By Madeline Purdue and Jacob Solis
Anyone with unpaid student loans may be facing a steep increase in how much they are expected to pay back under the proposed Tax Cuts and Jobs Act — which passed in the House on Thursday, Nov. 16. The tax bill would repeal the student loan interest deduction that more than 12 million people used in 2015 and reduce $65 billion worth of tax benefits for college students over the next 10 years.
The Tax Cuts and Jobs Act looks to offset a $1.5 trillion tax cut by taking away a number of individual tax breaks, including the student loan interest deduction.
“The Tax Cuts and Jobs Act is focused on providing tax relief and increasing take-home pay for Americans of all walks of life — including people working to pay off tuition and other education costs,” a House Ways and Means spokeswoman said in a statement.
The deduction allows an individual that makes up to $65,000 a year or a married couple that makes up to $130,000 a year to lower their taxable income by $2,500, saving them $625 a year.
But the tax cut would hit graduate students particularly hard, increasing taxes for them by nearly 400 percent.
Currently, universities offer graduate students tuition waivers, meaning they can attend school for free in exchange for work — whether that be teaching classes, working research labs, or other things around the university. Under the Tax Cuts and Jobs Act, this tuition waiver would be taxed as income.
According to the American Council on Education, nearly 145,000 graduate students use these tuition waivers.
According to CNBC, it takes the average student loan borrower 20 years to pay off their loans. In the United States, over 44 million people hold a total of $1.4 trillion in student loan debt and over 3,000 people default on their federal student loans every day.
Fred Vautour, a Boston College custodian who put his five children through school by working for the university and using his benefits as an employee, told the New York Times that if he had had to pay the increased tuition this bill promises, it would’ve been “killer”.
“It’s not going to hurt the people who can afford college anyway,” Mr. Vautour said in the article. “These kinds of benefits, they’re either for the rich or the poor. It’s always the in-between people who get screwed.”
Even though the bill passed earlier this month, the future of tax reform remains in the Senate’s hands — and what the Senate might do is not completely clear.
The Senate bill would preserve a number of tax breaks, exemptions and deductions the House bill looks to scuttle, including the student loan interest deduction. However, even with those deductions intact, it’s not nearly as clear-cut a victory for the GOP as the House bill was.
Some deficit hawks have raised concerns over the steep increase in the federal debt the current tax plan would cause. As late as Monday afternoon, Sen. Ron Johnson, R-Wis., vowed to vote against the measure in a key committee vote Tuesday over the inclusion (or lack thereof) of additional cuts for so-called “pass-through” businesses.
Johnson’s vote — which is yet to take place as of print time — could delay a floor vote that had been planned for next week and force Republican leaders in the Senate to shift once again on the precise details of their plan.
If the Senate does manage to pass a bill, it will almost surely differ wildly from the already-passed House proposal. The two chambers will have to hammer out an amalgam of the two bills in conference, and what that amalgam will look like exactly (and therefore what exemptions it might still include) remains unclear.
Though, should the House and Senate come to an agreement on the tax bill, students could see their taxes jump as soon as Jan. 1.
Madeline Purdue can be reached at firstname.lastname@example.org and on Twitter @madelinepurdue. Jacob Solis can be reached at email@example.com and on Twitter @NevadaSagebrush.