[LusoTycoon]

The 2nd comment in the article reveals some interesting things.

Basically tuition is usually not charged for Phd students but is used for accounting purposes to get money from Federal agencies.

The "tax increase" would stop incentivizing universities to do these accounting tricks and declare tuiton as 0.

This is a good step in that tax code is simplified and accounting tricks / loopholes are closed for corporations and universities (and other public/private entities).

This is what I read, can anyone clarify this?

" But from an outside perspective, the current rules look like a money laundering scheme. Universities use an accounting gimmick of setting an arbitrary dollar amount for PhD student tuition, and then waive it. At least in STEM fields, essentially no PhD student actually pays tuition. Why not just set tuition to 0? The reason is because “tuition” can be charged to funding agencies, and so this accounting trick of setting and then waiving tuition allows universities to extract more overhead from the NSF, NIH, etc.

Of course, this accounting trick represents a non-trivial fraction of government support for academic research. It seems natural to simplify the tax code by disallowing this trick, but unless the goal is to de-fund academia (maybe it is), it should be countered with an increase in direct funding to universities from funding bodies. "

[turkishgetup]

> But from an outside perspective, the current rules look like a money laundering scheme.

> The "tax increase" would stop incentivizing universities to do these accounting tricks and declare tuiton as 0.

You cannot just ask the Universities to "declare" tuition as 0. It is not some money laundering scheme for the purpose of cooking tax books. The universities actually do get all that tuition $ from the funding bodies. The tuition is "waived" for PhD students, because it's paid for by the PI's research grant/funding agencies. This bill does not shift some already-existing tax burden from universities to students---it's creating new tax liabilities for the students.

You cannot just write laws to force Universities to zero out graduate tuition and forfeit all the revenue either, as the Universities would just hike up administrative overhead, cutting a bigger slice from the PI's research grants.

What really should have been done, for curbing student debt and stopping nonsensical measures like this one, is to restrict university administrative expansion, board member salary, campus expansion etc. Universities have expanded too much from their core functions of teaching and research, by adding out-reach programs and program administrative staff.

[bradleyjg]

> You cannot just write laws to force Universities to zero out graduate tuition and forfeit all the revenue either, as the Universities would just hike up administrative overhead, cutting a bigger slice from the PI's research grants.

What's wrong with this solution? It looks like it leaves the grantors, universities, PIs, and graduate students in the same financial positions, but use a more straightforward and logical way to get there.

[turkishgetup]

> It looks like it leaves the grantors, universities, PIs, and graduate students in the same financial positions

Because the grantors, universities, PIs, and graduate students are not in the same decision-making positions. PIs and graduate students are absolutely powerless. Grantors may impose rules to give preference to projects from low-overhead institutions, but that's difficult to implement, as the grantors would mostly prefer high impact projects rather than seeking out which school is cheaper. The result would be just higher administrative overhead, and less $ for actual research.

I do realize that many commentators on HN believe that university research is a scam, does not create value, or that graduate students who choose to do a PhD are naively making irresponsible financial decisions, or that grant funding should be reduced in order to weed out the less-capable PIs and RAs/TAs. If I were to take on a perspective from this philosophy, then I would agree that zeroing out graduate tuition is good, as it disincentivizes people from considering a career in academia and imposes a self-limiting mechanism to the academic Ponzi scheme. Personally, I do not believe that defunding academic research is good for society---but restricting university administrative cost would do tremendous good to solve the educational cost problem.

[bradleyjg]

> I do realize that many commentators on HN believe that university research is scam, does not create value, and graduate students who choose to do a PhD are willingly making irresponsible financial decisions

I'm not taking that position at all. Here's how I understand the current situation. A grant proposal would say something like:

  $1,000,000 Lab Equipment and reagents
  $250,000 Post-Docs
  $150,000 PI
  $300,000 Phd students tuition waivers
  ----------
  $1,700,000
  x      1.2 university imposed overhead
  ----------
  $2,040,000

The grantor writes a check for $2,040,000. Of that the university gets $300,000 (for tuition) + $340,000 (overhead) = $640,000. The PI doles out the rest.

If this law were to pass the grant would instead be written up as:

  $1,000,000 Lab Equipment and reagents
  $250,000 Post-Docs
  $150,000 PI
  ----------
  $1,400,000
  x    1.457 university imposed overhead
  ----------
  $2,040,000

The university would get $640,000 and the PI would dole out the rest.

The grantors could decide not to agree to this second grant, while they would to the first, but they have no good reason to do that. From their perspective it's the same thing.

[secabeen]

Close. Many universities don't charge overhead (which is usually 50%+, not 20%) on large equipment purchases. Faculty successfully made the case that it doesn't cost $450k to house a $1 million instrument as compared to $1 million in salaries for researchers.

Also, costs for graduate students do not linearly map to costs for Post-Docs and PIs. This would de-couple the funding for graduate students from the actual enrollment, and would make the computation of the appropriate overhead rate even more complicated and fraught than it already is.

The other important thing to note is that the grantors don't pay the overhead until the actual underlying cost is incurred. Trying to project what it would be would be very hard.

[turkishgetup]

This is an interesting idea. As far as I understand, many grantors such as NSF place strict limit on each categories (PI salary, student stipend, material, travel), and generally you cannot move extra $ from one category to another. I think your proposed method does look like stream-lining the accounting, though I do not have a strong opinion. From the grantors' perspective, they might prefer the first as the second reduces transparency on where $ goes?

[secabeen]

>What really should have been done, for curbing student debt and stopping nonsensical measures like this one, is to restrict university administrative expansion, board member salary, campus expansion etc. Universities have expanded too much from their core functions of teaching and research, by adding out-reach programs and program administrative staff.

