For some international students, federal taxes imposed on Yale scholarships represent a cumbersome financial burden.
The Internal Revenue Service requires that universities withhold 14 percent of any scholarship in excess of tuition and other required fees from all students who are not U.S. citizens or permanent residents and whose home countries do not have a tax treaty with the United States, according to Daysi Cardona, the international tax coordinator at Yale’s Tax Department. This federally imposed tax can eat up allowances that Yale provides to international students, such as money for travel, vacations and other expenses, with students who have the highest need forced to pay the most money. For international students receiving full financial aid packages, the tax can amount to about $3,000 per academic year. Yale increases the first-year scholarship amount for all international students to help offset the tax, but provides no additional money in the following years.
All international students, Cardona said, are required to file a U.S. income tax return in the spring and, depending on their personal tax situation, may be able to receive a refund of the tax that was withheld. Still, Caesar Storlazzi, the university director of financial aid, said the financial aid office has not studied whether all international students indeed receive a full refund, adding that “It behooves [the University] to do that.”
“Yale’s theory has always been that it really hurts in the first year if the student has to have withholding based on the tax treaty status,” Storlazzi said. “The theory is that students will then get into the system where they file the non-resident tax return and get refunds of that amount.”
The theory does not hold true for some international students, who criticized the University for not offsetting the tax cost for all four years, as well as a general lack of transparency on the issue of taxation.
Jodie Coburn ’20, a sophomore from the United Kingdom, told the News that the University initially failed to increase her scholarship amount for the first year due to a clerical error. She also stressed that her IRS refund — about $700 — paled in comparison to the $2,800 of tax withheld.
Coburn criticized the way information on international taxes is presented on Yale’s website. Full of jargon and unclear phrasing such as “Yale may be required to withhold,” the website does not comprehensively address how the financial aid tax process works, she said. She added that when she was trying to amend the clerical error that resulted in her initially not receiving additional funds from the University, the staff at both the financial aid office and the tax department were unhelpful and often dismissed her concerns.
“It’s just really unfair that they advertise on their website that [Yale] is affordable for everyone when it just isn’t,” Coburn said. “I just wish that they’d make it clearer because I feel like quite a few international students probably wouldn’t have come to Yale if they had known about this just because of the burden that it causes.”
Because the tax eats up the allowances she receives outside of tuition, Coburn added, she is not able to take classes that would require her to purchase expensive textbooks.
Camila Franco ’18, a student from Argentina, said that because of the taxes she went into credit card debt in order to pay for expenses related to travel and her summer internship abroad. The tax, Franco said, limits what she can do during the academic year, such as eating out with friends who live off campus or eating well during breaks when the dining halls are closed.
She added that she had to rely on a summer fellowship in order to participate in an unpaid internship program this year. But an $850 tax on the fellowship left her with insufficient money to cover even her summer expenses.
“Yale didn’t give me the full International Summer Award to cover the difference because it looked at the fellowship pre-tax rather than after tax and considered it to be more than what they had budgeted for internships in Madrid,” she said. “They ended up only giving me $40 of ISA and still made me write the fellowship thank you letter at the end of the summer.”
Resla Wesonga ’19, a student from Kenya, said that she pays around $3,000 each year on taxes and that for the 2016 tax return, she received only a $247 refund. In order to cover the costs that would have otherwise been offset by Yale allowances, she works 19 hours a week — the maximum number of hours a student can work when classes are in session.
This limits the scope of her involvement at Yale, Wesonga said, as she cannot take part in some time-consuming extracurriculars and sometimes has to choose between working and resting or spending time with friends.
“To schedule that time means something else has to be sacrificed,” she said.
She added that she did not know about the tax before she came to Yale and only learned about it during the Orientation for International Students. Even then, Wesonga said, as a first year she did not think twice about the issue until her sophomore year when she was faced with a $1,473 federal tax charge in her September bill.
Storlazzi said that the University has worked on helping international students better understand the system and providing them with information earlier in their Yale careers.
“We try to explain why we do it the way we do it, and even how we do it mathematically, and I’ve seen people’s eyes glaze over,” Storlazzi said. “I don’t want students to think we are not doing something.”
Scott Wallace-Juedes, director of undergraduate financial aid, said that this year, the University made the tax offsetting funds available in first years’ accounts at the same time that the tax charge was added — something Yale has not done before — to ensure that students’ accounts did not have a negative balance.
He added that there was also increased coordination between the Office of International Students and Scholars and the international tax office to ensure that the students’ paperwork was filed appropriately and on time.
The University Tax Department provides students with information regarding U.S. taxes and filing and gives students access to Foreign National Tax Resource preparation software, Cardona said. She added that staff at OISS and the tax department are available to meet with students individually to discuss their concerns.
Still, all the international students interviewed by the News said they believed the University should offset the cost of the tax for all four years, at least partially.
“I worked over the summer freshman year to save money, which was consumed in the end by the tax,” said Jorge Meneses ’19, a student from Chile who paid $3,000 in tax and received just $900 back last year. “Yale should cover all taxes for [everyone] every year without the lie that the money they give you first year will cover everything.”
In 2000, Yale became one of the first colleges in the U.S. to offer need-blind admission to international students.
Anastasiia Posnova | anastasiia.posnova@yale.edu