NASFAA Mention: College Scholarships Hit With Big Tax Increases in New Tax Law
"A little-noticed provision in President Trump’s sprawling new tax law is treating middle- and low-income college students as if they are trust-fund babies, taxing sizable financial aid packages at a rate first established 33 years ago to prevent wealthy parents from funneling money to their children to lower their tax burdens," The New York Times reports.
"Higher-education leaders are calling on Congress to fix the provision, which drastically raised the tax rate on so-called unearned income for children with assets and young adults in school. Students with large financial aid packages are finding their nontuition assistance for items such as room and board taxed by as much as 37 percent, even if their family income tax rates are much lower.
The impact on full-time undergraduate and graduate students under the age of 24 went largely unnoticed until the waning weeks of tax season. But word is spreading. About 1.3 million undergraduate students and 15,000 graduate students have scholarships and grant aid that cover nontuition expenses.
... In the past, a student from a household with a joint income of $50,000 who was awarded a scholarship that covered $11,500 in room and board would be taxed at their parents’ rate of 12 percent. Under the new law, that money would be taxed up to 35 percent.
'It’s one of those things that is under the radar now but could really have a big impact,' said Megan McClean Coval, the vice president for policy and federal relations at the National Association of Student Financial Aid Administrators."
NASFAA's "Notable Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented.
Publication Date: 5/17/2019
