're right,but maybe you missed the point here-The point is to make the ignorant,easily led baa-baas hate the Republican Party and hate the independently wealthy.


Judging from the replies that I've seen-Epic fail.

T_Merlin
T_Merlin

@Habrams01 It is entirely fair to pay a higher income tax once you actually earn a higher amount.


Before that point, why should someone pay more for money they don't actually receive as income?

Lee_CPA2
Lee_CPA2

 So, basically you would be getting a $61,000 value (we can argue if it is really worth that much later) for a mere $7200?  Sounds like a no brainer to me.

Darid220
Darid220

Seems like a pretty easy work around.  The grad schools could just lower their tuition, since the vast majority of grad students in non-professional programs are on fellowships.

James W. Brown
James W. Brown

If it passes in anything like this form, it will immediately and irreparably destroy graduate education in the US. How, then, will higher education and research survive? Grad students are the backbone of science. I fear this is exactly the point.

AJC  Get Schooled
AJC Get Schooled

House passed it with 227 votes for and 205 against. Thirteen Republicans voted against the bill. No Democrats voted for it.

Astropig
Astropig

 Tuition waivers are clearly a monetary benefit.The author here is essentially asking for a tax benefit that everyone else has to pay for.Speaking just for myself-pay your fair share,you hypocrites!


Another couple of points that jumped out at me in this one-sided piece-


1) A LOT of graduate degrees (especially MBA's) are paid for by employers,not the students.Both sides benefit,so the cost is seen as an investment,not an expense.I've had two in my family receive that benefit from their employers and there were still some tax consequences,but we happily paid them because the price was worth the benefit.


2) The real reason for opposing this seeps into the discussion when you think about it-The universities want to continue to have a deep pool of cheap labor to teach and do the grunt work so that their tenured profs can pursue those big money grants that keep the assistant vice-chancellors of student affairs in six figure jobs.In short, they want to do the same thing that every big money employer wants to do-keep salaries down for employees outside the power structure.The author thinks that you are too stupid to figure this out.


3) If you are so stupid,Ms. Bledsoe,to refuse pay an extra $7200 a year for a couple of years in order to make more money for the rest of your working life,I really hope that you never start teaching economics,because you're alarmingly uneducated.You won't invest in yourself,but the rest of us should? Are you really that selfish? Do you really have that much entitlement? Seriously?


I'm against this tax bill,but for different reasons.The author's reasons,however, are transparently self-serving.It might be best if she sticks to whatever she's good at and leave public policy to others.

redweather
redweather

@Astropig  "The real reason for opposing this seeps into the discussion when you think about it-The universities want to continue to have a deep pool of cheap labor to teach . . . ."

That's definitely one of the reasons. However, this is also good teaching experience for graduate students, many of whom will be taking teaching jobs once they have their degree in hand.

Astropig
Astropig

@redweather @Astropig


You know exactly what. Academics have no moral authority whatsoever to preach to the rest of society or business about the way that graduate students and untenured employees are treated by universities and colleges.A lot of adjunct professors are on food stamps,while a university vice president makes major league shortstop money.The only way for some of these people to be able to support their families in any dignity is for some faculty member to die or retire.They frequently do the work that their boss considers beneath them,while working a second job bagging groceries for their students.


Say what? Hypocrisy-that what I'm saying.All of this corrupt,rotten system is supported by taxpayers and students that are borrowing from the future to keep these people well fed and very well paid.


You know exactly what I'm saying.Don't pretend otherwise.

Astropig
Astropig

@redweather @Astropig


First thing you've said that I agree with!


Afflict the comfortable,comfort the afflicted-that's the Astropig Way!

Astropig
Astropig

@redweather @Astropig


I mean today-This topic.You actually have made a lot more sense since you've retired.Maybe stepping out of the bubble has been a tonic for your soul...Or maybe not.Maybe,(like the blind pig that occasionally finds an acorn) it's just dumb luck.

redweather
redweather

@Astropig @redweather I worked as an adjunct (slave according to you) for ten years because, like many other adjuncts, I was unable to find a full-time university teaching gig when I got out of graduate school, so I worked another job as well. Some adjuncts refuse to do what I did and what many others do. If you're stupid enough to need food stamps, I'd prefer you found another line of work.

