Graduate assistants' stipends again being reduced by taxation

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."

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sameeker wrote on December 14, 2011 at 8:12 am

Where is the logic in this? Free welfare for single moms and tax a student trying to work and better themselves. Education should be free and welfare should be a loan.

Squirrel wrote on December 14, 2011 at 8:12 am

Sounds like there's a tax loophole that needs to be closed. All benefits need to be taxed to feed the machinery of government. Everybody seems to feel their case is different. Well too bad. Pay your taxes and quit complaining. If you don't like it then tell your elected reps to quit spending your money.

Joe American wrote on December 14, 2011 at 9:12 am

Education should be "free"?  Based on what logic?

Iseewhatyoudont wrote on December 14, 2011 at 10:12 am

Based on the fact that you are paying taxes that help support education, which includes public institutions like the U of I.... AND that students are pursuing higher education to obtain employment and, hopefully, make more money (which means you are going to pay more taxes).... AND that pursuing a higher education only to rack up more debt from school loans (that one is forced to take out to help support themselves because dumb tax laws eats up all of their money that there isn't enough left to pay for food/shelter) and then not being able to find a job afterwards so that you can pay off that debt is counter-productive...

Joe American wrote on December 14, 2011 at 11:12 am

I guess when I said "based on what logic?", that included bad logic.  My bad - I should have been more clear.

"Based on the fact that you are paying taxes that help support education"

"Help", being the operative word, is exactly what our tax dollars do.  They HELP pay for it, not fully cover it.  Nor should they.  I don't want to pay for anyones education other than my dependents, and trust you me, you're not my dependent.  And can you imagine what every Joe's tax bill would be if we footed the bill for every student who didn't want to work their way through school?  No thanks.  Work, my friend, work.

"....are pursuing higher education to obtain employment and, hopefully, make more money"

Great, but this country was built on motivation, not relying on others to pay their way.  And it's not my concern if you want to live on $25k/yr or $125k/yr, and it's not my responsibility if you choose the former. 

"....that pursuing a higher education only to rack up more debt from school loans (that one is forced to take out to help support themselves"

And this is my, or anyone else who's been through the systems problem HOW? (Hint: It's not)

Now get back to work.

The Voice of Common Sense a... wrote on December 14, 2011 at 11:12 am

Must be a cold self-centered Randian world you live in sir. The "I've got mine so f you" attitude is some of the worst humanity has to offer.

Joe American wrote on December 14, 2011 at 11:12 am

Excuse me?

I did it.  Millions of others have done it.  So what does that tell you and your self-proclaimed common sense?


The Voice of Common Sense a... wrote on December 14, 2011 at 11:12 am

I've done it as well. That doesn't entitle me to smugly condescend upon others who are working their way through and derive some twisted satisfaction from hearing of their troubles.

Joe American wrote on December 14, 2011 at 11:12 am

I'm not sure who you're referring to as deriving "some twisted satisfaction from hearing of their troubles", but let me know when you figure it out.  Surely common sense would have told you the exact opposite. 

sameeker wrote on December 14, 2011 at 11:12 am

I am sick of you dinks who claim that the poor CHOOSE to live this way. We work harder then any rich CEO ever will. You know what you can do with your GOP thinking. If you weren't so self absorbed, you see that the point that I am trying to make is that it stinks that women can get free welfare checks, medical coverage, food stamps, WIC, rent, daycare and a host of other services, while students can borrow enough to go to school. Why not reverse the situation and make welfare a loan and use the proceeds from the repayments to provide education for all serious students?

tigersy2k3 wrote on December 14, 2011 at 12:12 pm

You are 50% correct there, all those programs should be eliminated, but students should still have to pay for college.  The fundamental principals of our government were to provide a military, infrastructure, and a common currency.  Over time as politicians have started dipping their hands into the pot know as Legislation, all these other welfare programs were created, and now we have the system we have. Mostly to blame for this is the human's change in heart on the topic of 'human welfare'. It use to be if my family could feed ourselves, and your family couldnt, it was our choice with free will to contribute to you if we wanted, if we didnt, your family would either starve or go elsewhere, and that was publically accepted.. now with human mentality, we are required to help our neighbor who's family is starving... Whether you feel these things are right or wrong, the generations past have created this problem, and there is no way to stop it, because can you imagine the uproar the government would create by telling all those receiving federal/state aide for whatever reason that it is going to cease to stop??  People receiving those have a sense of entitlement, so if the government didnt give it to them, they would take it from the people that have it, as they feel it is their right as a human to have a job, family, residence, food on the table... where in natural habitat those are luxaries...

Joe American wrote on December 14, 2011 at 12:12 pm

Then be a CEO and you can work less.

Makes sense to me.

Joe American wrote on December 14, 2011 at 9:12 am

Waaaaaa. I guess Ms. McCullough is going to have to get a real job to pay for school. And dare I say it - maybe MULTIPLE jobs.  The horror!

