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I don't understand this. During my PhD my "scholarship" was just basically the university choosing not to charge me money. It's not as though I sat down and set

I don't understand this. During my PhD my "scholarship" was just basically the university choosing not to charge me money. It's not as though I sat down and set on fire $20k worth of paper every year. So now they have to pay tax on to the amount they would have otherwise charged me? Isn't that kind of a hypothetical concept? Like, can't they say, "Oh the tuition for the civil engineering PhD program is now zero"? Virtually no one in my program had ever paid tuition before. Maybe what they could do is claim we are first and foremost employees and that the PhD is a certificate of on-the-job training. Presumably they are not going to charge Facebook for the training courses they give their employees.

madcaptenor 9y ago
I've got a PhD in math. I've been wondering this too. I remember that one of the institutions that accepted me, said, in the acceptance letter, that my offer was worth something like $60k a year ($20k in actual stipend and $40k in tuition I wouldn't be paying). That was good for a laugh then, but it would have actual meaning now.
turc1656 9y ago
This is similar in concept to how debt forgiveness works. Generally (there are exceptions), debt that was defaulted on gets taxed as though it was income because it was planned/expected to be income for the creditor, upon which taxes would be paid. It's also similar to how other non-monetary transactions are treated in the tax code. For example - bartering. Legally, if I agree to fix your roof if you repair my vehicle, that is, under the law, a taxable event. It's just that such things are very hard to enforce in that kind of situation. This is essentially applying the same concept. It's not hypothetical. Something of value is being received/transferred. That is a taxable event, but here it is much easier to enforce because there are numerous records proving that it occurred.
ISL 9y ago
Graduate students cost research groups about as much as postdocs cost, precisely because we're paying the University for the analog of the tuition waiver.
rayiner 9y ago
The proper way to view it is that the university is giving you an "in kind" benefit, in this case a free education. "In kind" benefits are taxable. An employer cannot say, for example, that providing a free apartment to an employee is not compensation, because the employer is "simply choosing not to charge the employee rent."
- candiodari 9y ago
  But obviously this is one variable that can be highly fudged. They can provide apartments at 1/3 the normal cost, but claim to be charging you rent. Or, if you want to go further, have those rooms "available" for guest faculty and you're just holding the key. Or, well, this is how it's done in some places in Europe, where benefits "in kind" are "taxed". Except they're not taxed. You can't make that happen.
  - rayiner 9y ago
    You can fudge a bit but not that much. In an audit, it's pretty easy to notice if your company is leasing out employees an apartment for 1/3 of market rate. Few companies are going to risk tax fraud charges for that. It's particularly difficult in the case (as with universities) where you're literally in the business of selling the same product a particular price to other people.
- eli_gottlieb 9y ago
  >The proper way to view it is that the university is giving you an "in kind" benefit, in this case a free education. Under no circumstances does a company in industry pay an intern $20k/year, "waive" a $40k/year "training fee", and then go to the government and register it as an in-kind benefit. Here in the much-vaunted "real world" outside academia, we may pay trainees and interns less than the full salary, but we don't try to put a tax penalty of half the salary on being an intern.
maxerickson 9y ago
Yes, during your PhD there were no tax consequences to the university forgiving your tuition, because it was given special consideration. This would change that. Ostensibly valuable students will be able to arrange for the university to bear the burden of the taxes, but it will be a change and it is likely that large institutions will use it to their advantage.
- lewis500 9y ago
  No but from an accounting perspective I don’t get how this works. Phd students often do no use any of the univeristy’s real resources. The marginal cost of a phd student is often zero or negative, due to the work they do. There are no platonic costs to charge them, especially if they are passed quals and aren’t taking classes any more. Sure they use their advisor’s time, but that’s unaccountable and variable. So the university could just adjust tuition downward for programs for which everyone gets a scholarship anyway. Is the GOP going to regulate tuition too?
  - harryh 9y ago
    So the university could just adjust tuition downward for programs for which everyone gets a scholarship anyway. Yes, this is what would happen. They probably couldn't adjust it down to zero as that would trigger a legal challenge from the IRS but they could very likely make it much lower than it is today.
nindalf 9y ago
Can't speak to PhDs but for MS programs, the university couldn't charge $0, because they need to charge foreign students exorbitant amounts of money to balance the books.

