After subtracting student fees and paying for insurance, doctoral student Tom Millay takes home about $15,000 per year from a Baylor University stipend. But soon he could be taxed as though he earns three times more.
Millay, who is studying religion and works as graduate assistant at Baylor, is one of thousands of doctoral students in Texas and beyond watching nervously as congressional Republicans iron out the details of their tax cut bill. In exchange for his teaching duties, Millay receives free tuition — a $30,000 savings — and an annual stipend of $20,000. If lawmakers approve the House version of the bill, tuition waivers like Millay's would be marked as taxable income, causing a major financial hit for him and thousands of graduate students like him.
The Senate’s version of the tax reform measure does not include the same tax on tuition waivers. The two chambers must reconcile their differences before sending a final version of the bill to President Donald Trump, who has publicly pushed to sign a tax bill by the end of the year.
“In terms of net income, [the House proposal] would put most Baylor graduate students right on the poverty line,” said Millay, who acknowledged that his spouse's income would soften the blow for him. “When your net income at the start is only $15,000, losing additional thousands of dollars each year in taxes is a huge difference.”
Universities across Texas and the nation have tried to rally against the proposal. A&M officials said they have “made clear” to lawmakers that the change would have “negative consequences.” Baylor University President Linda Livingstone gently suggested to students and staff that they express their “individual concerns” about the bill. And Rice University president David Leebron called the idea “odious” in a Houston Chronicle op-ed.
If the House version of the bill is approved, taxes for some graduate students will increase by as much as 400 percent, according to estimates. Leebron says some of his students could see their tax bills go up to five times their current amount.
Experts also say the bill may lead to institutions seeing a decline in the number of graduate applicants, which could be devastating to major Texas research schools like Rice and the University of Texas at Austin.
“This really affects me because I’m a full-time graduate student,” said Charity Embley, a doctoral student at Texas Tech University. “We’re not independently wealthy.”
House tax bill hits higher education
Thousands of masters and doctoral students across the country receive tuition waivers in exchange for teaching classes or conducting research. Under current law, those waivers aren’t counted as income. Only the students' additional stipends, which are usually paltry compared to most full-time jobs, are currently taxed.
House lawmakers have said they have moved to eliminate some individual tax breaks, like the one for tuition waivers, in order to offset the $1.5 trillion tax cuts elsewhere in the bill. But the change would mean that graduate students would be paying taxes on money they never pocket, critics say, and those additional taxes could make earning a graduate degree nearly impossible for some students.
“From what I have been hearing as a representative for other graduate students, many live in a precarious financial position,” said Jeff Strietzel, president of the Baylor Graduate Student Association.
Strietzel is a third-year doctoral student, a husband and father of four children. In addition to his studies, he works 20-hour weeks and helps run a student organization — all while living under the federal poverty line.
“I know that higher education is not the route that every American will take to pursue their version of the ‘American dream,’ but I hope that my representatives have students like me in mind as they consider any reforms to tax policy that makes pursuing higher education in America more difficult,” he said.
“We don’t know where we stand”
While most expect some form of a tax bill to make its way to Trump soon, it’s still unclear whether the tax on tuition waivers will be included.
In recent weeks, several university groups have staged walkouts in response to the House bill. And last week, 31 House Republicans — including six Texans — led by U.S. Rep. Pete Sessions, R-Dallas, wrote a letter urging House and Senate leaders to leave the tuition waiver language out of the final version of the bill.
“A tax on graduate tuition waivers would be unfair, would undermine our competitive position, and would inhibit the economic growth that tax reform promises,” the lawmakers wrote. “Repeal of the income exclusion for graduate tuition waivers would subject thousands of graduate students to a major tax increase at a time in their lives when they likely lack the ability to pay.”
Nationwide groups representing some of the top research universities in Texas — including Rice, UT-Austin, the University of Houston and Texas A&M University — have come out in opposition of the bill.
“As our counterparts and competitors abroad aim to vastly increase the number of skilled workers in highly technical fields, we can’t afford to roll back incentives that have long helped make the American workforce the envy of the world,” said Peter McPherson, president of the Association of Public and Land-grant Universities.
Meanwhile, students who would be affected are anxiously watching.
"We don't know where we stand,” said Embley, the Texas Tech graduate student.
Disclosure: Baylor University, Texas A&M University, Rice University, the University of Texas at Austin, Texas Tech University and the University of Houston have been financial supporters of The Texas Tribune. A complete list of Tribune donors and sponsors is available here.