7 ms·

Low-Income College Students Are Being Taxed Like Trust-Fund Babies

85 points by tysone 7y ago

6gvONxR4sf7o 7y ago
So the problem is that all unearned income that isn't for tuition is being taxed the same, regardless of who it's coming from and who it's going to? Am I reading it right?
- RIMR 7y ago
  No, the problem is that all the unearned income is being taxed at a prohibitively high rate, regardless of whether or not it is being used for tuition, regardless of where it coming from, and regardless of who is receiving it. The rate they are using was established specifically to discourage wealthy people from exploiting tax laws to reduce their tax burdens. Now it is being used to discourage low-income students from accepting financial aid. It honestly seems perfectly in-line with the Republican agenda: Reduce low-income people's access to higher education, and bastardize an anti-tax-avoidance law so that they can excuse the subsequent repeal of said law at the benefit of tax-dodging autocrats.
  - Vaslo 7y ago
    I mean it’s crazy. God forbid they contribute toward the free health care they get until 26-the nerve of those evil republicans and their responsibility nonsense
    - RIMR 7y ago
      Who the hell is getting "free health care" until they're 26? If you come from a low-income family, there's a damn good chance you're uninsured.
      - Vaslo 7y ago
        They have something called Medicaid, you should go read about it before you fall for the NYT agenda. It’s the people in the middle that get screwed, and it’s not just a republican issue
        seppin 7y ago
        > It’s the people in the middle that get screwed Medicaid doesn't cover even a majority of lower income or younger Americans.
        fzeroracer 7y ago
        I don't know about you, but I grew up dirt poor and on Apple Health (WA's version of Medicaid) which did the bare minimum for my health. Not to mention it had zero dental coverage at a time when I was going to college with teeth quite literally rotting out of my head, broken down to the gums and with occasional abscesses. And that's only because my parent's combined income was effectively $0, because neither of them could work due to severe disability. You can look at the income limits [1] and see that you basically have to be living in abject poverty in order to qualify. So I'd advise you to actually experience it before telling others to read about it. [1] https://www.hca.wa.gov/health-care-services-supports/apple-health-medicaid-coverage/individual-adults https://www.hca.wa.gov/health-care-services-supports/apple-h...
    - volkadav 7y ago
      since when is being a poor kid trying to get an education a lack of responsibility? if anything, folks like that have more than enough on their plates without a bunch of jerks -- of any political leaning -- kicking down at them as they try to build a better life for themselves and their families. to your point down-thread, student aid packages tend to lift you over the very low threshold of medicaid eligibility last i knew. if you think being broke enough to be on medicaid or qualifying for need-based aid is easy street, you are waaaaaaay off base.
- 4NDR10D 7y ago
  Thats the gist. The main problem is the lack of distinction between finincial aid or graduate fellowships and other forms of "unearned income". This lack of distinction leads to a graduate student's only source of income (a fellowship) being taxed as if it was a gift handed down by a rich parent.
  - briandear 7y ago
    It is a gift handed down by a rich parent — the parent in this case is the university. There is no difference. Someone is handing you thousands of dollars and they say: “here is some money for your school, in order to keep getting this money, you have to get good grades and volunteer as a teaching assistant.” How is that any different than a rich parent giving you the same money with the same conditions? At the end of the day, some benefactor is handing you a pile of money to get an advanced degree.
    - ForHackernews 7y ago
      Graduate students work to earn their keep. They are more properly treated as employees: https://www.npr.org/sections/thetwo-way/2016/08/23/491090762/nlrb-rules-graduate-students-are-employees-with-the-right-to-unionize https://www.npr.org/sections/thetwo-way/2016/08/23/491090762...