Astropig
Astropig

@redweather @Astropig


" If you're stupid enough to need food stamps, I'd prefer you found another line of work."


Some studies suggest that as many as a quarter of adjuncts are on public assistance of some sort. When the numbers are that bad,there is an economic distortion involved.Economic distortions are caused by bad public policy,bought and paid for by political clout.These people are clearly not stupid-they are being screwed by the power structure that runs our universities.In a truly free market,they would be paid more money.

redweather
redweather

@Astropig @redweather These people also must have at least a masters degree. I would like to think that means they've got enough sense to avoid needing public assistance. Apparently not, however, if you're stat is reliable (as if we needed another indictment of American education). 

Astropig
Astropig

@redweather @Astropig

"Avoid needing public assistance"?


Look,sometimes there just isn't enough money coming in to live in some sort of dignity.There's.Not.Enough.I don't begrudge public assistance for a person to be able to make a go of it.It will make the world a better place.


The point that I am making is that exploiting these people's desperation and lack of power is morally wrong.Especially so when tenured faculty gets so much and enjoys job security that adjuncts can only dream of.I would have a different view if the academic elites didn't preach to the rest of us about how immoral the business world is,while running the exact same system in their sandbox.In fact,it is their cryto-marxist rhetoric that got me intrigued about the plight of non-tenured professionals to begin with.My reading and research made me sick.


You've lived it.How can you defend it?


redweather
redweather

@Astropig @redweather I haven't defended anything. I lived it, I survived it, I advocated against it. But I also had bills to pay and kids to raise. Necessity clarifies the mind.

feedback1
feedback1

An English medieval literature student holding forth on the intricacies of tax policy. Really? Trees were felled to provide the newsprint for this?

redweather
redweather

@feedback1 And you've never held forth on tax policies, say around April of each year?

TheAmericanTaxpayer
TheAmericanTaxpayer

Why would anyone study medieval literature, much less pursue a Ph.D.in it?  And then want a tax break while doing it?  She is receiving a tuition break--I think it should be taxable.  She chose high-tuition Emory!  Choices have consequences.

T_Merlin
T_Merlin

@TheAmericanTaxpayer Forgive the long reply. I've answered your two questions in turn. 


1. I assume you want a better answer than "interest." I'll give one answer.

We need the humanities to help people define who we are and what we value. In terms of education, it's important for people to understand how society forms and breaks down, how central practices like commerce, politics, and religious worship change over time, and to be able to take abstract ideas and put them into practice. Deep research into archives and texts builds the case not only for how people existed before but also fosters fruitful comparisons to our current situation. That reaches expression in teaching. Practicing critical thinking and rhetorically-aware communication make us all better citizens, workers, and human beings.

Medieval literature is no exception to that. Geoffrey Chaucer provides pointed satires of faults and flaws not only of his own time but of our own as well. Medieval women like Christine de Pisan wrote potent arguments that would better inform anyone arguing about the place of women in society today. Their examples remain endlessly applicable to our time, as any teacher, instructor, or professor worth her salt would show in class. 

That's one reason why a lot of  leaders and innovators get their start as English majors: they go through rigorous literature surveys and more focused subject courses to get a firm grounding in qualitative thinking, writing, and understanding things in-context.


Graduate students often go on to teach these courses at universities while staying current in their fields through studious research. They also go on into technical writing, into administering programs, and into analytical fields. I even know someone who bridged her interest in medieval literature into designing websites, and someone else who advises people on making historically-credible video games and documentaries. For all of these people, the study of medieval literature provided the foundation of their success.


2. A tuition waiver involves no money being exchanged. Rather, graduate education involves an exchange of services: students teach and perform service for their institution, and they get a small stipend and an education in return. A student can't decide, "Oh, just pay me the waiver amount for the semester and I won't advance in credit hours." Thus that's not income and shouldn't be treated as such. 

Furthermore, educational expenses have often been protected from federal taxes. Federal work-study programs place students in part-time jobs where they earn money to use for educational expenses. When the money is used for that purpose, it is exempt. 

