A staggering 73 percent of American parents are worried about paying for college -- more than the percentage of Americans concerned with paying for medical costs in the event of a serious accident or illness, according to a Gallup poll. Further complicating the matter? The GOP’s looming tax bill. Here’s a closer look at the bill, along with how experts think it will impact students, families and universities.
About the Proposed Tax Bill
The unveiling of the proposed Republican tax bill earlier this week was met with its fair share of controversy. While purported to offer relief for middle-class families, New York Times analysis suggests a different reality. One particular area of concern? The bill’s potential impact on higher education.
A Dire Development, Some Say
Various entities have weighed in on how the proposed bill will impact stakeholders. In a Washington Post editorial, American Council on Education (ACE) president Ted Mitchell wrote, “The bill would, in one fell swoop, set back by decades the effort to make the cost of college more affordable for individuals from all walks of life.”
He continued, “In addition to proposing to tax some private college and university endowment earnings, restricting access to the tax-exempt bond market and reducing incentives for charitable giving — all of which will have a far-reaching negative impact on higher education — several provisions directly and immediately affect the cost of college to students and their families. The bill eliminates a set of longstanding provisions designed to help a wide range of middle- and lower-income students and their families finance a college education.”
Specifically, the plan will end the student loan interest deduction; repeal a provision which includes both tuition waivers and tuition exemptions from taxable income for graduate students; and end tax-free tuition assistance for employees at both the undergraduate and graduate levels.
Mitchell concluded, “In all, according to the House Committee on Ways and Means’ own summary of the legislation, this bill would increase the cost to students of attending college by more than $65 billion over the next decade. The bottom line: The House tax revision proposal would discourage participation in postsecondary education and make college more expensive for those who do enroll.”
While all of these proposed changes are worrying students and parents alike, eliminating tuition exemptions from taxable income is perhaps the most contentious and potentially devastating. If passed in its current form, the bill would make it significantly more difficult for graduate students without personal means of funding to undertake postgraduate and doctoral studies.
Under current regulations, graduate students who are awarded living stipends and tuition waivers are only required to pay taxes on the stipend (which, in some degree fields, are below the range of taxable income). The GOP’s tax bill proposes taxing graduate students on the combined value of their stipend and the waived tuition, which in most graduate students’ cases would quickly triple their yearly tax payment despite their take-home earnings remaining at or below a minimum wage. In some cases, graduate students would face a tax bill greater than their entire stipend.
But Good Could Come of it, Say Others
While Mitchell and others paint a stark picture, some say good could come of it -- at least pertaining to the elimination of the student loan deduction.
Some say the student loan interest tax deduction has not only never been linked with a positive effect, but also drives tuition inflation. Insists CNBC.com senior columnist Jake Novak, “The student loan tax deduction….is just another enabler for tuition inflation. And since it doesn't increase the number of Americans entering school in the first place, good riddance to this useless deduction.”
Corporate finance and security lawyer Michael Durkheim asserts the same position -- even more directly -- in Forbes. For reasons including its small size, inadequacy as an economic incentive, and government involvement, “The student loan interest deduction is already a sham,” he contends.
Regardless of its pros and cons, the reality is that sweeping change may be imminent. Reports NPR, “The House Ways and Means Committee is expected to approve that tax bill within the next several days, paving the way for a full House vote as early as [this] week.”
Read more about studying in the US.
Many Dreamers just got a big step closer to their college dreams. Here’s a closer look at a newly announced $33 million scholarship grant funded by ...
International students love Switzerland—particularly at high levels of education and if they’re studying natural sciences. Let’s take a closer l...
A major North Korean university has plans to open its doors to more international students, according to a North Korea-facing Japanese news source. He...