Graduate students ask for tax exemption

A coalition of U.S. graduate students is lobbying Congress for relief from a 1986 law that taxes part of students’ stipends.

For the last 16 years, graduate students have paid taxes on stipends they receive from their universities. At Yale, the basic graduate student stipend is $15,000 for one school year, but students lose a portion of their stipends each month to federal taxes.

The average graduate student loses approximately $200 each month to federal income tax, according to a study by the National Coalition of Graduate Students for an Affordable and Accessible Education.

Prior to 1986, graduate students’ stipends were exempt from taxation, but a change to the tax code that year made parts of the stipends taxable, said Alik Widge, vice president for external affairs for the Graduate Student Assembly at Carnegie Mellon University.

Graduate School Dean Susan Hockfield said Yale views stipends as scholarships rather than as income from employment, so stipends should not be taxed.

“It would be marvelous if we could get a change in the tax law,” Hockfield said.

Alice Oliver, director of finance and administration at the Graduate School, said the code change allowed the federal government to tax the part of the stipend that covers room and board. Under the current law, the amount of a fellowship that is taxable is the part that exceeds the cost of books, supplies and tuition, she said.

Graduate students from around the country gathered in Washington, D.C., on Oct. 10 to lobby for changes in current tax policy. During the day of lobbying, students explained to their representatives how changing the tax code would help graduate students and the country, Widge said.

“It is very likely that there will be a bill in the next congressional session,” he said.

Although she was not aware of the lobbying effort, Oliver she was not surprised that the issue is gaining prominence.

Kurt Jensen, president of the Graduate Biosciences Society at the University of Virginia, said in an e-mail that the proposal’s purpose is to make the cost of attendance tax-exempt, so that room and board expenses would not be taxed.

“This proposal sends the message that higher education is a priority for the federal government, providing impetus for more students to pursue research,” Jensen said. “This lobby has identified several members of Congress who may be able and willing to sponsor or co-sponsor legislation to this effect in the next session of congress.”

Jensen said the loss of tax revenue from a policy change would be insignificant because there are fewer than 500,000 doctoral students nationwide.

Widge said graduate students tend to struggle financially and many potential candidates choose not to pursue graduate education because of the financial difficulties involved.

“Graduate students tend to be poor and that disincentivizes people,” Widge said. “We keep needing more advanced degrees in a knowledge-based economy. It’s reasonable to try and put incentives in to encourage people to go to grad school.”

Oliver said she thought the amount of taxes paid by graduate students was very small, but given the current economic and political situation, she did not think a bill to change the tax code would pass.

“In the aggregate, it’s just a drop in the bucket, but for the student it makes a big difference,” Oliver said. “I would be very surprised if something like this made it all the way through. It would be wonderful if it did. I think it’s horrible that graduate students pay taxes.”

Widge said the next Washington, D.C., lobby day will be Feb. 19-21. He was hopeful there would be a bill in Congress by that time, although he said there are also “a ton of variables.”

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