The (Potential) Impact of the New Tax Bill on Graduate Students

Posted by Lucas T on 12/13/17 6:09 PM

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Dear Reader,

I'm Lucas, a graduate student in the Math Department at MIT and a tutor with Cambridge Coaching. Like most graduate students, I have intently followed the discussions about the new tax bill, thinking how it would affect my finances. As of this writing, only the House of Representatives’ version eliminates a provision that would directly affect graduate students, Section 117(d)(5) of the current code. Currently, Section 117(d)(5) says that “gross income shall not include any qualified tuition reduction;” with the repeal, that means that tuition reductions would count as gross income.

It is important to understand how most graduate students (especially in STEM) earn money. We are generally funded by teaching or research assistantships, which require us to work in the classroom or labs approximately 20 hours a week. This is in addition to taking courses and working full time on our thesis, doing experiments, simulations, writing papers, attending conferences, etc. Yes, graduate school is a full-time job, and no, we do not receive overtime for nights in the lab.

Those teacher/research assistantships pay us a stipend, health insurance, and tuition waivers. Tuition waivers allow graduate students to take courses at their institutions without paying tuition. We usually only take the courses that are required for completing our PhDs, since we don’t really have much free time to learn basket-weaving or other fun “electives.” In practice, we never see that money. Regardless of whether or not we take classes, those “tuition waivers” are there in our graduate student appointments every semester.

Now, if Section 117(d)(5) is eliminated from the tax code, then all of a sudden those tuition waivers become income for graduate student. Tuition at places like MIT is not cheap, around $50,000 a year! I have made a short video to outline how this change affects graduate student taxes.

I do want to mention that this is not a done deal yet, the House of Representatives and the Senate have to reconcile their versions of the tax bill (the Senate did not eliminate Section 117(d)(5)). Also, universities can also take measures to make sure that the burden does not fall entirely upon their graduate students. In any case, this would mean that universities would be footing a bill which would probably decrease the number of graduate students they can admit. In any case, there will certainly be impacts on graduate education if the bill passes through without Section 117(d)(5).

Lucas is originally from São Paulo, Brazil, where he learned to appreciate soccer, Bossa Nova, and Brazilian Churrasco! He moved to Miami in sixth grade, where he started to participate in regional and statewide Math competitions. He attended MIT as an undergraduate, where he obtained a Bachelor of Science in Applied Mathematics and Physics, and a minor in Management Science. He decided to remain at MIT to pursue a Ph.D. in Mathematics, where he is currently in his fourth year.

Work with Lucas!

Are you interested in reading more on the subject of college/graduate financial aid?  Read on, dear reader:

Graduate School: How to Get the Best Financial Aid Package Possible

Application Consulting: Is Graduate School Right for Me?

Graduate School Application: I Don't Have a Job Yet! What Do I Do?

Tags: graduate school