Tuition tax: UO graduate students, university fight back on tax reform that raises student costs by $65 billion over 10 years
Considering graduate school? You might need to think twice. University of Oregon graduate students may soon see their taxes doubled — and some grad students fear they won’t be able to afford finishing their degrees.
A GOP-led federal tax reform bill, H.R. 1, passed in the House on Nov. 16, by a partisan vote. The Tax Cuts and Jobs Act strips grad students — and undergraduates — of several tax benefits. Nationwide, some graduate students could see their taxes triple if the Senate and House come to an agreement on tax reform in the next few weeks.
The House bill increases college costs by repealing the student loan interest deduction and eliminating two tax credits that both students and their parents benefit from. It implements taxes on employer-provided tuition assistance and tuition waivers that allow parents employed by universities to send their children to college. H.R. 1 even limits the ways in which parents can save for college. And universities depending on millions of dollars in donations each year could see those gifts shrink — fewer donors will itemize their taxes, and will lose the incentive to give.
Both UO and its graduate students are clamoring for changes to a bill that could increase costs to college students nationwide by about $65 billion over the next 10 years — and they aren’t alone in their outrage.
The American Council on Education and some 50-odd higher education groups (including the Association of American Universities, of which UO is a member), signed a letter to the House Ways and Means Committee, decrying the legislation for discouraging postsecondary education and undermining the financial stability of educational institutions.
The letter cited eight sections of the House bill that higher education groups call detrimental. The sections eliminate deductions and raise the taxes of both undergraduate and graduate students while significantly reducing the revenue of universities.
“It is already a struggle for me to survive on the stipend provided to me,” Julia Taylor, a UO Ph.D. candidate two years into her studies said. “If this tax bill goes through the Senate, I honestly don’t know what I am going to do.”
A Senate version of H.R. 1 passed out of the Finance Committee Nov. 16, and could make its way to the Senate floor as early as next Wednesday, says Nancy O’Neall, monitor of the Ad Hoc Tax Group, an informal collective of university and higher education associations that tracks federal tax policy and its effect on higher education.
But the Senate version retains key differences that must be reconciled with the House version of the bill before any legislation becomes law, and it is unclear exactly what effects the final legislation would have on educational institutions and college students. Many at UO are expecting a large, negative impact.
“If our revenues are disrupted we have to find ways to balance that,” Betsy Boyd, federal liaison for UO said. “We have a commitment at this university to the student experience and keeping college affordable and this bill will make it harder for us to do those things.”
The House bill repeals two tax credits for students and their families, the American Opportunity and the Lifetime Learning tax credits. It also eliminates deductions for student loan interest — increasing the cost of student loans by about $13 billion over the next ten years, according to the American Council on Education.
“About half of our student body population has to borrow money to go to school,” Boyd said, “and when you are just starting out in a career, being able to deduct that interest helps manage the cost of borrowing.”
But graduate students might stand to lose the most.
The House version of H.R. 1 repeals a traditional tax exclusion on tuition waivers received by graduate students around the country — including the 1,400 graduate employees at UO. Tuition waivers are usually about $5,000 per term, and graduate employees also receive a stipend for living costs, according to Interim Vice Provost and Dean of the Graduate School Sara Hodges. Eliminating the tax exclusion would more than double the tax on UO graduate stipends — amounts already difficult to live on, grad students say.
Calling graduate employees a “life-force” on the campus, Hodges expressed her concern in a letter to Oregon representatives Sen. Ron Wyden, ranking member of the Senate Committee on Finance, and Rep. Earl Blumenauer, who sits on the House Ways and Means Committee — the two committees responsible for drafting the legislation.
“This legislation is bad for graduate students, bad for the undergraduates who are instructed by graduate students, and bad for research labs that are powered by graduate student workers. It is bad for America’s ability to attract the brightest minds to its universities, and for America’s stature as a world leader in research and higher education,” Hodges wrote.
But UO grad students aren’t taking the legislation sitting down. While other students prepared to head home for the holiday, some grad students organized a phone banking day — their only recourse to countering the legislation so far.
On Tuesday, Nov. 21, graduate student members of the university-wide Graduate Teaching Fellow Federation gathered in PLC 180 to call senators representing communities around the nation and asked them to vote down the tax reform bill. They also asked family, friends, educators and community members to call their legislative representatives on behalf of graduate students.
For some, a tax on tuition waivers could mean a swift end to their academic careers.
After more than three years of working towards her Ph.D., Graduate Employee Larissa Petrucci worries she will have to quit graduate school.
“If the University of Oregon could not find a way to keep me from paying that increased tax, it would not be tenable for me to continue grad school,” Petrucci, who organized the phone banking said.
While it’s unclear how UO would manage the increased costs, the university will advocate for its students, Boyd said.
“What we do know is that if we tax graduate student tuition or we reduce the tax credit that helps put money back in student pockets, college is going to be less affordable,” Boyd said.
The university could see impacts to both its revenue and donations, Boyd said. Last year, UO received 50,000 donations from 40,551 donors for a total of $695 million. Annual donations average around $200 million, and last year UO received a single $500 million gift from the Knight family that will be used to build a new research center, the Phil and Penny Knight Campus.
For the most part, UO relies on small, yearly donations.
“We have a lot of people who make small gifts that make a big difference to the university,” Boyd said. “This bill is expected to greatly reduce charitable giving.”
The tax reform means about 94 percent of taxpayers would not itemize their taxes, and not receive any deduction for charitable giving. That, in turn, would significantly lower the amount of people donating to nonprofit organizations and universities like UO, Boyd said.
The university expects to take a big revenue hit, losing federal tax subsidies on bonds, and universities everywhere would lose access to private activity and advance refunding bonds. UO uses these low-interest bonds for capital projects like building construction, including the Ford Alumni Center and Global Scholars Hall, said Boyd. Sequestration on Build America Bonds alone would cost UO about $20 million between 2018 and 2040 — about $1 million per year, said Boyd. And changes to the unrelated business income tax (UBIT) would tax nonprofits for licensing trademarks and logos — taking a chunk of UO’s $4 million annual revenue, money that otherwise goes to the athletic department.
For now, the tax reform hovers in the Senate, waiting for a vote.
Senate Majority Leader Mitch McConnell needs 50 Republican votes to pass the Senate version of the bill and could bring it to the floor next week, according to Nancy O’Neall, monitor of Ad Hoc Tax Group.
But action on the Senate floor might be delayed if McConnell and House Speaker Paul Ryan think they can negotiate a deal between the House and the Senate in the next few weeks.
“If so — and that’s a big ‘if’ — McConnell would amend the Senate Finance bill on the floor with the pre-cooked deal, the Senate would pass it and send it to the House for their approval,” O’Neall wrote in an email to Ad Hoc Tax members. “This would obviate the need for a House/Senate conference committee and speed the bill to the President’s desk before Christmas.”
What, exactly, the final bill will contain depends on the current negotiations between GOP senators and the House.
“The end game is critical,” Boyd said. “You can assume that House and Senate Republican leadership are coordinating.”
For now, grad students and universities await a fate resting in the hands of the GOP senators.
“From a university perspective, what we care most about are the impacts to students — changes that result in tuition being taxed, making college less affordable or creating new costs that disrupt our ability to meet our mission,” Boyd said. “There are a lot of bad things in this bill.”
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