    - simple_phrases 7y ago
      Are you telling me you have a hard time discerning between a trust fund and an educational grant or stipend?
      - briandear 7y ago
        From a taxation perspective, yes. If it’s earned income, then the university should put the “student” on a W2 and pay then as such. Otherwise, it’s unearned income and I mean “unearned” in terms of tax treatment; that doesn’t imply that it isn’t deserved. A day trader makes unearned income, but nobody could argue that doing that isn’t “work.” But the IRS still considers that also unearned. I am all in favor of cutting taxes on unearned income. However ironically, those most opposed to that also like to complain when it’s their unearned income being taxed as in the case of a stipend or fellowship.
- deleted 7y ago
  [deleted]
kosys 7y ago
Why don't we just be honest. The housing mortgages crisis bailout with many other blunders by the government... has resulted in using the new generation as the potential piggybank to pay it all back. The generation in power doesn't care if one generation is sacrificed with all the downfalls that occur to the young persons who have no help from their parents or whatever reasons.
- guelo 7y ago
  I'm really having a hard time following your connection between the "housing mortgages crisis bailout" from 10 years ago and unintended consequences of the tax cut 2 years ago.
- resoluteteeth 7y ago
  The government got back the money from the bailout with interest, so there's no debt left from it for future generations to pay back.
  - apta 7y ago
    Paid back by the people who this was passed down to.
- EpicEng 7y ago
  That money was already paid back, not sure what you're talking about.
swozey 7y ago
> About 14 percent of the university’s undergraduate class is part of a program called the Carolina Covenant, which provides debt-free, full financial aid packages to students who fall below 200 percent of the federal poverty level. That package includes nontuition room, board and living expenses that total about $13,402 in the university’s estimated cost of attendance next school year. Are you still required to combine both parents income (even if they're divorced and you're estranged from one or both of them) before you qualify if you're under 25 (23?)? When I was 19 I didn't qualify for any financial aid because my fathers income HAD to be included in my application even though he didn't contribute anything to me and my mother was on disability, they were divorced and I hadn't seem him in years. I believe he was in the 40-50s range and my mother was under $10k/yr. I was making around $10/hr working full time and attempting to put myself through about $40k of debt. No pell grants or anything. I couldn't afford a real school and dorms or any of that at all. I eventually just dropped out because working 8 hours a day and going to class and affording rent, etc wasn't exactly going my way. I feel like I rarely hear about this and it always makes me wonder if there was something more we could've done. I remember this distinctly though and my mother fighting back and forth with admissions. It just makes no sense to me.
- briandear 7y ago
  > Are you still required to combine both parents income (even if they're divorced and you're estranged from one or both of them) before you qualify? If either of them claim you as a dependent, then yes.
  - tylerhou 7y ago
    IIRC not tax/dependency status; in order to be free from parents’ income you need to be above 24, emancipated from your parents, a ward of the court, etc.. source: https://www.fastweb.com/financial-aid/articles/federal-financial-aid-and-the-independent-student https://www.fastweb.com/financial-aid/articles/federal-finan...
    - throwaway287391 7y ago
      These criteria are really shitty for some people. My middle class parents spoiled me and paid for the entirety of my college tuition and expenses, but I had friends from families with similar income whose parents completely refused to pay for any college expenses, and they had to survive on whatever scholarships and student loans they could get, but couldn't get any FAFSA aid. I'm not sure what the alternative is, and I'm sure they were more privileged than many/most of the people who do qualify for FAFSA aid, but it still felt really unfair to me. I guess they should've gotten sham marriages to qualify as independent? (Why is marriage a qualifying criterion for independence? Seems really antiquated to me...)
