Graduate School Can Be Taxing

This week the House of Representatives passed their version of a tax reform bill. As reflected on page 11 of the Ways and Means Committee’s summary of the bill, this legislation would eliminate qualified tuition reductions for all graduate students. This measure and others have drawn harsh criticism from across the academic community and beyond. As of now, the Senate version of the bill – which may or may not pass – does not contain this provision.

This is little comfort to graduate students, including myself.

While Republicans have touted the benefits of cutting taxes for Americans, taxing graduate students’ tuition waivers has the potential to drastically increase our tax burdens. Higher ed finances and tax law are, of course, complicated. However, the basic issues are simple.

As part of the funding packages most graduate students receive, our universities essentially pay themselves tuition on our behalf. Yes, that’s weird, and I won’t pretend to understand all the accounting reasons behind it. (One important factor is that universities need to factor in tuition for graduate students when applying for grants to support research projects.) Regardless of the reasons, the effect is that graduate students are at the center of some very big transactions (since tuition is so high) that, from our perspective, happen only on paper: I never see a dime of the part of my funding that comes in the form of tuition waiver.

The tuition waiver is only one part of my funding package. Another part is my stipend – money that the university pays me so I can pay rent, buy groceries, etc. A salary by another name. This is taxable income, as well it should be. But I don’t get taxed on the money I don’t see.

How the legislation passed by the House would affect graduate students would vary by individual case and depend, of course, various other things in the tax code. But again, the underlying math is simple. Instead of just being taxed on the ~$25,000 I receive via my stipend and TA wages, I would be taxed on that amount plus the value of my tuition waiver: conservatively, a total of at least $70,000. Basically, I’d be taxed as if I were making about three times as much as I actually am. I’ll let you think about how that kind of change in your tax bill would affect your personal finances. (Remember to bump up your tax bracket along the way.)

There a lot of confusing things about graduate school finances. Some might wonder how anyone can live on so little. Others no doubt find it odd that our universities pay tuition for us, let alone give us a stipend on top of that. These are, after all, benefits that our colleagues in other types of post-graduate education, like law school and medical school, do not receive. Couldn’t graduate students in STEM, the humanities, and social sciences do without these perks? Or at least suffer paying drastically higher taxes on them?

These questions boil down to a much simpler one: Should pursuing a PhD be a viable option for people who aren’t independently wealthy? In the absence of tuition remissions, stipends, and reasonable tax rates, getting a PhD is a profoundly terrible idea financially. In fairness, it already is, at very least in terms of comparing a stipend to what someone qualified for a PhD program could be earning over seven or ten years in their 20’s and 30’s. Not to mention the issue of the increasing number of people who have earned PhD’s who are working for poverty-level wages as contingent faculty.

Despite these serious challenges, it is possible, at least under certain conditions, to make getting a PhD work financially. But we’re not far from the cliff, and some of us are already sliding off the edge. Taking thousands of dollars in income away from us through taxes on money that we don’t receive will take financial feasibility off the table for thousands of people like me who have put off taken-for-granted aspects of middle-class life in order to increase our knowledge about the world. As I’ve said, the logic and the basic math is simple. Anyone who spends more than a second thinking through this and still votes for this bill is casting a vote to say that people like me shouldn’t exist.

227 legislators did just that.

And that’s what is especially taxing about being a graduate student right now. No matter what, getting a PhD is going to be difficult intellectually, personally, and financially. No one is going to fundamentally change that, least of all politicians. But that does not preclude recognizing the value of training people to expand our knowledge in specific fields and not putting up illogical obstacles to doing so.

Instead, we are witnessing a collective disregard for the value of learning. Some will argue that higher ed devalues itself by training students in fields of expertise that are overly narrow or irrelevant. To be sure, we always need to do more to explain the value of our work both within and beyond the academy. But even work that is highly relevant to contemporary problems often finds itself shunted aside. As I’ve written before, it is preposterous that a country that sees itself as a global leader would shirk even modest funding for training people in less commonly taught languages. For myself, becoming an expert in the history of a city with a population of seven million people that is nevertheless practically unheard of among Americans and being trained to teach the last millennium’s worth of history of the world’s most populous country may be many things, but overly narrow is not one of them.

The current tax legislation extends this disregard across academic disciplines. Experts-in-training who would teach about the languages, histories, political systems, and social conventions of the other seven billion people who live on the planet, who would discover the cure for cancer, who would research the principles behind technologies that would provide more affordable and sustainable energy, and so on – none of us is spared. When it comes to higher ed, we need more than a debate about taxation. We need people to go on record about whether or not they think PhD training is worthwhile. With their penny-wise, knowledge-poor tax policy, our representatives have done just that. Will you?


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