GOP Tax Plan Could Increase Graduate Students’ Tax Bills by 400%

tax plan

In the past few weeks, politicians and economists have been reviewing the Republicans’ proposed tax plan. The new plan would dramatically change our tax structure, affecting how much corporations and individuals owe to the Internal Revenue Service (IRS).

The tax plan also could have serious implications for students — particularly graduate students, some of whom could see their tax bills increase by as much as 400 percent.

Here’s what you need to know about the proposed changes.

How the tax plan affects graduate students

To pay for the proposed cuts that benefit some businesses, others will face a tax hike.

Graduate students — who generally don’t make much money to start with — would experience a significant increase. They’d pay more thanks to the changes that affect tuition waivers and tax brackets.

Tuition waivers

Some graduate and Ph.D. candidates take on roles as teaching or research assistants. In return for their work, they often receive a waiver for all or some tuition charges. This system reduces the amount some students have to pay for a degree.

Currently, tuition waivers are not taxed as income. Under the new tax plan, however, that rule would change.

According to salary comparison website Glassdoor, the average salary for a graduate assistant is $26,387. If someone made that amount and received a tuition waiver that covered $10,000, their taxable income would jump to $36,387, resulting in a larger tax bill.

Tax brackets

Because tuition waivers would be taxable as income under the proposed tax plan, students could see their tax brackets change too.

For example, if you made $28,000 a year, you’d fall within the 15 percent tax bracket. However, if your tuition waiver were included as taxable income, you’d have to pay a higher rate. A $10,000 waiver would raise your income to $38,000, which is within the 25 percent bracket.

A larger rate means you’ll pay more overall at tax time.

Impact of the proposed plan

The proposed plan has raised serious concerns from Democrats and people who work in education.

“The tax bill under consideration in the House seems poised to put one of our most important engines of social mobility in reverse,” wrote Ted Mitchell, president of the American Council on Education, in a Washington Post op-ed. “The bill would, in one fell swoop, set back by decades the effort to make the cost of college more affordable of individuals from all walks of life.”

Critics say the proposed tax hike will make graduate school cost-prohibitive for students and that many student will choose to forego an advanced degree. With fewer graduates of master’s programs, some fields might face a shortage of qualified professionals, especially in science and engineering.

However, Republicans say the new tax plan is necessary for the good of everyone. The plan is an example of “trickle-down economics” — the idea that if corporations pay less in taxes, they will hire more and everyone will end up prospering. In fact, Republicans say the average household will see a $4,000 increase in annual income.

But Democrats claim the “raise” Republicans promise is impossible and that the bill would impact the middle class.

Looking ahead

The House and Senate have not yet voted on the bill, and it will face significant opposition from Democrats and even some Republicans. There also could be changes to the bill, such as extra deductions or credits to offset the impact on students.

Although the proposed tax hike might seem frightening, you still can save money on your education. There are thousands of grants and scholarships specifically designed for graduate students. To find scholarships that match your needs, check out these six resources for financial aid.

Miranda Marquit contributed to this story.

Interested in refinancing student loans?

Here are the top 6 lenders of 2018!
LenderRates (APR)Eligible Degrees 
Check out the testimonials and our in-depth reviews!
2.58% - 7.25%Undergrad
& Graduate
Visit SoFi
2.99% - 6.99%Undergrad
& Graduate
Visit Laurel Road
2.57% - 6.32%Undergrad
& Graduate
Visit Earnest
2.57% - 6.49%Undergrad
& Graduate
Visit CommonBond
3.11% - 8.46%Undergrad
& Graduate
Visit Citizens
2.56% - 7.82%Undergrad
& Graduate
Visit Lendkey
Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print, understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.