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November 13, 2017

University Opposes GOP Plan to Tax Endowments and Grad Student Stipends

The University is opposing provisions of GOP congressional tax plans that would impose a tax on private university endowments and scale back deductions for graduate students.

A University spokesperson referred to a statement by the Association of American Universities (AAU), of which UChicago is a member, on the House tax plan. The AAU has since released a statement criticizing the Senate plan, though it is “pleased the Senate bill retains many of the student tax benefits the House was willing to eliminate.”

“[The AAU] remain[s] troubled that the Senate proposal contains the same misguided excise tax on certain private university endowments,” the statement reads. “Rather than allowing endowment funds to help students and support critical research advances, this excise tax is sending those funds directly to the U.S. Treasury.”

Vice Executive Provost David Nirenberg sent an e-mail to University graduate students, saying that the University “is collaborating with numerous other institutions and associations, including the AAU, in opposing these changes. This is a fluid situation that we are monitoring closely, and we will continue to engage directly with the Illinois congressional delegation and other key lawmakers to convey our serious concerns.”

House Republicans unveiled the Tax Cuts and Jobs Act on November 2, a 429-page proposal that entails a 1.4 percent tax on the private endowments of colleges and universities.

To be eligible for taxation, the GOP majority of the Ways and Means Committee originally determined that these institutions must have at least 500 students and assets of $100,000 or more per full-time student. However, just five days after the proposal’s release, House Republicans raised the asset threshold to $250,000 or more per student, halving the number of affected schools from approximately 155 to 60 or 70. The Senate version would retain the 1.4 percent tax on private endowments, but would not eradicate several student tax breaks including tuition waivers for teaching assistants, credits for loans, employer-paid tuition benefits, and the Hope Scholarship and Lifetime Learning Credit.

The implementation of the House’s policy would nonetheless eliminate roughly $65 billion in tax benefits for student loans and college tuition, college employee discounts, university-provided educational assistance programs, the Hope Scholarship Credit, and the Lifetime Learning Credit, according to an article by Politico.

The bill also eliminates or consolidates several tax credits specific to graduate students, particularly those pursuing master’s degrees and Ph.D.s, including nontaxable tuition waivers for teaching and research assistants.

Graduate students affected by this provision, estimated by Vox News to be 145,000 people, could end up owing an additional $2,000 each in annual tuition.

Potential long-term consequences of the implementation of this bill include decreased incentive for donations and a higher barrier to entry for lower-income students due to increased tuition. Subject institutions range from smaller colleges such as Amherst and Oberlin to the Ivy League and UChicago. 

 

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