Taxing graduate student tuition waivers is bad for education and bad for the economy


One small provision in the #TrumpTaxScam threatens STEM (science, technology, engineering and mathematics) research and teaching in the US – the very fields that so many are depending on to keep our economy strong and to help us compete successfully in the global marketplace. To find a few more dollars in savings to balance against the huge deficits which giant tax cuts for corporations and the wealthy will create, the House version of the tax cut bill proposes taxing tuition waivers for graduate students. If that provision makes it to the final version, and if the #TrumpTaxScam becomes law, graduate study will be out of reach for all but the independently wealthy.

For example, at my alma mater the University of Michigan, doctoral students in Engineering are paid $28,000 for 12 months of work as teaching or research assistants supporting faculty members. Not bad, especially since the waiver of tuition that comes with this award does not generate any federal income tax, so each student pays around $3730 in taxes, or about 13% of that stipend.

But under the House version of the #TrumpTaxScam, all the tuition waived for these students will be taxable, even though they don’t actually receive any extra money from the waivers. If such a student is from the state of Michigan, tuition for a year of doctoral study in Engineering is $13,087, and if that is added to the stipend of $28,000, the total taxable income exceeds $40,000. The taxes to be paid would be over $6,000, or 21% of the actual money the student is paid ($28,000).

And if the student is from another state, the equation becomes completely untenable. Doctoral enrollment for an out-of-state Engineering student at Michigan is $48,686 for a year. Add that to the stipend of $28,000 and the taxable income is nearly $77,000! The taxes for which this graduate student would be liable would be almost $15,000, or 53% of the money she is actually being paid for the year.

So that’s really bad for the student. Perhaps it will convince her to switch from Engineering to Business, but why should we care? We should care because without graduate assistants to conduct or support classes for undergraduates or to conduct research with faculty, the research and teaching programs in STEM at our public research universities will be jeopardized. If they no longer have graduate assistants, faculty will no longer be able to conduct as much research or teach as many classes. Vital discoveries will be missed, and undergrads who wish to achieve a bachelor’s degree in a STEM field will face stiffer competition for the fewer available seats in courses being taught by fewer instructional staff. It’s also possible that departments in smaller or less-generously funded public research institutions could close entirely, without a steady stream of graduate assistants to support research and teaching.

Why would we deliberately weaken our teaching and research efforts in STEM at this time of cutthroat competition around the world? This makes no sense at all; our graduate programs in higher education, especially in the STEM fields, are a huge strength of this nation. Just one more reason the #TrumpTaxScam will be bad for all Americans. For more information on the issue of taxing graduate student stipends, please visit this page: https://orgtheory.wordpress.com/2017/11/18/what-nonacademics-should-understand-about-taxing-graduate-school/

Deborah Pierce, PhD

November 22, 2017