House tuition waiver tax plan could be devastating for grad students
FARGO — Al Habib Ullah, a graduate student in mechanical engineering at North Dakota State University, works 20 hours a week as a teaching assistant, earning $1,396 a month after taxes.
He pays $250 a month for a two-bedroom apartment he shares with two other graduate students. He spends about $150 a month on food and essentials. Health insurance, required for international students like him, costs another $150 per month.
Ullah sends $800 home each month to his family in Dhaka, Bangladesh — his mother, father, and a brother who is in school. None of his family members have jobs. The money he sends home every month is their only means of support.
After paying all his expenses, Ullah has no money left over for entertainment or to go out to eat. He struggles financially and sometimes must pay expenses using a credit card without really knowing how he will pay the bill when it arrives.
It is the price he must pay to pursue his dream to become a college teacher.
"It's very difficult for me to live," he says.
As a graduate assistant, Ullah also receives a tuition waiver from NDSU that pays for the cost of his classes, which is standard for graduate assistants at universities like NDSU. The value of that tuition waiver is about $18,000 a year, depending on how many classes he takes.
If Republicans in the U.S. House of Representatives have their way, however, graduate students like Ullah will have to pay taxes on the value of their tuition waivers. The Republican-sponsored tax plan approved by the House would repeal a section of the tax code that exempts graduate students from having to pay taxes on the value of tuition waivers.
The Republican Senate tax plan does not include such a provision, but the House and Senate would have to reconcile their bills before any tax changes would become law.
If the House change becomes law, Ullah will likely have to drop out of NDSU. He simply would not be able to afford to attend school in the United States. It would reduce the likelihood that he would be able to obtain a faculty position in this country once he earns a degree.
"I wouldn't be able to survive," he says. "If they charge me more money, I don't have any option other than to go to another country. I have a lot of friends who want to come. But after hearing about this, they are thinking of doing their Ph.D. in Canada or a European country."
'Hand to mouth'
NDSU has 2,500 graduate students and about 1,100 of them hold graduate assistantships and receive tuition waivers. The University of North Dakota has 2,800 graduate students and about 575 receive assistantships and waivers. Graduate assistants at Minnesota State University Moorhead do not receive tuition waivers.
"For many, the additional tax burden would make it impossible for them to live," says Claudia Tomany, dean of NDSU's graduate school. "It is a big problem that is very worrisome. Students will have to drop out because they will not be able to afford to continue."
The impact of the potential tax change would not be the same on all students. North Dakota residents pay less for tuition at NDSU and UND than out-of-state students, so their tuition waivers are worth less. International students pay higher tuition than domestic students, so their waivers have the highest value. Therefore, international students would see their tax bills increase the most.
Pay for graduate assistants also varies greatly, though most earn low incomes. Teaching assistants generally earn less than research assistantships because RAs are sometimes funded through lucrative research grants. The average pay for graduate assistants at NDSU is $11,592 for the academic year, but pay ranges from $2,500 to $25,000.
The House tax plan would dramatically increase the tax burden for all graduate students receiving tuition waivers. For some, it would double their taxable income.
"It would be devastating," says Asif Arshid, a Ph.D. student in civil engineering at NDSU and president of the school's Graduate Student Council. "We graduate students live hand to mouth. For many students, it will be very difficult for them to continue."
'Lifeblood of research'
Taxing graduate student tuition waivers would not only impact students, but would have ripple effects throughout universities and beyond. Graduate students teach classes, lead lab sections of science courses, and help instructors with grading. They aid faculty in their research.
Universities may have greater difficulty attracting graduate students if they cannot afford the cost of college. If they are unable to attract enough graduate students to help with teaching and need to hire more-experienced teachers, the cost of instruction will increase. They may be forced to reduce the number of classes or increase class sizes.
The impacts would also extend beyond campuses because university research, conducted by faculty aided by graduate students and also produced by graduate students themselves, develops new technologies and other innovations that contribute to economic growth.
"This is a national issue," says Grant McGimpsey, UND's vice president for research and economic development and dean of its graduate school. "We have to have graduate students. They are the lifeblood of research at a university. They drive a lot of research that the country benefits from."
Universities could increase graduate student pay to make up for the higher taxes, but that may be difficult in an era when many higher education institutions are facing budget cuts. NDSU has implemented a 17-percent budget cut for 2017-19. UND has also experienced severe cuts.