4NDR10D 7y ago
This doesn't only effect undergrads, this is also horrible for graduate students. I'm going to be directly effected by this tax this year if the law doesn't change. It will tax my fellowship stipend (used for living expenses such as rent, food, and transportation) equivilant to an ESTATE. It's basically like saying that grad students are not "earning" this income and thus they don't deserve to be taxed on it as if it was a wage.
- 6gvONxR4sf7o 7y ago
  In this case the problem seems to be the university trying not to treat the grad student as an employee.
- awinder 7y ago
  But not quite like an estate since you have to have an estate larger than $11.4M before any taxes will be applied to it. That raised limit was also part of the tax bill; you’re just offsetting the cost.
linuxftw 7y ago
College education should not be the primary route out of poverty, that's the real issue. Not everyone can or should get a college education. College should just be cheaper for everyone. Eliminate federal-backed student loans, eliminate useless classes, eliminate remedial classes, utilize more technology, eliminate excess administrators, eliminate ever-expanding resort-style amenities.
- fzeroracer 7y ago
  College education is likely not the primary route out of poverty. That medal would likely go to the military right now, and I hope I shouldn't need to mention the myriad issues of having an entire class of citizen whose only potential route out of poverty is by joining the military industrial complex. Everything that you mentioned otherwise comes as a result of universities designing for-profit over for-education. Because they have to attract the people with the deepest pockets, which means resort-style amenities. The easiest way to solve this problem is to just make college free and give people the choice of going the traditional route, going to a technical school etc. If people want to get a college education, they should be able to.
  - fjsolwmv 7y ago
    Military is only a good route if you win the lottery and don't go to a battle zone and get injured and then thrown away
- commandersaki 7y ago
  > Eliminate federal-backed student loans Or make them available to everyone irrespective of their income, make sure it covers the entirety of tuition and board cost, subsidise interest, and require repayments after an income threshold. Offer discounts for people that pay upfront. Get rid of "free ride" tuition in its entirety. This is the Australian and UK model. I agree with the other stuff though: eliminate useless classes, remedial classes, etc. Also 2 years of courses should be allowed to be completed at community colleges and transfer in directly. There also needs to be more incentive towards vocational work and apprenticeships.
sriram_sun 7y ago
> "The impact on full-time undergraduate and graduate students under the age of 24 went largely unnoticed until the waning weeks of tax season." I disagree. So many Phd. students were complaining about it. I guess it has hit them hard.
mrfusion 7y ago
Is this only an issue if the students are claimed as dependents? (I might be misunderstanding)
- junar 7y ago
  No. The test are similar, but actually being claimed as a dependent has nothing to do with it. If you meet all of these tests, you may be subject to the tax. 1. You had more than $2,100 of unearned income. 2. You are required to file a tax return. 3. You were either: a. Under age 18 at the end of 2018, b. Age 18 at the end of 2018 and didn’t have earned income that was more than half of your support, or c. A full-time student at least age 19 and under age 24 at the end of 2018 and didn’t have earned income that was more than half of your support. (Earned income is defined later. Support is defined below.) 4. At least one of your parents was alive at the end of 2018. 5. You don’t file a joint return for 2018. https://www.irs.gov/instructions/i8615 https://www.irs.gov/instructions/i8615 Edit: But being eligible to be claimed as a dependent can reduce your standard deduction, potentially causing more of your income to be subject to tax. Even if they choose not to claim you, your standard deduction is still reduced.