Oh, wait, do you mean like millions of other students have had to over the years?

linzy221 wrote on December 14, 2011 at 10:12 am

Joe American, I appreciate you taking the time to read this story.  This is Lindsay (Ms. McCullough).  I just want to re-emphasize that I left my job based on the fact that I would have enough money to support myself and pay for graduate school while not going FURTHER into debt (with student loans).  Also, I am working 3 jobs (over 40 hours a week) while I balance 4 classes (and the subsequent homework/studying).

Joe American wrote on December 14, 2011 at 11:12 am

Excellent.  As did I, because I had to if I wanted a degree.  I had to work four jobs my last year of grad school, three of which I worked consecutively.  I also took a full load of classes, AND I had - get this - absolutely no tuition waiver.  Nothing, nada.  I applied for nearly every one available in my major and got none.  The ONLY thing I had to rely on was whatever money I could save up over the summer, and that usually lasted only a couple months.

So your tuition and rent are covered, and you've got three jobs, so of course I'm wondering how that doesn't cover the rest.  Call me a rotten person for not feeling overly sympathetic, but how can you not be making ends meet on that when I made ends meet AND had to pay tuition?  Life wasn't overly-comfortable, but I made it through.

I really do wish you the best in your pursuit of a degree and successful career, but not so much at taxpayer expense.

(I'm leaving out the reason that I didn't get the waivers which is both another sore spot and surely to open a can of worms.....but I'm not complaining.  I've moved on.)

tigersy2k3 wrote on December 14, 2011 at 12:12 pm

Joe America, seems that you are more concerned about being bitter then addressing the situation at hand. Most of us have had to work for what we want, but this article is about the university possibly misleading students.  To your equivalent it would be like one of your 4 employers promising you a paycheck and bonus after you completed a project assigned to you and then bailed on paying you your bonus.. aka, money you were planning on and made your decisions around getting that income.

Im sure your "sore spot" is because you are a white male, and you didnt get that because it went to a minority applicant. It happens both ways, if you have truly moved on you wouldnt be on here posting the comments you are. It has nothing to do with you being a rotten person, but rather you have turned this article into a personal issue rather then focusing on the true issue... which isnt, whether or not a student works, gets aid, or anything other then the fact the university may be continuing to mislead these students, promising them something, then they make a decision to attend like this young lady, and then in the end they dont get what they were promised. 

I am sure you are employed, just imagine if your employer told you that you can take vacation and then you go on vacation, and when you come back they take that money out of your paycheck because it was an "unauthorized vacation" -- im sure you wouldnt be too happy about that, just like these students have the right to feel mislead 

Joe American wrote on December 14, 2011 at 12:12 pm

If the University failed in their duty to withhold the required taxes from the students stipends, then where is that money now?  And how does this absolve any of the students from having to pay those taxes?  I may be wrong, but didn't these same students benefit from those monies which were, technically, not theirs?

tigersy2k3 wrote on December 14, 2011 at 12:12 pm

All of these points you raise is why I posted the message below to Lindsey. I dont go to U of I so I dont know the answers to your questions. I believe they should have to pay the taxes. like I stated before to you several times, the question is. "Where the students mislead by the university?" If your employer is going to take all your taxes out in the final 2 months of the year, so you get 2 months worth of $0 checks, wouldnt you like your employer to tell you that is what they are doing? So the other 10 months of the year you can save and prepare for those 2 months?? That is the simple issue at hand, not whether they should/should not have to pay this tax.  But obviously this has struck a cord with you, and you are out to prove everyone wrong, even when there is no proving to do. Who knows maybe you make more money then an executive who worked at Enron, and money isnt an issue to you, so you cant relate to this, but anyone who doesnt have a financial nest to fall back on can relate to how they would feel if promised something financially and then you got only a percentage of what you were promised... hence, "is the university misleading these students?" -- im sure her old position has been filled, so its not as if she can just sya, "oh well, I gave it the college try, time to go back to my job" -- no, she took a leap based on something she was told, and now she is getting something different putting her in a financial bind -- I can appreciate her concen and the others in the community that are concerned as well, because I was once in the situation where I lived paycheck to paycheck, while not trying to take on more debt

Joe American wrote on December 14, 2011 at 12:12 pm

I respect your opinion, but need to make a few corrections.

"Who knows maybe you make more money then an executive who worked at Enron."

I can assure you I make substantially less than the person who had the coffee waiting for the Enron executive every morning.

"I was once in the situation where I lived paycheck to paycheck..."

Ummm, I would like to say "been there", but that's my situation right now.

tigersy2k3 wrote on December 14, 2011 at 11:12 am

Lindsay, I am just curious, since all this came to light last year (school year anyways) and you are a new student this year. Did the U of I disclose to you that this would happen or give you any guidance so you could better prepare for it? I found it easy to sympathise with the students last year because it came out of nowhere with no advance warning since the university dropped the ball for several years, but one would believe that now the university would let students know this in advance as so they could prepare financially for when it happens.  So I guess I am just curious to hear a 1st hand account of how you didnt know this would happen and if the university did anything before you accepted your position in graduate school to make you aware of the possible tax? No offense to you or any of the other students, but I find it hard to be sympathetic again this year for something that has already been discovered and should be known (and the university should let you know before you make the decision to accept their package).  Unlike Joe America I am not going to belittle a graduate students work habits, as I am sure you and others are hard working, but at the same time I do believe you and the others are responsible for this tax as it is the taxpayers money covering everything you receive, but you should be fully educated before making your decision to attend. Make me wonder if you (or any student) would be better doing a professionals study master's degree if this is the alternative option.

