Taxing tuition waivers

One of the provisions of the Republican tax bill as presently configured would eliminate the forgiveness of a tax on the money graduate students receive as tuition waivers. I understand this is but one of the perks the proposal wants to remove and there are many things on this list that are considered loopholes.

Let me explain this issue from my perspective of working with graduate students and being an administrator in a program and attempting to attract the highest possible quality of students. The meaning of “graduate student” covers a lot of territory. The group of students I have in mind are full-time students spending 4-5 or so years in graduate school after completing their undergraduate studies. Start with a recognition that this is what it takes to make yourself employable in many fields. After 9+ years of education, it would not be unusual for a PhD to start as a junior faculty member making say 60k a year. If full-time graduate students are lucky they are paid as teaching assistants or research assistants. The value of this job (considered 1/2 time employment) could be 15k-20k in many fields at many institutions. Additional employment is strongly discouraged and keeping an assistantship may be a competitive process so it is risky to try to double dip. It is pretty difficult to live on this salary and certainly not possible to offer much in support of a family.

The tuition waiver is offered as a way to sweeten the pot. My interpretation would be that most departments make no effort to meet the cost of instruction based on the income from graduate courses. Depending on the program, working with graduate students is very much a mentoring and craft business. For example, I oversaw a graduate program in clinical psychology. This program was limited by the accrediting agency to taking 1 student per licensed clinical psychologist per year. My department made a very heavy faculty investment the training of clinical psychologists (7 of 18 faculty were clinical). You don’t much tuition money out of 28 clinical students (4 years x 7 students) and the number of courses that are involved requires that some of the student time be used to support undergraduate instruction (mostly laboratories and discussion sections to lower class size) and research activities to bring the budget down to a reasonable level.

So, why is the tuition waiver an issue. So students are paid say $18,000 a year – this is taxed. The cost of tuition is higher for graduate courses and out of state students could be charged say $40,000 in tuition (in state could be much lower, but remember the goal when you take few students is to get the best students you can). So, a student with an income of <20,000 and high student debt would be expected to pay taxes on $60,000.

Because this would be an impossible burden for so many students, many public institutions would be forced to raise additional money to attract quality students and still be not really improving the situation with departmental budgets. Or, students with more money and not necessarily more talent would be the only students capable of affording graduate education in order to compete for those $60,000 starting academic jobs.

This becomes an inflationary spiral. Aside from funding the most qualified students, higher education in many smaller institutions would have to come up with more than $60,000 to find future professors. The only way to do this would be to raise tuition on undergrads, etc., etc., etc.

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