85 points by tysone 7y ago

So the problem is that all unearned income that isn't for tuition is being taxed the same, regardless of who it's coming from and who it's going to? Am I reading it right?

RIMR 7y ago
No, the problem is that all the unearned income is being taxed at a prohibitively high rate, regardless of whether or not it is being used for tuition, regardless of where it coming from, and regardless of who is receiving it. The rate they are using was established specifically to discourage wealthy people from exploiting tax laws to reduce their tax burdens. Now it is being used to discourage low-income students from accepting financial aid. It honestly seems perfectly in-line with the Republican agenda: Reduce low-income people's access to higher education, and bastardize an anti-tax-avoidance law so that they can excuse the subsequent repeal of said law at the benefit of tax-dodging autocrats.
- Vaslo 7y ago
  I mean it’s crazy. God forbid they contribute toward the free health care they get until 26-the nerve of those evil republicans and their responsibility nonsense
  - RIMR 7y ago
    Who the hell is getting "free health care" until they're 26? If you come from a low-income family, there's a damn good chance you're uninsured.
    - Vaslo 7y ago
      They have something called Medicaid, you should go read about it before you fall for the NYT agenda. It’s the people in the middle that get screwed, and it’s not just a republican issue
      - seppin 7y ago
        > It’s the people in the middle that get screwed Medicaid doesn't cover even a majority of lower income or younger Americans.
      - fzeroracer 7y ago
        I don't know about you, but I grew up dirt poor and on Apple Health (WA's version of Medicaid) which did the bare minimum for my health. Not to mention it had zero dental coverage at a time when I was going to college with teeth quite literally rotting out of my head, broken down to the gums and with occasional abscesses. And that's only because my parent's combined income was effectively $0, because neither of them could work due to severe disability. You can look at the income limits [1] and see that you basically have to be living in abject poverty in order to qualify. So I'd advise you to actually experience it before telling others to read about it. [1] https://www.hca.wa.gov/health-care-services-supports/apple-health-medicaid-coverage/individual-adults https://www.hca.wa.gov/health-care-services-supports/apple-h...
  - volkadav 7y ago
    since when is being a poor kid trying to get an education a lack of responsibility? if anything, folks like that have more than enough on their plates without a bunch of jerks -- of any political leaning -- kicking down at them as they try to build a better life for themselves and their families. to your point down-thread, student aid packages tend to lift you over the very low threshold of medicaid eligibility last i knew. if you think being broke enough to be on medicaid or qualifying for need-based aid is easy street, you are waaaaaaay off base.
4NDR10D 7y ago
Thats the gist. The main problem is the lack of distinction between finincial aid or graduate fellowships and other forms of "unearned income". This lack of distinction leads to a graduate student's only source of income (a fellowship) being taxed as if it was a gift handed down by a rich parent.
- briandear 7y ago
  It is a gift handed down by a rich parent — the parent in this case is the university. There is no difference. Someone is handing you thousands of dollars and they say: “here is some money for your school, in order to keep getting this money, you have to get good grades and volunteer as a teaching assistant.” How is that any different than a rich parent giving you the same money with the same conditions? At the end of the day, some benefactor is handing you a pile of money to get an advanced degree.
  - ForHackernews 7y ago
    Graduate students work to earn their keep. They are more properly treated as employees: https://www.npr.org/sections/thetwo-way/2016/08/23/491090762/nlrb-rules-graduate-students-are-employees-with-the-right-to-unionize https://www.npr.org/sections/thetwo-way/2016/08/23/491090762...
  - simple_phrases 7y ago
    Are you telling me you have a hard time discerning between a trust fund and an educational grant or stipend?
    - briandear 7y ago
      From a taxation perspective, yes. If it’s earned income, then the university should put the “student” on a W2 and pay then as such. Otherwise, it’s unearned income and I mean “unearned” in terms of tax treatment; that doesn’t imply that it isn’t deserved. A day trader makes unearned income, but nobody could argue that doing that isn’t “work.” But the IRS still considers that also unearned. I am all in favor of cutting taxes on unearned income. However ironically, those most opposed to that also like to complain when it’s their unearned income being taxed as in the case of a stipend or fellowship.
deleted 7y ago
[deleted]

kosys 7y ago

Why don't we just be honest. The housing mortgages crisis bailout with many other blunders by the government... has resulted in using the new generation as the potential piggybank to pay it all back. The generation in power doesn't care if one generation is sacrificed with all the downfalls that occur to the young persons who have no help from their parents or whatever reasons.

guelo 7y ago
I'm really having a hard time following your connection between the "housing mortgages crisis bailout" from 10 years ago and unintended consequences of the tax cut 2 years ago.
resoluteteeth 7y ago
The government got back the money from the bailout with interest, so there's no debt left from it for future generations to pay back.
- apta 7y ago
  Paid back by the people who this was passed down to.
EpicEng 7y ago
That money was already paid back, not sure what you're talking about.

swozey 7y ago

> About 14 percent of the university’s undergraduate class is part of a program called the Carolina Covenant, which provides debt-free, full financial aid packages to students who fall below 200 percent of the federal poverty level. That package includes nontuition room, board and living expenses that total about $13,402 in the university’s estimated cost of attendance next school year. Are you still required to combine both parents income (even if they're divorced and you're estranged from one or both of them) before you qualify if you're under 25 (23?)? When I was 19 I didn't qualify for any financial aid because my fathers income HAD to be included in my application even though he didn't contribute anything to me and my mother was on disability, they were divorced and I hadn't seem him in years. I believe he was in the 40-50s range and my mother was under $10k/yr. I was making around $10/hr working full time and attempting to put myself through about $40k of debt. No pell grants or anything. I couldn't afford a real school and dorms or any of that at all. I eventually just dropped out because working 8 hours a day and going to class and affording rent, etc wasn't exactly going my way. I feel like I rarely hear about this and it always makes me wonder if there was something more we could've done. I remember this distinctly though and my mother fighting back and forth with admissions. It just makes no sense to me.

