Op-Ed

Senate Tax-Reform Bill will hurt graduate students and charitable giving to universities

President Trump unveiling his tax plan at the Indiana State Fairgrounds in October.
President Trump unveiling his tax plan at the Indiana State Fairgrounds in October. GETTY IMAGES

In a surprising 51-to-49 vote, the Senate narrowly approved a major piece of tax legislation for the first time in 31 years. Though this Tax-Reform Bill will have several drastic implications affecting hard-working Americans, it also stands to affect the lives of millions of students who are carving a better future for themselves and their families.

In addition to direct impact to students, the bill will also create new tax burdens for educational institutions by negatively affecting charitable giving that supports colleges and universities.

One of the most significant implications of this bill in particular is that the bill will require graduate students to pay income tax on tuition scholarships received, and employees of universities will also have to pay income tax on tuition waivers provided by the university. Graduate students already face steeper tuition prices due to the rising costs of education. This bill will tax these scholarships and waivers as if the student received income in such amount. Students will inevitably get into bigger debt, as many will have to borrow to cover the cost of education as well as the corresponding income taxes.

For example, if the cost of an MBA is $40,000 and the student has received a scholarship for $20,000, and assuming the student is in a low tax bracket of 25 percent, the student will be liable to pay additional income tax in the amount of $5,000.00 for the scholarship received. In total the student will have to cover the $20,000 remaining tuition cost plus the $5,000 income tax for a total of $25,000.00. In a typical two-year MBA program, this student will pay an additional $10,000.00 in taxes and this is only considering the tuition costs.

In addition, according to Inside Higher Ed, the bill also doubles the standard deduction for individuals, which may discourage some taxpayers seeking tax write-offs from donating to charity. This measure will have grave implications across the nation, considering most institutions, both public and private depend on charitable donations to fund scholarships, develop new educational programs, and educational infrastructure, among other needs.

For many of us educators, waking up to this news a few days ago felt like waking up from a bad dream, only that this time the nightmare is real.

As a university administrator, I support tax reform that facilitates access to quality higher education, but as drafted, the Senate Tax-Reform Bill does not achieve that goal in any capacity. Under this legislation, the thousands of students pursuing graduate education at all universities across the nation who are currently receiving financial support through some form of scholarship will be impacted. Under this legislation, all of this support will be taxable.

If you want to take action, I urge you to contact your House and Senate Congressional representatives and tell them this bill will severely create barriers to student success by directly increasing the cost of education through additional taxes.

We need to unite to improve the future of America through education, and this is certainly a step-away from that. Let’s do our part to ensure we move in the right direction.

Irma Becerra is a professor and currently Provost and Chief Academic Officer at St. Thomas University in Miami.

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