In public institutions, there is a linear relationship between the reduction in state funding for education, and increasing student debt. Per-student spending is down at UC: http://dailybruin.com/2014/11/18/tuition-rises-despite-decli...

Research spend has gone up a lot, but so has federal funding, and the bureaucratic requirements imposed by the feds to obtain that funding. See OMB Circular A-21 if you want your eyes to bleed with this stuff.

[klipt]

It seems like the Republicans are applying double standards here to universities vs regular businesses. Businesses can reimburse employee expenses, deduct those from taxable revenue as a business expense, and the employee doesn't have to pay tax on the reimbursement.

Grad students are essentially employees of the university, if they're being reimbursed tuition costs why should they have to pay taxes on a reimbursed expense when other employees don't?

[bklyn11201]

An employee does not gain taxable income by driving to a client site and being reimbursed $0.535 per mile by the company as they have used fuel and have caused wear on their vehicle. But if the company decided to purchase an employee a new personal car at the end of the year as a bonus, that would be taxable compensation.

The university has decided to declare a tuition of $50k per year. So charging one student $50k and then providing the rest of the students with a reimbursement, is seen as a gift similar to your employer gifting you a car. The university could choose to set tuition at $5k per year instead and with a little bit more grad student pay and the tuition tax deductions, it should all be even.

[jrs95]

Because businesses pay people who vote Republican, and universities pay people who vote Democrat. That's a bit of an oversimplification of course, but that sort of thing is always in play. Both parties tend to have biases that conveniently align with the demographic that votes for them or supports their ideology.

[CWuestefeld]

We're not talking about expense reimbursements, though. They needed to be able to show that we have some number of certified AWS architects, so I paid $150 for an AWS certification test, and my employer is reimbursing me. They get the credentials they want, and I was made whole.

In this case, it's not that the grad student is getting to take classes (this is tuition we're talking about, remember) for the university, nor is it that the school is benefiting from the student taking classes. That's something the school is providing to them as a service for a cost.

What the schools and grad students are trying to do is to barter their way around taxes: "you give me tuition, I give you some TA and research work", and no (or minimal) money changes hands. That the tax code allowed this was a loophole: in general, you're responsible for the value that was received, not just the dollars portion.

This is even part of ObamaCare: I have to pay tax on part of what my employer pays for my healthcare, even though it was never given to me in any monetary fashion. (the reason it's only "part of" is one of the great tax engineering f-ups, leading to the disaster that is our current system of health insurance)

Even campaign finance law recognizes in-kind services as being equivalent to the dollars they'd otherwise be worth. If your airline writes off the cost of the candidate's cross-country trips, for example, the value of those tickets would count as a campaign contribution.

[klipt]

> In this case, it's not that the grad student is getting to take classes (this is tuition we're talking about, remember) for the university, nor is it that the school is benefiting from the student taking classes.

Why not? The grad student's real job is research. The tuition is for classes to make them better researchers.

[Cyph0n]

It depends on the university.

Here at Georgia Tech, which is a state university, TAs and RAs get an in-state tuition waiver instead of a full tuition waiver. In other words, you get to pay less tuition than if you came in as an out-of-state student.

But you still don't pay in-state tuition: the professor who funds your RA (or department in case of a TA) pays your in-state tuition on top of your stipend.

So there really are no "accounting tricks" going on since the tuition is covered by either faculty funds (e.g., external grants) or the relevant department's budget.

[pc86]

> the professor who funds your RA (or department in case of a TA) pays your in-state tuition on top of your stipend.

That sounds like income.

[Cyph0n]

Sure, I guess. The stipend is taxed by the way, just like regular income.

For me personally, taxing the tuition benefit would be the "straw that broke the camel's back". I believe that the only thing keeping the PhD system running (for domestic students at least) is the fact that it's fully funded and not taxed. If you take that away, many students like myself will just not continue.

In a nutshell, if you want to ruin the US academic research system, tax our tuition waiver​. Europe will suddenly​ become much more attractive, even for US citizens...

[praneshp]

The in-state tuition or the stipend? The stipend is taxed like a payroll tax..

[praneshp]

Since when do TAs get that benefit? Back when I was a TA, we just got $15 an hour* 15 hours a week.

[Cyph0n]

Firstly, it depends on the major and university. Secondly, out of state tuition here is around $20k per semester...

[praneshp]

Yeah yeah, I was in CS at Tech a while (~5 years) ago. I paid that out-of-state tuition for a semester.

[Cyph0n]

I'm in ECE, but I don't think CS is different. From what I know, TAs are per-semester and not hourly contracts.

[throwawayaway12]

I think it is important to emphasize that 'no tuition' is the norm for STEM fields, and not necessarily for non-STEM.

I will rephrase the scenario slightly: The university collects tuition on PhD students to recoup costs in education. This can be for paying professors (who teach the courses and advise the students) to paying electricity the student uses when doing their research. Getting a PhD is a questionable decision in terms of finance for the student. Advisors are able to write into grants support to pay tuition for students. This makes it easier to entice talented students to work with said advisor and get a PhD, rather than joining the workforce straight out of undergrad.

[mcguire]

"At least in STEM fields, essentially no PhD student actually pays tuition."

As someone who apparently "essentially" doesn't exist, I object to this statement.

Further, there exist fields other than STEM, and I'm not even sure this applies to all of STEM.

[allenz]

I disagree that it's a money laundering scheme. Universities provide real value to students. If anything, they are highly inefficient at capturing that value. Being forced to set tuition at $0 would be the real accounting gimmick. And yes, this is absolutely targeted at defunding education. It's certainly not a tax cut.