briandear 7y ago
> Are you still required to combine both parents income (even if they're divorced and you're estranged from one or both of them) before you qualify? If either of them claim you as a dependent, then yes.
- tylerhou 7y ago
  IIRC not tax/dependency status; in order to be free from parents’ income you need to be above 24, emancipated from your parents, a ward of the court, etc.. source: https://www.fastweb.com/financial-aid/articles/federal-financial-aid-and-the-independent-student https://www.fastweb.com/financial-aid/articles/federal-finan...
  - throwaway287391 7y ago
    These criteria are really shitty for some people. My middle class parents spoiled me and paid for the entirety of my college tuition and expenses, but I had friends from families with similar income whose parents completely refused to pay for any college expenses, and they had to survive on whatever scholarships and student loans they could get, but couldn't get any FAFSA aid. I'm not sure what the alternative is, and I'm sure they were more privileged than many/most of the people who do qualify for FAFSA aid, but it still felt really unfair to me. I guess they should've gotten sham marriages to qualify as independent? (Why is marriage a qualifying criterion for independence? Seems really antiquated to me...)

4NDR10D 7y ago

This doesn't only effect undergrads, this is also horrible for graduate students. I'm going to be directly effected by this tax this year if the law doesn't change. It will tax my fellowship stipend (used for living expenses such as rent, food, and transportation) equivilant to an ESTATE. It's basically like saying that grad students are not "earning" this income and thus they don't deserve to be taxed on it as if it was a wage.

6gvONxR4sf7o 7y ago
In this case the problem seems to be the university trying not to treat the grad student as an employee.
awinder 7y ago
But not quite like an estate since you have to have an estate larger than $11.4M before any taxes will be applied to it. That raised limit was also part of the tax bill; you’re just offsetting the cost.

linuxftw 7y ago

College education should not be the primary route out of poverty, that's the real issue. Not everyone can or should get a college education. College should just be cheaper for everyone. Eliminate federal-backed student loans, eliminate useless classes, eliminate remedial classes, utilize more technology, eliminate excess administrators, eliminate ever-expanding resort-style amenities.

fzeroracer 7y ago
College education is likely not the primary route out of poverty. That medal would likely go to the military right now, and I hope I shouldn't need to mention the myriad issues of having an entire class of citizen whose only potential route out of poverty is by joining the military industrial complex. Everything that you mentioned otherwise comes as a result of universities designing for-profit over for-education. Because they have to attract the people with the deepest pockets, which means resort-style amenities. The easiest way to solve this problem is to just make college free and give people the choice of going the traditional route, going to a technical school etc. If people want to get a college education, they should be able to.
- fjsolwmv 7y ago
  Military is only a good route if you win the lottery and don't go to a battle zone and get injured and then thrown away
commandersaki 7y ago
> Eliminate federal-backed student loans Or make them available to everyone irrespective of their income, make sure it covers the entirety of tuition and board cost, subsidise interest, and require repayments after an income threshold. Offer discounts for people that pay upfront. Get rid of "free ride" tuition in its entirety. This is the Australian and UK model. I agree with the other stuff though: eliminate useless classes, remedial classes, etc. Also 2 years of courses should be allowed to be completed at community colleges and transfer in directly. There also needs to be more incentive towards vocational work and apprenticeships.

sriram_sun 7y ago

> "The impact on full-time undergraduate and graduate students under the age of 24 went largely unnoticed until the waning weeks of tax season." I disagree. So many Phd. students were complaining about it. I guess it has hit them hard.

mrfusion 7y ago

Is this only an issue if the students are claimed as dependents? (I might be misunderstanding)

junar 7y ago
No. The test are similar, but actually being claimed as a dependent has nothing to do with it. If you meet all of these tests, you may be subject to the tax. 1. You had more than $2,100 of unearned income. 2. You are required to file a tax return. 3. You were either: a. Under age 18 at the end of 2018, b. Age 18 at the end of 2018 and didn’t have earned income that was more than half of your support, or c. A full-time student at least age 19 and under age 24 at the end of 2018 and didn’t have earned income that was more than half of your support. (Earned income is defined later. Support is defined below.) 4. At least one of your parents was alive at the end of 2018. 5. You don’t file a joint return for 2018. https://www.irs.gov/instructions/i8615 https://www.irs.gov/instructions/i8615 Edit: But being eligible to be claimed as a dependent can reduce your standard deduction, potentially causing more of your income to be subject to tax. Even if they choose not to claim you, your standard deduction is still reduced.