Tuesday, November 7, 2017

Transferring money from students to billionaires

While the new tax bill covers many things, Inside Higher Ed has a look at how this might impact students (more discussion here). There are two main concerns here, from my perspective. The first worrisome part is that the tax plan will end student loan interest deductions, greatly increasing the costs of higher education, especially given how rapidly education debt has been rising. This, of course, will disproportionately impact lower income students who need to take on more debt. Furthermore, adding to the cost of loans will make important but low paying jobs (that mean no rapid loan repayment) requiring high education such as teacher, social worker, or librarian that much less attractive.

Even more relevant to most readers of this blog, the new tax bill proposes to make tuition wavers taxable. According to the Inside Higher Ed article:

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.

OK. So we will take students making stipends of $25-30k and then tax them as if they were making $60-75k. That would bump people up from the 15% bracket to the 25% bracket on money they don't even see,. Given that many US students already have debt from undergrad, it is hard to see how this wouldn't greatly reduce the number of students able to attend grad school, especially when combined with removing the tax deduction on student loan interest. Now, I know that there are people who think we should reduce the number of grad students in STEM fields, but do we really want to cull the numbers with an economic means test?

This seems like a really strange proposal. For one thing, how much money can taxing grad school tuition wavers actually bring in? For another, why wouldn't grad schools drastically lower tuition in the programs that routinely provide such wavers, since it seems mostly like a bookkeeping fiction anyways? Its not like some programs don't have higher tuition than others already, and plenty of programs already have different tuition rates for students before and after they pass to PhD candidates.


Anonymous said...

this will advesrsely impact women who are currently getting more education but with this change they will be far less able to afford to do so. This is therefore part of the GOP theory of returning to the 1950's when women did not have economic freedom and were financially unable to live independently. This is the GOP dream: women barefoot, in the kitchen, pregnant and sexual objects only.

prodigal academic said...

Not sure that this is really an attack on women per se. I think the GOP right now is fairly anti-intellectual and distrustful of academia in general. They see a way to get more money for their cuts without imposing too much pain on their base, or at least give the appearance of doing so, since I don't think this will actually net much money. I do suspect the GOP base cares more about the student loan deduction than they think, since many people want their kids to get a college degree.