Proposed Tax Plan Could Increase Financial Burden on Graduate Students
Many graduate students on the PhD track receive a small stipend (typically $20,000 to $30,000 per year) along with a tuition waiver (valued around $12,000 to $50,000 per year, depending on the institution) as a part of their teaching and/or research assistantships.
The stipends are treated as taxable income, while the tuition waivers, which are paid by the institution to itself (and therefore never seen by the students), have been treated as non-taxable.
However, a new GOP tax plan recently passed by the House of Representatives has several proposals that directly target and affect higher education institutions and graduate students. One of the most striking provisions would treat the value of the tuition waiver as taxable income. Some estimates suggest that this change could lead to students (particularly those at private institutions where tuitions are higher) owing federal income tax amounting to roughly 37% of their actual income— a 240% increase of their current tax burden (Velan, 2017).
To talk more about the possible ramifications of this proposal, we asked a current social psychology PhD student, Mallory Roman, for her perspective. Mallory double majored in psychology and fashion merchandising at the University of Georgia and worked as a lab manager at the Sloan School of Management before coming to Duke to pursue her PhD in social psychology. Her research focuses on how individual differences in self-control and interpersonal resources inform motivational processes and goal outcomes. Mallory volunteers with local progressive groups in Durham, as well as with the North Carolina Democratic Party.
Generally speaking, what do you think the ramifications of this tax plan are for graduate education in the U.S.?
For the current House tax plan, I think the two major ramifications of taxing tuition waivers would be: a decrease in PhD enrollment at private higher education institutions, and a decrease in low-income students pursuing graduate education at the PhD level. I think the latter is really the most pressing concern, as there already appears to be an overrepresentation of high SES students in PhD programs.
Graduate education is currently fairly affordable for most supported students in the sense that they receive a stipend as well as tuition remission. This tax plan would make graduate education an unaffordable option for many, especially those who have no familial support or cannot take out loans.
In terms of taxing large endowments and losing other higher education tax incentives, we may see a decrease in student support and research support for the humanities and social sciences compared to more lucrative graduate areas, like economics or chemistry, to compensate for extra costs.
In what ways do you think this plan might deter potential applicants from considering graduate education?
I think it will lead to low SES students considering graduate education as less feasible, and therefore lead them to pursue other career paths, or perhaps attend universities with lower tuition, solely for tax purposes. There's already low visibility for low SES students in graduate education, so decreasing that visibility may lead to a drop-off in diverse applicants in the long run. That may further compound issues in various disciplines that do not account for class differences already. I think that high SES students will be largely unaffected.
If the plan ultimately passes, what effects do you think it will have for current graduate students?
An increase in anxiety in an already-stressed population; slimmer monthly budgets for students who are already living very cheaply; an increase in credit card and/or loan debt; and a more distinct possibility that students will abandon their graduate studies or master out of programs. I also think some graduate students would not claim their tuition waivers on their taxes, which may end up being a source of debt and legal trouble.”
Do you think this proposal reflects a larger trend in how the government values higher education and research?
I think it not only reflects the value that the current congress attaches to higher education and research, but also reflects a disregard for the systematic challenges presented by a low SES background and an ambivalence toward actively changing the distribution of wealth in this country. The House is essentially saying PhDs and the lucrative jobs in which PhDs are employed should be reserved for people who can afford to shoulder the cost. It also seems to target the prestigious private schools the most, so that also seems to be reflected in the current sense of derision toward the "elites" coming out of Washington right now.
Do you have any advice on how to reach out to representatives, or other ways to voice political concerns?
It's so important to call your representatives and speak to someone directly. Oftentimes, postcards and email are checked infrequently, but there is almost always someone on the phones.
It's important to engage some persuasion skills, too. If you aren't a likely voter for your senator or congressperson, they are less concerned with your opinion. If you call to essentially ask your representatives to switch to the other party's position, you are unlikely to see success. But if you call your representatives and engage politely and respectfully with their staff, while highlighting how listening to you could help them down the line, you may see some productive dialogue.
Many representatives are also fairly active on social media, which helps you to stay abreast of what your local reps are doing outside of the national spotlight. I also recommend getting involved with a political group that speaks to you and engages in outreach activities. Calling your representative and voicing your displeasure is great. Knocking on doors and telling your neighbors about it is how change happens on a grassroots level.”