Graduate assistants' stipends again being reduced by taxation
URBANA — Lindsay McCullough left her $38,000-a-year job at a Chicago nonprofit last year to pursue graduate studies in her dream career: employee training and development.
A key factor in her decision was the financial aid package offered by the University of Illinois — a tuition waiver and a $1,300-a-month stipend for working as a graduate assistant in the UI's Career Center.
Unfortunately, her pay has been reduced to $500 a month, barely enough to cover her rent.
UI officials discovered last February they had failed to withhold taxes on graduate assistants' tuition waivers for seven years because of a glitch in the Banner computer system.
Under federal law, the university has to tax the value of graduate students' tuition waivers at rates of 30 percent to 36 percent to cover state and federal income taxes, plus Social Security where applicable, according to UI officials.
For some students, especially out-of-state or international students with tuition waivers worth $30,000-plus, the withholding eats up a huge chunk of their stipends. As a result, several of them wound up with $0 paychecks in October and November.
"It is still upsetting to me," said McCullough, who broke into tears before a campus senate committee Monday. "This is something that's not going to go away."
The Senate Executive Committee agreed to create a task force to try to find a short-term and longer-term solution.
"Something has to be done. This is not a situation that can go on," said Associate Professor Joyce Tolliver, vice chairwoman of the committee.
The university last spring assumed liability for the back taxes but notified students that the money would be withheld from their paychecks beginning in March. About 180 graduate students were affected; the campus has hundreds of graduate assistants, but most don't earn enough to be taxed.
All graduate assistants and pre-professional graduate assistants receive tuition waivers as part of their compensation package. They typically earn $7,500 to $9,000 per year, according to the Graduate Employees' Organization.
The tax liability ranges from $1,500 to $9,000 annually, the GEO says, and some students faced the prospect of no paychecks last spring. But the Graduate College stepped in with one-time emergency grants to cover the cost.
No grants were available this fall, and most of the 180 students received 50 percent or less of their regular paychecks in October and November, said Miriam Larson, co-president of the GEO and a preprofessional graduate assistant for the Center for Children's Books. She said the GEO gave out grants to some students this fall.
McCullough said she has friends who are international students and can't get extra jobs off campus; some, especially those with children, have considered leaving the university. Larson said some graduate students left this summer.
"Everyone understands paying taxes is part of being an employed person," but no one expects to get a paycheck worth nothing, Larson said.
The law applies only to graduate assistants, not teaching assistants or research assistants. The first $5,250 of a tuition waiver is also exempt from taxes, so in-state graduate assistants pay little if any tax on their waivers. Base graduate tuition is $5,454 a semester for Illinois residents and $12,087 for nonresidents, according to the UI's website.
Among the remedies suggested by faculty were surveying other universities to find out how what they do; working with UI officials to mitigate the impact this year, possibly by spreading out withholding over a longer period; helping graduate assistants find jobs as TAs and RAs; and lobbying legislators to change the law.
"I would think if they were aware of it, they could potentially bring this to Congress and get this law changed," Professor Kim Graber said.
Graduate student Carey Ash, who is studying law and educational policy, said the university can influence politics at the state and national level and asked for a "genuine lobbying effort."
Some UI departments have already reclassified graduate assistants as teaching or research assistants so they'll be exempt under the law. But campus officials caution that can only be done selectively, where appropriate.
Another option is offering students an assistantship only once in a calendar year, so they don't meet the income threshold.
"None of those things add up to a full solution," interim Provost Richard Wheeler said.
Wheeler said some schools don't have a category called graduate assistants, though it's been a practice at the UI "forever," he said. Grad assistants usually don't do direct teaching or research but rather instructional support and administrative tasks. McCullough counsels students about career prospects, and many students in library and information science work at the UI Library.
The tax law was targeted at full-time workers who are pursuing advanced degrees, not graduate assistants, officials said.
"It just created this incredible vulnerability that nobody could have anticipated when the tax law was passed," Wheeler said.
The campus is eager to find solutions so it can continue to recruit top graduate students, he said. "These are not good jobs to offer."