Just a curious reader.  Thanks for sharing your story

Iseewhatyoudont wrote on December 14, 2011 at 10:12 am

I happen to know Ms. McCullough and she does have multiple jobs- 3, in fact. And commutes to Champaign to cut living costs....

ClearVision wrote on December 14, 2011 at 10:12 am

Welcome to the real world, where ignoring the fine print may very well have consequences.

ReadTheFinePrint wrote on December 14, 2011 at 10:12 am

Funny, because if you read the regular size print in this article, you'd see that the University was actually the culprit of not reading the fine print.  Hard for these graduate students to read the fine print when the fine print didn't exist for them.

Moral of the story: read the whole article before you comment.

Lostinspace wrote on December 14, 2011 at 12:12 pm

Thirteen hundred a month, as compared to $150,000 a month (plus perqs) for da new coach. Hey, we have our priorities!

tigersy2k3 wrote on December 14, 2011 at 12:12 pm

Its been proven that major athletic programs such as the Universit of Illinois pay for themselves. If it wasnt for the basketball and football program that Illinois has and the money that they bring in there are several hundred "student-athletes" in other sports that wouldnt receive athletic scholarships or be able to travel to the competitions they do... This includes sports like Women's Volleyball who is this weekend traveling to San Antonio for the Final Four -- So dont be too quick to speak about these subjects.

In addition.. how many students of the University of Illinois are in attendance here because they like Fighting Illini athletics growing up... I bet you would be surprised how many college students pick where they are going to go to school because, "thats the college they like in sports"

InterestedObserver wrote on December 14, 2011 at 12:12 pm

LostinSpace- that arguement doesn't make a whole lot of sense as the Football Coach isn't paid with tax dollars.  The Footbal Program (and more broadly, DIA) doesn't receive any state funds or tuition funds.  They generate their own funds through ticket sales and donations.  And, they also fund the non-revenue sports.  I agree it's a lot of money, but it's not money that's coming out of my pocket or that can be diverted to assist graduate students. Also, most coaches have spent a significant amount of time in their younger years working very long hours for 0 compensation to get the necessary experienece to move up the ranks. 

The issue here is that graduate students who entered last year recevied very little notice (maybe a month or two?) that the money would be taken from their paychecks.  I don't think Ms. McCollough is complaining about having to pay taxes. Rather she's sharing her experience in dealing with the the shock that the money she had depended upon (and was promised)  suddenly disappeared.  Had she known before choosing Illinois that her stipend would be taxed and by how much, she may have chosen a different school that would be more affordable.  I beleive other institutions who were withholding the taxes all along simply included that withholding when indicating the amounts of the stipends.  My stipend at another insititution a few years ago was similar to what Ms. McCollough now receives.  But, I don't recall any letter notifiying me that I was being taxed on my tuition waiver. 

This is a mistake the university made by not withholding the taxes.  This article is more about the impact that correcting the error has had on individual students, to me, not about anyone trying to evade taxes.  Also, Teaching Assistants and Research Assistants are not taxed on their tution waivers so it does feel very unfair to the graduate assistants who are being taxed. 

Lostinspace wrote on December 14, 2011 at 1:12 pm

Are you saying that no tuition or tax money from the University or Foundation goes to coach's salaries, facilities construction and maintenance, security, scholarships, travel, tutoring, etc.?

If that is the case, and if the University comes forth with the figures to prove it, I withdraw my comment.

And if that is the case -- that football and basketball, having little or nothing to do with the educational mission of the University, are truly self-supporting -- then they constitute an independent business and should be subject to taxation like other businesses.

coffeenomnom wrote on December 14, 2011 at 2:12 pm

I think something to bear in mind, Joe, is that these students were under the impression that their taxes had already been withheld. So they spent the money they earned at their jobs on food, rent, etc. Then it came to light that the university had miscalcuated and not withheld the right amount of money. These students are willing to pay back the taxes that they owe, but the university is making them do it all at once, rather than spreading it out over time. Everyone wants to fix an honest mistake, but it was the university's responsibility to properly withhold taxes and they failed. It would be a good faith act if they worked out a plan with the IRS so the students could pay back their taxes and still provide for themselves.

I'm sorry you didn't get a tuition waiver, I really am. But you're not entitled to act like all students who have one are on a joyride. A tuition waiver is not a gift, it is part of a compensation package in exchange for a lot of the work that keeps the university running. Please consider being a little less nasty in your comments. You're not the only one who works to make ends meet and you don't have the right to talk to down to everyone else. I'm sure you're a very smart man, but you just come across as mean and spiteful in the way you talk to people on here.