Students studying in the US universities are passing through a bad phase right now. The reason for this gloom is the proposed House GOP tax plan. The Republicans, to make up for about one trillion tax cuts given to US corporations, pushed the taxes on to graduate students. The latter have not much money and now they would be forced to pay a major chunk of their small student stipends in taxes. Needless to say, this tax has them stumped. Tamar Oostrom, who is pursuing a doctorate in economics at Massachusetts Institute of Technology (MIT) has crunched the new tax numbers. She found out that the tax has increased in the region of anywhere between 300 percent to 400 percent.
Tuition and tax
MIT charges its graduate students approximately $50,000 every year. Students do not have to pay this tuition. As per the House Republican tax plan, these students must report such tuition forgiveness as an income.
MIT gives its students a minimal stipend of $30,000 per year in exchange for them working with the teaching faculty or helping the latter in teaching courses. The student, as part of the deal, does not have to pay the tuition fees. This kind of arrangement is not unique to MIT. Almost all other US universities follow an identical model.
The new tax plan will hit students hard. Most of them already work part-time to supplement their meager income. A student earning $30,000 per year will be forced to pay taxes as if he or she is earning about $80,000 per year. This will financially cripple most students. They are already living a frugal life. Many married students have sacrificed dental insurance to scrimp on costs. The American Council on Education has reported that approximately 145,000 graduate students have suffered a reduction in their tuition within the 2011 to 2012 period.
Not only students, economists also hold the opinion that the tax is not a good one. The latter said that such a steep tax will discourage Americans from going for higher education. This will lead to an inadequately educated workforce. The negative ripple effect may destroy the US economy. The small tax amount extracted from students will inhibit American economic growth in the future. Many academicians have described such a move as a lethal threat to a doctoral education. About 30 academic organizations have sent Congress a letter decrying such a plan.