Tax policy has generally recognized that educational expenses are a net benefit for society and shouldn't be taxed as much. For people paying tuition, there's the Lifetime Education Credit (reduces tax owed), a tuition and fees deduction of up to $4,000, and a student loan interest deduction of up to $2,500. For qualifying students, there's also the precedent that scholarships and fellowships are *not* taxed when used for qualified educational expenses. 

In sum, not taxing educational expenses is customary. In addition, the way tuition waivers function adds an elusive, imaginary element to all of this - if the student never sees the money, why are *they* getting taxed for it? For a bit of "income tax," I'd expect the money to be coming in.


--

Your final words are correct. Choices have consequences. By choosing to tax educational expenses that have traditionally gone untaxed, Congress will reduce the number of qualified people who can afford to do graduate studies. This will hurt not just medieval literature or the humanities; it will also reduce enrollment in STEM fields. That's not great at a time when we need more researchers, more medical practitioners, and more entrepreneurs.




Astropig
Astropig

@T_Merlin @TheAmericanTaxpayer


You know, I like your post here.It is well written.I don't agree with it,but you make your points well.Kudos. However...


The exact same people that think that tax free tuition reimbursement will be on here in a couple of months with bitter denunciations of the states tax credit scholarship program for deserving students (in many cases disadvantaged and minority students.)They will savage it and call it a scam of some sort.But it operates almost precisely like this program does.Of course,they want to keep and expand this program,but want to end the scholarship program,even though the state supreme court has ruled that that program doesn't use tax money.


That's why some of us are cranky when we see the hypocrisy in these pieces.Nothing personal,it's just blindingly obvious.

Cats_Resist
Cats_Resist

@Astropig @T_Merlin @TheAmericanTaxpayer Waivers aren't the same as reimbursements, are they?


It's one thing to agree that the government should not tax tuition waivers as if they were income, and another to say that the government should pay tuition.

Astropig
Astropig

@Cats_Resist @Astropig @T_Merlin @TheAmericanTaxpayer


Nonsense.Try selling a property to a relative below its true value and you'll see that money not paid is treated as income.Same with forgiven debt.


This is income.It should be taxed as such.Piles and piles of special favors are why we have to go through these reform battles every few years.

bendedknee
bendedknee

GOP hates the highly educated. Their base is ignorant poorly educated white folks.

Surelyyoujest
Surelyyoujest

"...Eliminating this line of tax code effectively condemns those who pursue higher education to a life of debt servitude..."  That is such hyperbole.  Why is it seemingly everyone wants something for nothing?  Such freakin' snowflakes!

Blynne Roberts
Blynne Roberts

Wish I could wipe that "smirk" off Paul Ryan's FACE!!!

Blynne Roberts
Blynne Roberts

It seems that "HELPING PEOPLE" are dirty words to the GOP!!! It's like cryptonite to Superman!!!

Kathy
Kathy

Sadly, its always been true that only the wealthy can afford grad school. Nothing new.

catmom-scout
catmom-scout

Bledsoe chose to attend an expensive private university studying...medieval literature. What are the job prospects, even in academia, of someone with a Ph.D. in medieval literature?

I say this as a person who earned a B.A. in history from an expensive private college 16 years ago and graduated with over $35,000 in student loans. Loans that will take over 20 years to finish repaying.

I can't say I would make the same choice today, but I was a naive 18 year old who didn't understand the ramifications of 20+ years of student loan payments. Bledsoe was not a naive 18 year old when she entered her Ph.D. program.

Cats_Resist
Cats_Resist

@catmom-scout A Ph.D. in Medieval Lit from Emory? I'm guessing the author's job prospects will be just fine, and that down the road, thousands of students will benefit from her highly informed instruction -- provided of course, they can still afford to go to college....

MaureenDowney
MaureenDowney moderator

@Cats_Resist @catmom-scout I agree. I have used about eight Emory sitters for my four kids at one time or another for after-school care. All of them, regardless of major, went on to great jobs.

Kim McCall Dutton
Kim McCall Dutton

I cannot believe how ridiculous this is....punish students who are trying to better themselves, conduct research that could help many, and live meagerly for many years to earn advanced degrees. Why can't our gov't just cut the fat from their own programs?

Katrina Bishop
Katrina Bishop

Ultimately it will increase student loan debt because too many careers now require a Masters just to be considered for entry level positions