Working minimum wage 60 hours a week, graduate students preserved future of research, dodged tax bullet
$10-20 million tax on university endowment kept in GOP consolidated bill
By 9am every morning, Aubrey Paris, a third year chemistry graduate student studying biofuels at Princeton University has arrived at her lab. From fixing equipment to repeating reactions to mentoring undergraduates, Aubrey will spend the next twelve hours at her bench, departing as late as midnight. The routine is no different on the weekends.
For essentially a 70 hour-a-week job, Aubrey receives a stipend of $32,000 a year, a figure higher than what most graduate students take home thanks to her grant from the National Science Foundation.
As most research based universities are rooted in expensive areas such as Boston, New York, and Berkeley, most of graduate student stipends like Aubrey’s flows directly to rent, food, and utilities that cost upwards of $2500 per month on a conservative estimate.
“Most of us are very happy just to break even,” Aubrey said.
But a provision in the House version of the Tax Cuts and Jobs Act would have made “breaking even” nearly impossible. As late as Wednesday morning, had the House draft been pushed through, graduate students would be taxed on their tuition waiver that values close to $45,000. Together, the numbers add up to around $75,000 per annum income, falling in a bracket of over $11,000 in federal tax.
Pushing against this proposal has been a legislative priority, says Vice President of Princeton University Bob Durkee. Lobbyists from Princeton among other universities and education-advocacy alliances have worked around the clock to stall the inclusion of this provision in the consolidated bill, Durkee explained. In an unprecedented move, graduate students across the country also launched unified, aggressive campaigns against the amendment. After promising indications, the final version introduced on Friday preserves the tuition waiver exemption, sparing graduate students a financial quagmire.
“If kept, the provision would’ve crippled the quality of research dramatically and closed the door to students from lower socioeconomic tiers.” Aubrey said.
Indeed, the proposal comes at a time when graduate education already suffers a lack of diversity. According to the U.S. Department of Education, on the graduate level, underrepresented minorities make up less than 12 percent of graduate enrollment and 8 percent of graduate degrees.
Under financial constraints, Aubrey would have raced to shorten the time requirement needed for her degree. In other words, her research would’ve been significantly downsized from a typical five year endeavor designed for doctoral students in STEM.
Up in MIT, Victor Ying, a second-year graduate student in the renowned Electrical Engineering and Computer Science department, voiced similar concerns. Victor shares a one-bedroom apartment with his girlfriend, Jenny Sun, also an engineering graduate student in Boston University.
Victor and Jenny collectively pay around $700 in taxes every month on a combined annual stipend income of just over $60,000. The two work between 12 and 14 hours every day. Victor spends no less than 10 hours each day barnstorming codes for improved computer architectures while Jenny crisscrosses between conducting extensive lab-work and teaching a 40-strong undergraduate course.
“We love the work we do,” Jenny said. Her research yields promising prospects for next-generation medical imaging techniques that can transform the treatment landscape for neurological diseases.
Yet, if confronted with squeezed budget, Jenny and Victor may have to drop their doctoral studies and opt for a masters program.
A transition from research-heavy academia to industry for a software engineer would earn Victor three times the salary as his graduate stipend. Victor, who graduated from Princeton in 2016, had the opportunity of joining the tech scene for a lucrative career.
“We made the decision to solve these interesting problems,” Victor said, “but we really can’t keep doing it if doesn’t work out economically.”
The tax imposition on graduate students was patently unfair, Durkee said. Research institutions often tackle challenges overlooked by industry. For many, House GOP’s decision to not push the amendment led to a huge sigh of relief.
Yet, the attack on higher education has far from subsided. The draft released Friday proposes a 1.4 percent excise tax on returns of university endowments larger than $500,000 per student. The provision essentially affects around 35 highly-ranked institutions around the nation.
This proposal is the first instance in the country’s history when the income of non-profit organizations are subjected to an income tax, Durkee said. In 2016, a series of lawsuits filed by Princeton residents against the university challenged its tax-exemption status. Princeton ultimately settled the suit with a $18 million voluntary contribution to the town.
“If passed, the amendment sets a dangerous precedent,” Durkee explained. There’s nothing halting a tax on income of other charitable, operational organizations in the future.
The amendment would cost between $10 to $20 million in taxes for Princeton, Durkee said. Though the university has a firm commitment to providing financial aid, the money will have to come from some where.
“Ironically, the institutions targeted under the two bills include many that have made the greatest efforts to use their endowments to provide financial aid and strengthen their programs of teaching and research,” Durkee said.
Currently, every year, $1 billion from Princeton’s endowment provides over half of its operating budget, including offering financial aid to 60 percent of students. Unlike grant-making charities that can adjust its award allocations from year to year, Princeton cannot suddenly place aid or research programs on hold.
“We can’t tell our faculty or scholars, our endowment didn’t generate enough returns this year, you can come back in twelve months,” Durkee explained.
Thus, a compressed endowment return will most likely be offset in the elimination of entire programs.
Additionally, Durkee noted that a full tuition aid package valued around $50,000 will typically take a million dollars in endowment to generate, provided an average market return rate of 5 percent. An excise tax will undoubtedly burden the university’s abilities to provide aid in the future.
“As Congress looks at the deficit this bill would create, it knows that it has to generate revenue from some place. There needs to be recognition that their proposal for doing so is damaging,” Durkee said.
In a statement, Congressman John Delaney, a member of the Joint Economic Committee and a 2020 presidential candidate, expressed outrage at the proposal.
“By increasing taxes on students and universities, [the bill] jeopardizes access to education for working people and their children and threatens one of our singular national assets – our global leadership in higher education and research. It’s really shocking to me that Republican leaders and President Trump would look at where the world is headed and conclude they should tax education more,” he wrote.
A vote on the bill is expected as early as next week.