CHICAGO (Reuters) - Graduate student Mollie Marr is worried that the U.S. tax overhaul working its way through Congress will force her and many other fellow students to give up on their educations.
The 36-year-old is working toward a doctorate degree in neuroscience at Oregon Health and Science University in Portland. She is among thousands of graduate students sending letters and petitions calling on Congress to stop considering tax changes that would raise revenue by targeting tuition waivers that grad students receive.
“I won’t be able to stay if the tax happens,” she said.
One plan being considered in Congress would require graduate students to pay taxes on the free tuition many universities provide. The change was part of the tax bill approved by the U.S. House of Representatives, but not part of the Senate’s. A final conference version is expected by year’s end.
The Joint Committee on Taxation has estimated that student-related tax changes will provide the federal government with about $71 billion in revenue over 10 years. Besides the tuition tax, changes include ending the deduction people can take on student loan interest payments, the Lifetime Learning Credit, and tax-free education help employers provide employees.
About 145,000 graduate students could be affected by the new tax on tuition, but the impact would also hit about 25,000 undergraduate students, according to the American Council on Education. Thousands of children of college employees get free or reduced tuition and the tax change would require families to pay taxes on it in the future.
“I just scratch my head and wonder what they are thinking,” said Steven DiSalvo, president of Saint Anselm College in Manchester, New Hampshire and the chairman of the student aid committee for the National Association of Independent Colleges and Universities. “The effect on colleges and students would be devastating.”
He noted that many parents choose jobs such as janitors and food service workers at colleges – despite lower pay than in the private sector - so they will be able to send their children to college without tuition. About 51 percent of employees getting the tuition benefit earn less than $50,000 a year, according to the American Council on Education.
If the tax change occurs, Marr, for one, would be viewed as a person earning $70,000, even though she lives on just the$30,000 stipend the university provides for her living expenses. Marr already pays tax on that portion of her grant. She would have to come up with enough cash to pay income taxes on the additional $40,000 in free tuition each year, an amount that would vary depending on which tax bracket structure Congress eventually adopts, but would likely be near $7,000.
Given what she already spends on food, rent, transportation and payments on $85,000 in undergraduate student loans, it would be a stretch. Taking on more loans is out of the question, Marr said, and she is already working long hours in her unpaid research position so another job would be difficult.
Alyssa Sherry, a 25-year-old doctoral student in chemistry at Arizona State University in Tempe, said she also could not take on an extra job even if she could squeeze it into her schedule. She puts about 20 to 40 hours a week into her unpaid teaching assistant position.
“I can’t pick up a waitress job,” she said. “We are not allowed.”
Sherry did not know how she would get by on the $17,000 remaining from her stipend after taxes if the Congressional tax goes through and she owes tax on about $30,000 in tuition, but she hopes Congress will hear pleas of her peers. Amid heavy lobbying, Republican Representative Pete Sessions of Texas recently wrote a letter with 31 House Republicans to House leaders opposing the tax and asserting that it will impair economic growth.
“It is no secret that student loans are crippling our young leaders and this tax would add to this growing epidemic,” he said.
If lobbying fails, Sherry says she will resort to what she already does in emergencies: credit cards and eating ramen.
(The opinions expressed here are those of the author, a columnist for Reuters.)
Editing by Beth Pinsker; Editing by David Gregorio