Graduate school is not lucrative. The starving graduate student archetype is so prevalent it has given rise to its own form of self-deprecating comedy; one need look no further than the popular online comics “Lego Grad Student” and “Piled Higher and Deeper” to see the trope played out.
Despite the risk of destitution, many opt to continue their education, pursuing advanced degrees to fulfill passions for research and goals of making personal contributions, however small, to the ever-expanding realm of human knowledge. Surely there’s no other way to rationalize the decision to forego employment after obtaining a bachelor’s degree for an academic career path that demands long hours, involves weeks or months of stagnant progress due to difficult experiments or studies, and sees high rates of depression and other mental illnesses.
Universities often provide tuition waivers and small living stipends as a means of encouraging students to pursue graduate studies. Still, most graduate students are barely able to scrape by on those stipends. We take solace in knowing we’ll be graduating mostly debt-free and ready to join the rest of our generation in making fiscally responsible choices, such as saving for the future.
This dream is in serious jeopardy, though.
The GOP tax reform bill passed recently in the House of Representatives will make attending graduate school infeasible for all but the independently wealthy by repealing Section 117(d)(5) of the tax code. Section 117(d) defines an individual’s gross income as independent from any qualified scholarships given by an educational institution, including tuition waivers, and Section 117(d)(e) applies it to graduate researchers and teaching assistants – meaning we graduate students are currently only taxed on our stipends, or the income we actually take home.
However, the language of the new bill would add a tax onto the value of the tuition waivers that we receive as graduate students – money that we never see ourselves. This would dramatically increase the effective tax rate on graduate students.
Consider the following example: A UCLA graduate student funded by the Eugene V. Cota-Robles Fellowship earns a stipend of $25,000 per year. At the current 2017 tax rate, this student would be paying a federal income tax of 15 percent, or $3,750. Seems reasonable.
Both the House and Senate tax plans would place an individual with a take-home income of $25,000 in a 12 percent tax bracket. This means this fictitious student’s federal income tax would drop to $3,000. Looks good so far.
Unfortunately, that’s not the end of the story. If we assume this student is a California resident, they are receiving, behind the scenes, a tuition waiver valued at, as of 2017, $16,818. According to the House bill passed Nov. 16, this waiver would now become taxable income, increasing the graduate student’s taxable income to $41,818, and leading to an increased federal income tax of $5,018. If we consider that this student must pay the entirety of their living expenses out of their $25,000 stipend, they would be effectively taxed at a rate of more than 20 percent – a staggeringly high rate.
This situation becomes even more untenable for nonresident students, who receive a tuition waiver valued at $31,920. The nonresident student would now be required to pay $6,830, or more than 27 percent of their $25,000 stipend, in federal income tax alone. This is a higher rate than someone earning up to $290,000 would pay, according to the House tax bill.
The lower a graduate student’s stipend is compared to the value of their tuition waiver, the bleaker the situation looks. The House bill hardly seems like a tax cut.
Of course, the Senate plan does not currently contain this tuition waiver tax. If passed, the differences in the two plans would have to be reconciled. The best way to ensure that the final form of any reconciled tax plan does not include the repeal of Section 117(d)(5) is to be vocal in your opposition to that measure specifically.
If you’re a graduate student, or hope to pursue that path in the future, this bill is poised to make life much more financially difficult for you. This bill is a thinly veiled attempt to stifle higher education in this country. If we hope to safeguard our educational future, we students need to contact our representatives and senators to voice our concerns.
The Science Policy Group at UCLA has written up a detailed guideline for doing just that.
There are many things to consider when making the decision on whether you want to attend graduate school. Financial limitations, however, should not be one of them. By raising our voices and calling on our elected officials, we can do our part to help ensure that graduate education in this country remains a financially accessible option for all.
Stemer is a materials science and engineering graduate student in UCLA’s Henry Samueli School of Engineering and Applied Sciences.