In December, President Trump signed a sweeping tax overhaul bill that will have a significant impact on the American middleclass. The legislation will also affect college students – especially graduate students.
According to Liz Clark of the National Association of College and University of Business Officers, very few changes have been made in the bill regarding loan interest, reduced or free tuition and endowment investments.
Loan interests for graduate students were originally deducted if a taxpayer’s income was under a certain level. But the deduction was stricken from the bill and will be a $21 billion tax increase in the next decade.
According to the Los Angeles Times, graduate students across 33 states and 60 campuses rallied together to protest the new tax bill. Many students around the East Coast have said they are worried about their tuition being taxed. In the former tax bill, graduate students were able to waive their tuition fees by working as teacher’s assistants or applying for a research job and only stipends were taxable. CNBC reports that graduate students who receive monies to waive their tuition fees will be taxed as income.
Another tax change is to endowment investments. Many private institutions receive financial donations, which provide a steady income for scholarships and day-to-day operations. Private institutions which have at least 500 students and assets of $250,000 will be taxed a 1.4 percent of their investment income.
According to USA Today, the wealthiest and private universities will be affected the most because instead of using the money toward financial aid or research for students it will be used to pay the investment income tax.
In the new bill, nonprofit organizations such as universities, hospitals and housing agencies, will be able to issue tax-exempt bonds. These bonds allow institutions to borrow money from the government, to use the money for buildings or other costs and pay lower tax interest.
The House proposed to combine different tuition tax credit programs that eliminate the lifetime learning credit. This will no longer give tax credit toward tuition for part-time students.
Labib Baltagi, an accountant for Jackson Hewitt, said, “If there were any changes made it would not take effect until the following year.” He explained that the few changes that will possibly be made include adding a cap on how much graduate students can deduct from their loans. Students will only be allowed to deduct $2,500 from their loan balance. Baltagi said that changes made to the bill regarding higher education will be minor.