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Grad students say GOP provision will tax them out of school

A provision in the House bill could upend the finances of graduates students who, in many cases, are cash-strapped as it is.

University of Southern California graduate students Mariel Bello (from left), Nina Christie and Alyssa Morris posing for a "selfie&quot to post online and forward to their congressman during a November rally to protest the GOP tax bill, which they say will significantly boost their taxes.
University of Southern California graduate students Mariel Bello (from left), Nina Christie and Alyssa Morris posing for a "selfie&quot to post online and forward to their congressman during a November rally to protest the GOP tax bill, which they say will significantly boost their taxes.Read moreAl Seib / Los Angeles Times

Katie Warczak has had a productive first year in her graduate program at Penn State University.

She taught a class of undergraduates, landed a coveted spot on a research project, and got accepted into her department's Ph.D. program. But these days the student of 20th century American literature  is focusing more and more on something far afield from her area of expertise: the tax bill moving through Congress.

That's because, if a single provision in the House version of the bill makes it into the final law, Warczak says she'll likely have to leave school. She won't be able to afford the taxes.

Large universities' infrastructures depend in part on the work of graduate students, who pay taxes on the small stipends they get for teaching classes and conducting research. But competitive schools like Penn State generally sweeten the deal by waiving their tuition fees, too.

It's money that grad students say never actually makes its way into their wallets. But it's money the House has proposed taxing as income, in a move that tax experts say would upend the finances of students who, in many cases, are cash-strapped as it is.

A doctoral student with a $15,000-per-year stipend and a tuition waiver of $40,000 could end up paying as much as $5,000 more in taxes, said Gordon Mermin, a senior research associate at the Tax Policy Center, a Washington think tank.

"It would be a dramatic change in taxes for the graduate students, and would potentially make things unaffordable for some students," Mermin said. "Or some schools would have to increase stipends. In the long run there could very well be fewer doctoral students, particularly in the sciences, where this sort of funding relationship is common."

The provision is not included in the Senate bill — and neither are several others, like the elimination of the lifetime learning credit, which helps qualifying students offset the cost of their studies. Students are banking on Congress keeping it that way.

By Thursday, it seemed tides could be turning in the students' favor: A total of 31 legislators had signed a letter against the provision​, the Chronicle of Higher Education reported. Eight graduate students were arrested at a protest outside Speaker of the House Paul Ryan's office earlier in the week.

But as Republicans in both chambers meet to work out the final details of the bill, some graduate students are already panicking about an uncertain future.

"I think about it, and I get physically ill. My stomach turns. It's this immense anxiety about what's going to happen next," said Warczak, a Wisconsonite who picked Penn State partially because its compensation package was so attractive.

At Harvard University, health policy Ph.D. student Alice Ndikumana said she'd likely have to take out loans, or move to her parents' house — a four-hour round-trip commute to campus — if her tuition waiver is taxed. "No one I've spoken to seems to have a plan," she said. "I think we're just hoping it doesn't go through."

Graduate students organized protests across the country last week over the provision. Warczak, who is active in an effort to unionize graduate students at Penn State, organized one on her own campus. At the University of Pennsylvania, graduate students staged a work-in outside President Amy Gutmann's office to protest the bill.

"This bill makes it so that graduate education is the domain of people who are wealthy enough to afford these tax bills," said Zachary Smith, a Ph.D. student in political science at Penn.

That's a fear shared by Nick Ungson, who is in his fifth year of a psychology doctoral program at Lehigh University. "This would totally harm higher education infrastructure, and severely hamper colleges' ability to increase socioeconomic and racial diversity," he said.

"The money that people make in their stipend or teaching income as a grad student is already very tough to live on, even on people in fairly well funded and prestigious programs," Ndikumana said. "We would probably see a shift in the enrollment in doctoral programs — toward people who come from families that can support them. We'd lose out on a lot of great talent."

Even graduate students who don't receive tuition waivers say other provisions in the House bill could weigh heavily on their finances. Colleen Tewksbury, a public health Ph.D. student at Temple University, works full-time as a dietitian and is finishing up her dissertation this year. Her student loan interest deduction is on the chopping block, as is the lifetime learning tax credit that many part-time graduate students use to offset the cost of tuition.

"Even with the standard deduction going up, with the number of things I itemize, I'll still likely have to pay more in taxes," she said. "I'm at the end of my degree. I am going to be finishing it. But it will be a lot more challenging to make ends meet."

Mermin said that with a projected $1.5 trillion in tax cuts, Congress has to come up with ways to raise revenue elsewhere — and counting tuition wavers as income would raise about $10 billion.

"The other side would argue, 'Well, this graduate student with a $15,000 stipend and a $40,000 tuition waiver is someone who's being paid $55,000 and spending all of it going to school,'" he said. But, he added, the House bill doesn't touch similar forms of un-taxed compensation, like employer-provided health benefits or retirement benefits.

"Reading some comment sections, people seem to be under the impression that grad students are entitled, that they're not paying tuition, that in fact we should be taxed on this," Warczek said. "But we're performing services for our universities. If we have to leave, the university's going to lose researchers, teachers, and higher education is going to suffer."

Michael Knoll, a tax law professor at Penn, said colleges could restructure the way they pay graduate students if the provision were to pass, offering scholarships with stipends. Before the Thanksgiving break, Temple University sent an email to students – including its 1,200 graduate assistants – saying they had reached out to federal lawmakers and encouraged graduate students to do the same.

Knoll said the final version of the bill may well hew closely to the Senate version, which doesn't tax tuition waivers — if only because backers can't afford to lose too many votes in the Senate, with its razor-thin margin between Democrats and Republicans.

Still, until the final bill emerges, graduate students say they're living in a state of suspended animation — and increasing anger.

Transferring the tax burden away from billion dollar heirs and heiresses onto graduate students — it's just so obscene. It's ridiculous," said Paul D'Avanzo, a Temple student getting his doctorate in public health. "It's not like we're making a lavish income."