There has been a lot of recent discussion about the Republican’s new tax bill, the largest overhaul to tax reform in almost 30 years, which passed in the House of Representatives earlier this month.
As a student, I have found the controversy surrounding the proposed cuts to loan tax deductions, among other changes to tuition credits, troubling. However, my major is in history and secondary education, not economics, so I found myself doing a rather extensive amount of reading on the topic. While many people seem to find the new changes alarming, there are a few advocates for the new changes.
However, I found the information I gleaned from researching the new bill to be unsettling to say the least. To begin with, the GOP wants to combine three separate tax cuts for higher education expenses into one, eliminating both the student loan interest deduction and tax-free tuition reimbursement from employers.
This would entail repealing the Lifetime Learning Credit, which offsets 20 percent of the first $10,000 of qualified education expenses, and the Hope Scholarship Credit. They are replacing this with the American Opportunity Tax Credit, where students can get up to $2,500 back for the first four years and $1,250 for the fifth year.
In addition, the GOP plans to eliminate student loan interest deductions currently used by borrowers paying off education loans to deduct up to $2,500 of interest paid on loans annually. While the deduction is worth less overall than the credit, according to an article by Time magazine online, more than double the number of people claim the deduction than use the AOTC credit. This takes place because the deduction can continually be used for several years after college while paying off loans.
Other troubling factors included in the new tax bill include the elimination of the tax-free status of employer tuition reimbursements, and the creation of a new tax on private universities with over 500 students with assets of more than $100,000 per student. The ramifications of all the changes seems to be further reaching than just the immediate changes to the tax code.
As a student who plans to attend graduate school after completing a bachelor’s degree, I find this information to be upsetting. As a mother, it concerns me that my children will face new economic challenges when they chose to pursue a higher education.
In this country, it has become almost impossible to make an adequate living without some type of degree, and many professions require master’s or Ph.D. degrees to practice in their field. An article from STAT magazine discussed the issues of students in health care fields, who often graduate with an average debt of around $200,000 to $250,000 dollars. These loan debts accrue massive amounts of interest over time, interest that the loan deduction has helped to offset. What will this do for poorer students whose families cannot afford to help them pay off student debt?
Furthermore, creating new taxes on private universities with large endowments has direct effects on what these universities can do in terms of scholarships and spending. Many students, myself included, could not attend private universities without the extra monetary support of scholarships or grants from the establishment.
These tax changes are going to directly affect the ability of those universities to provide the maximum amount of monetary support to the student body. If these institutions are paying more money in taxes, that’s less money that can be offered to students.
The term “streamlining” regarding educational benefits for families, feels a little like the GOP is attempting to put a pretty name on something ugly. The general consensus of those who fight for, and study how tax changes could affect students and universities, including The American Association of State Colleges, is that the new tax plan will only undermine higher education by changing tax breaks given to students and families. The changes in taxation on colleges and universities, will make college less affordable to a vast majority of students.
The end game to these tax cuts will, according to the GOP, save almost $47.5 billion over the next 10 years. This seems to be what they are most concerned about–finding a way to make their new tax codes affordable, no matter who it affects or how. A tax bill that reduces tax brackets to four tiers, the highest rate kicking in at $1 million dollars, which is more than double than where it kicks in now.
The corporate tax rate is being reduced from 35 to 20 percent, and corporations will no longer pay taxes on overseas profits.
Finally, estate tax, which currently is paid only by estates worth $5.5 million or more, will be phased out. While these are just a few of the many changes in the new bill, it seems to me that our government should be taxing companies on the wildly inflated profits that are being made out of our country rather than going after the money used to help educate citizens and future leaders.
I can’t help but wonder if it is simply a matter of protecting the wealthy constituents and their business interests rather than a genuine a concern for “streamlining” student access to the higher education tax credits that the government seems so intent on obliterating.