For weeks, Republican Party leadership has been working to pass a massive overhaul of the tax system. If you're in school, whether you're an undergrad or getting your master's degree, you may be wondering how the GOP tax bill could affect students — especially now that it appears primed for passage. That makes it the perfect time to familiarize yourself with some of the specific changes that have been made to previous versions of the bill concerning students, as well as some of the potential consequences of other pieces of the legislation that were left intact.
As for the overall effect of the GOP tax plan on Americans' income, several different analyses have shown that it would amount to a big redistribution of money from the lower and middle classes to the upper and corporate classes. That's a huge part of why Democrats and progressives are so vocally and forcefully opposing the plan. But much ink also has been spilled over a provision in the initial versions of the tax plan that would have taxed graduate students' tuition waivers as income. Such a change would've been devastating for many, reportedly treating some students who earn about $20,000 per year as if they were earning about $70,000 per year.
Fortunately for American graduate students, that provision did not make it into the final bill. Similarly, a provision in earlier drafts of the bill to eliminate the student loan interest deduction was also cut from the final version, meaning students can still deduct student loan interest payments under the new tax scheme. But there are other ways the final tax plan could impact anyone attending a university — and it's not all as obvious as what's considered taxable income and what's not.
Consider one of the Republican Party's longest-standing priorities that it was able to accomplish in crafting its tax overhaul: taking an axe to the foundations of the Affordable Care Act (ACA). Specifically, the bill repeals the health care law's individual mandate, meaning people will no longer be required to purchase health insurance. Since there'd no longer be a requirement for people who don't already get health insurance through their employers to purchase a plan on their own, overall enrollment may suffer, with more and more people deciding they're willing to risk going uninsured. This would likely lead to a spike in premiums and added instability in the markets.
Many colleges and universities already offer, or even require, health care plans for their students. For those who couldn't afford their school's coverage or who weren't offered coverage through their schools, the ACA gave them options — in addition to subsidies to help pay for health coverage, which schools don't offer with their own plans. So someone attending college and potentially racking up debt in the process may face a difficult choice after the GOP tax plan goes into affect: get health coverage, or go without? As it is, young adults historically have high rates of uninsurance thanks to their generally lower rates of serious illness.
The GOP tax plan also would cut federal deductions for people's state and local tax bills, capping what was once an unlimited deduction at $10,000. This could have implications for students in public K-12 schools and universities alike. Cutting those deductions would mean an increase in people's individual tax burdens, which could lead state and local governments to slash taxes themselves to soften the blow.
The less revenue that flows into state governments, obviously, the less money there is to direct into state-funded universities and schools. State universities are heavily dependent on those funds, although most are also bolstered by high tuition costs. It's reasonable to expect that a dip in a state's revenue would cost these universities some of their funding, which could lead universities to shift the burden to students in the form of more tuition increases. That's exactly what happened in the aftermath of the 2008 financial crisis; states cut their funding, then schools hiked their tuition. The increased costs for students stuck around later, even as the economy recovered.
In sum, even as the grad student tuition waiver provision of the bill has been thwarted ― for now, at least ― the passage of the GOP's tax plan may still pose challenges for students at public universities. It probably won't be much longer before it's signed into law, either: even though the House will be forced to re-vote on the plan Wednesday, it appears poised to clear both houses of Congress by the end of the week.