madcaptenor 9y ago

I've got a PhD in math. I've been wondering this too. I remember that one of the institutions that accepted me, said, in the acceptance letter, that my offer was worth something like $60k a year ($20k in actual stipend and $40k in tuition I wouldn't be paying). That was good for a laugh then, but it would have actual meaning now.

turc1656 9y ago

This is similar in concept to how debt forgiveness works. Generally (there are exceptions), debt that was defaulted on gets taxed as though it was income because it was planned/expected to be income for the creditor, upon which taxes would be paid. It's also similar to how other non-monetary transactions are treated in the tax code. For example - bartering. Legally, if I agree to fix your roof if you repair my vehicle, that is, under the law, a taxable event. It's just that such things are very hard to enforce in that kind of situation. This is essentially applying the same concept. It's not hypothetical. Something of value is being received/transferred. That is a taxable event, but here it is much easier to enforce because there are numerous records proving that it occurred.

ISL 9y ago

Graduate students cost research groups about as much as postdocs cost, precisely because we're paying the University for the analog of the tuition waiver.

rayiner 9y ago

The proper way to view it is that the university is giving you an "in kind" benefit, in this case a free education. "In kind" benefits are taxable. An employer cannot say, for example, that providing a free apartment to an employee is not compensation, because the employer is "simply choosing not to charge the employee rent."

candiodari 9y ago
But obviously this is one variable that can be highly fudged. They can provide apartments at 1/3 the normal cost, but claim to be charging you rent. Or, if you want to go further, have those rooms "available" for guest faculty and you're just holding the key. Or, well, this is how it's done in some places in Europe, where benefits "in kind" are "taxed". Except they're not taxed. You can't make that happen.
- rayiner 9y ago
  You can fudge a bit but not that much. In an audit, it's pretty easy to notice if your company is leasing out employees an apartment for 1/3 of market rate. Few companies are going to risk tax fraud charges for that. It's particularly difficult in the case (as with universities) where you're literally in the business of selling the same product a particular price to other people.
eli_gottlieb 9y ago
>The proper way to view it is that the university is giving you an "in kind" benefit, in this case a free education. Under no circumstances does a company in industry pay an intern $20k/year, "waive" a $40k/year "training fee", and then go to the government and register it as an in-kind benefit. Here in the much-vaunted "real world" outside academia, we may pay trainees and interns less than the full salary, but we don't try to put a tax penalty of half the salary on being an intern.

maxerickson 9y ago

Yes, during your PhD there were no tax consequences to the university forgiving your tuition, because it was given special consideration. This would change that. Ostensibly valuable students will be able to arrange for the university to bear the burden of the taxes, but it will be a change and it is likely that large institutions will use it to their advantage.

lewis500 9y ago
No but from an accounting perspective I don’t get how this works. Phd students often do no use any of the univeristy’s real resources. The marginal cost of a phd student is often zero or negative, due to the work they do. There are no platonic costs to charge them, especially if they are passed quals and aren’t taking classes any more. Sure they use their advisor’s time, but that’s unaccountable and variable. So the university could just adjust tuition downward for programs for which everyone gets a scholarship anyway. Is the GOP going to regulate tuition too?
- harryh 9y ago
  So the university could just adjust tuition downward for programs for which everyone gets a scholarship anyway. Yes, this is what would happen. They probably couldn't adjust it down to zero as that would trigger a legal challenge from the IRS but they could very likely make it much lower than it is today.

nindalf 9y ago

Can't speak to PhDs but for MS programs, the university couldn't charge $0, because they need to charge foreign students exorbitant amounts of money to balance the books.