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Financial Aid

2018 Tax Reform Bill

The waiver deduction for grad students (117 d(5): loan interest deduction; and employees tuition benefits). 

  • Impacts middle income and low-income students and families (increasingly the predominant population in higher education)
  • Impacts the future economic growth of our country by making the pursuit of a graduate degree for the underserved populations that much more difficult.  Especially in the Miami.

MOST CONCERNING: 

  • Sec. 117(d): Repeal of the qualified tuition reduction
    • From the American Council on Education (ACE): Section 117(d) permits educational institutions to provide their employees, spouses, or dependents with tuition reductions that are excluded from taxable income, helping them afford a college education and providing an important benefit to many middle- and lower-income college employees.
    • At FIU, 1,950 employees and dependents use tuition benefits to further their career and improve their educational standing. At FIU, the average salary of employees using the waiver benefit is $50K. 
  • Sec. 117 (d) (5)  -- allows colleges and universities to lower the cost of graduate education for their graduate students who are serving as teaching or research assistants as part of their academic training without the tuition reductions counting as taxable income.
    •  At FIU, initial calculations show that FIU supports approximately 1,175 Graduate Student Assistants (70% of all grad assistants) on tuition waivers for a total of $15 Million. 
  • 117(d)(5)
  • Sec. 1303: Changes to the state and local tax (SALT) deduction, expected to reduce state budgets and, in turn, funding for public higher education
    • From ACE: Cuts in state support for public higher education can lead to increased tuition and potentially cuts to state student financial aid programs, raising the cost of attending college for students and their families. History has shown that when states need to make cuts, support for higher education is often a primary target. 
  • Sec. 3601: Termination of Private Activity Bonds 
    • From ACE: This action eliminates private activity bonds, which are used by private nonprofit colleges and universities to finance capital projects. This repeal would essentially prevent institutions from using lower-cost tax-exempt bond financing. Higher borrowing costs can result in diminished investments in infrastructure, fewer jobs, reduced services, and increased service charges and other fees to students.

 

Below is a comparison of the House v Senate versions concerning several other provisions that affect higher education: 

Provision 

House Bill - Passed

Senate Bill - Proposed

Section 1002  

American Opportunity Tax Credit (AOTC)

Combines with Lifetime Learning Credit (LLC) (by Canceling the LLC)  + Hope Scholarship Credit (HSC)

Retains AOTC 

Section 1002

Lifetime Learning Credit (LLC)

Cancels; Combines with AOTC + HSC

Retains 

Section 1002

Hope Scholarship Credit  (HSC) 

Combines with AOTC + LLC 

Retains 

Section 1204

Student Loan Interest Deduction 

Repeals 

Retains 

Section 127

Employer Provided Education Assistance 

Repeals 

Retains 

Section 117(d) and 117(d)(5) 

Qualified Tuition Reduction 

Repeals 

Retains 

Section 1002

Standard Deduction and loss of charitable deduction 

Increases

Increases 

Section 1303 

State and Local Tax Deduction 

Repeals  

Repeals 

Section 5103

Excise tax of endowments at private colleges and universities 

Creates 

Creates 

 

In addition to the similarities and differences, the Senate bill also:

  • Repeals the deduction for personal exemptions, including college-age dependents:
    • From ACE: Under current law, taxpayers may claim a deduction ($4,050 in 2017) from income for each dependent. 
  • Repeal advance refunding bonds:
    •  From ACE: An important financing tool for institutions to refinance outstanding debt at lower interest rates, and broaden the tax on Unrelated Business Income (UBIT), increasing the regulatory burden, complexity, and cost. 
  • Make changes to Unrelated Business Income for universities:
    • From Inside Higher Ed: "The Senate proposal would require tax-exempt organizations to calculate losses and gains for each economic activity for the purposes of paying taxes -- a change referred to as a "basketing" proposal that higher ed groups say would make colleges' tax bills shoot up as they could no longer use losses from one activity to offset gains in another for tax purposes. Accounting for various business activities under the new rules would also add a substantial regulatory burden for colleges, higher ed groups say. While the tax reform plan has been advertised by GOP leaders as simplifying and streamlining how individuals, families and corporations pay taxes, those higher regulatory costs could take money away from services to students, higher ed groups said."

Federal financial aid investments at FIU make a critical impact in South Florida, allowing our region to gain new college-educated professionals as these individuals work to pursue their dreams.

FIU is one of the largest public universities by campus enrollment, and more than 19,000 students currently receive Pell grants (48 percent of total undergraduate population).

  • 54 percent of these students receive the maximum award based on an expected family contribution of $0.
  • 51 percent of Pell grant recipients at FIU are first generation college students.
  • More than 24,100 FIU students receive Stafford loans.
  • On average, our students graduate with an average debt of $17,500.

Download the 2017 Financial Aid Information

Together, we will make higher education not only an achievable goal, but a more affordable oneBetsy DeVos, U.S. Secretary of Education

Reductions to federal financial aid programs would disproportionately affect FIU’s students—many of whom are classified in the categories of highest need, such as the growing first generation and large Pell eligible populations—due to their heavy reliance on aid to attend school. As reauthorization and supplementary legislation move forward, year-round Pell grants and other access initiatives are still top priorities that would greatly benefit our students.

Research by our national partner, CEOs for Cities, shows that by increasing local baccalaureate degree production by just one percent, the South Florida region would benefit from an expected economic impact of $1.7 billion; such advances are only possible with continued federal financial aid investments.

Priorities/Recommendations for Congress

  • Protect the maximum Pell grant amount and forestall interest rate increases on Stafford Loans.
  • Encourage year-round Pell grants under the Higher Education Act.

Related Agencies

  • Department of Education

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