How the Republican Tax Cut & Jobs Act will hurt American higher education [by Nadia Vinogradova]

We know by now that the Republican Senate tax bill was revised, scribbled and not given sufficient reading time. It passed in the Senate a quarter after one in the morning—or at least that’s when the first headline proclaimed it so. The House version of this bill would make the taxes of a first- or second-year graduate student at Northwestern University go up by 499.7 percent. Currently, the tax burden for a $29,000 yearly stipend is $2,293. This would change to $11,460 a year if tuition becomes taxable income. As a fourth-year, my taxes would only rise by 157.3 percent. But beyond my personal finances, the House bill will also devastate higher education in America.

Americans are used to winning Nobel Prizes. We have top-notch research published in every field, and we’re renowned for our college and postgraduate programs and departments at a variety of state and private universities and colleges. This is a relic of the money we invested in science and education during the Cold War. Our country is a world leader in technology and innovation, in scientific breakthroughs, medicine and the arts. This all stands to change because of one little exclusion: 117(d).

The Republican Tax Cut and Jobs Act — the House bill — excludes Section 117(d) of the Internal Revenue Code. This section is vital to the wellbeing of higher education in America. It exempts tuition from being taxable income. Without it, graduate students will have to pay taxes on their tuition and stipend, which many cases more than quadruples their tax burden, and shifts the already modest income from our stipend to an income that has graduate students living below the poverty line. In effect, graduate school is no longer affordable to students without an independent source of income — say, a trust fund.

 Alternatively, if it’s at all possible to keep Section 117(d) in the final Republican tax bill, this particular crisis may be averted. I and my friends will continue to call our representatives and insist on this. However, it has not been a year of favorable votes for those of us who cannot afford professional bribers (why America has a separate name for lobbyists baffles me – corporate corruption is corruption by any other name).

The fight over the tax bill is far from over: the next task of lawmakers is to reconcile the two versions of the bill. The House bill is deadly to higher education — the Senate bill is merely harmful. I will focus on the consequences of the former; if the House bill’s exclusion of 117(d) is accepted in the final version of the bill, many of my friends are going to drop out of their graduate programs.  There will be a mass exodus, first of international students, then of lower-class and middle-class American students. I do not know how the university will handle the loss; it’s needless to point out that graduate students teach and serve as teaching assistants for a vast portion of courses and labs across departments. This is not an alarmist outlook. It is a firsthand account. I do not type this lightly. I know it is, and will be, a devastating blow to the people who drop out. What is perhaps more devastating is the fact that the university has the means to mitigate this damage, but will likely refuse to do so.

 I will commit a faux pas here, and talk numbers. The university pays me $29,000 a year, and it also pays itself about $52,000 a year for tuition. I never see a penny of that second number. I am not required to do coursework this year, though I am required to teach a language course Monday, Tuesday, Wednesday and Thursday from 9-10 a.m. So why am I charged tuition?

 Full disclosure: I do sit in on a course, because I choose to. But this is not entirely relevant. Courses are training toward the work graduate students do: research and teaching. On-the-job training should be paid for, it should not cost money. In all other fields, this is the case. Why not in the academy?

Graduate students are graduate workers, and should not be charged tuition in the first place. By charging and then waiving large sums of money for tuition, the university can tout its generosity — in transferring money from one pocket to another — and it continues to do this because paying tuition is financially advantageous for the university. Under Code Section 501(c)(3) and Section 115 of the IRS code, private universities qualify as tax-exempt organizations because they exist for educational purposes and universities list the tuition they waive (for graduate students) under tax-exempt charitable gifts. Tying these sums of money up in “educational purposes” — though it is essentially work training, as discussed — makes this money tax exempt. Please correct me if I misunderstand the nuances of our current tax system, but it seems to me that universities will refrain from lowering tuition for graduate students because this conflicts with their own self-interest.

It would be quite simple for the university to reduce tuition to a nominal fee — say, $25 per year for every graduate student for all five years of their initial contract (if graduate students had contracts. We should and we are unionizing towards this. That is another matter.) The point, however, is that universities will not want to do this. They will say instead that they want to help, really, but do nothing that might be financially disadvantageous to the (frankly bloated) administration. And this will result in a significant percentage of graduate students dropping out. More students who are early in their careers will drop out, as the debt from their undergraduate years in addition to the onerous burden of five or more years of accruing further debt will — for good reason — daunt and deter them from pursuing their dream and working frankly ridiculous hours for the university. Ramen noodles will fuel passion, but these poor souls won’t be able to afford ramen.

And this is the real loss for the university. It will still have students, but the quality and caliber of these students will change. They will be bright, perhaps, but they will be drawn from a smaller pool – the independently wealthy. This will limit their brightness. It will limit research, creativity and talent, and it will bring in its own set of problems. Entitled graduate students are less likely to put effort into teaching undergraduates or pursuing research for passion when they can simply buy their degrees. This will erode and devalue the quality of research and of the university itself. This process is already underway, but the House’s Tax Cut and Jobs Act would catalyze it significantly. What might have taken generations or decades will likely occur over a handful of years. I might go further to speculate that an erosion of education and the skills of skeptical thinking will lead to an erosion in our democracy. I dare say it already has.

Vital is the fact that the university could prevent this by changing its tuition system. And the first university to do this would have the gratitude of its graduate students and the spotlight in the national conversation. It would have a righteous position of moral superiority, too, but, more importantly, it would demonstrate that it prioritizes its proclaimed values — the academy stands by truth and knowledge — over money. The politics of the past year have been demoralizing to many of us, and nothing short of strong support and action on the part of the university now — before graduate students are forced to make that difficult decision to leave — can save both the graduate students and the University.

Northwestern could be the institution that sets the trend, the first of many universities. For the sake of my friends, of higher education in this country, and yes, of my finances, I hope that Northwestern proceeds with these or similar reforms. But I won’t be holding my breath.


Nadia Vinogradova is a graduate student at Northwestern University.