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Tax Plan Targets Grad Students to Make Up for Cuts

Barry Lewandowski, Contributing Writer

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A new tax plan passed through the House of Representatives last week. While this does not put the bill into law yet, as it stands the bill makes some revisions to certain tax breaks towards college students.

The goal of the bill, according to Republicans, is to simplify the tax code while simultaneously lowering taxes, so one provision the GOP looked at was individual tax breaks. By cutting these, they believe it will more than make up for the $1.5 trillion cut. While the bill’s language is seen as incredibly complex, there’s specific ways the law will affect college students.

As a result of higher tuition costs at many colleges and universities, most students work for their schools as teaching assistants and such in exchange for money off their tuition. Under the current U.S. tax plan, this money is not taxed, as that tax is paid off by the federal government. The new House plan cuts that benefit, making work-study a taxable income, thus largely increasing students’ yearly tax rate. This means graduate students need to apply for a larger loan to make up for the loss of income, but the new tax plan also changes how students pay off student loans.

When most students – graduate or undergraduate – apply for student loans, they pay off the interest so they don’t have to pay as much once they’ve graduated and loans are due. When they pay off that interest, it is taxed; however, at year’s end, that money is tax deductible, where they can get it in refund. By contrast, the new tax plan no longer allows that interest paid to be tax deductible, ultimately rising the price of the student loan entirely.

Already paying off loans for their undergraduate degree, denying graduate students these tax breaks could lead to them rethinking the pursuit of their degree.

“My parents were able to pay for half of my undergrad tuition but the rest was covered by loans,” said Michael Parillo, a graduate student at the University of New Haven. “My entire grad program is being paid for through loans. If I do not receive the return, it would affect my income and my ability to pay back my loans.”

The US Senate presented their own tax plan last week, one without any education revisions, so for now, nothing has changed for students, but the Republican caucus hopes to vote on a final plan by the end of 2017.

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Tax Plan Targets Grad Students to Make Up for Cuts