Low-Income College Students Are Being Taxed Like Trust-Fund Babies | Hacker News Reader

Low-Income College Students Are Being Taxed Like Trust-Fund Babies

nytimes.com

85 pointstysone64 comments

> About 14 percent of the university’s undergraduate class is part of a program called the Carolina Covenant, which provides debt-free, full financial aid packages to students who fall below 200 percent of the federal poverty level. That package includes nontuition room, board and living expenses that total about $13,402 in the university’s estimated cost of attendance next school year.

Are you still required to combine both parents income (even if they're divorced and you're estranged from one or both of them) before you qualify if you're under 25 (23?)?

When I was 19 I didn't qualify for any financial aid because my fathers income HAD to be included in my application even though he didn't contribute anything to me and my mother was on disability, they were divorced and I hadn't seem him in years. I believe he was in the 40-50s range and my mother was under $10k/yr.

I was making around $10/hr working full time and attempting to put myself through about $40k of debt. No pell grants or anything. I couldn't afford a real school and dorms or any of that at all. I eventually just dropped out because working 8 hours a day and going to class and affording rent, etc wasn't exactly going my way.

I feel like I rarely hear about this and it always makes me wonder if there was something more we could've done. I remember this distinctly though and my mother fighting back and forth with admissions. It just makes no sense to me.

Fun fact, there's a loophole on this.

Get married.

I kid you not. I got married young (my choice, still together, love my wife, just for the record), and I was exempt from this. My jaw quite literally dropped because the year before I got married I had to pay full rate on school.

So, if you're planning on tying the knot but are waiting to finish school, don't. it might cost you less.

If financial aid helped everyone it should, it would just be called low- or no-tuition. But if schools admitted that, they would have to accept something they would rather not talk about: generous-sounding financial aid does not make jacking up tuition a victimless crime.

Why should financial aid help people who can afford to pay sticker?

Why should "sticker" be as outrageous as it is currently?

Why don’t I deserve a penthouse apartment in the centre of Dublin for €200 a month?

Because suppliers want money and demanders are willing to provide it to get what they want.

Yeah that's a pretty dumb argument. I'm talking about education which preferrably would not be subject to supply and demand forces as much as other markets.

If you want an education MOOCs, old textbooks and MIT OCW are cheap or free. If you want a degree that costs money because people want their stamped certificate of membership of the bourgeoisie.

Your talking to someone who has done very well for himself without a degree, not by choice. I couldn't afford community college in my day because I was unwilling to take on debt, while working 40 hours a week and living at home.

I don't believe that is a fair way to treat students though. You shouldn't have to get in debt up to your eyeballs to compete in the job market.

I was lucky I was naturally inquisitive and interested in learning all I could. Not everyone is though, and that's alright. If they learn better in a structured environment, I don't think that should preclude them from being educated.

The average Bachelor’s graduate in the US has $30,000 in debt on graduation, the price of a new car. That just isn’t that expensive for the magic piece of paper that gets you past HR. If you didn’t want to go into debt that’s fine but if you have a credible chance of graduating $30,000 over the course of a working life is not bad.

If you want a degree you can actually get a regionally accredited US one way cheaper, from Western Governors’ University or go even cheaper and munchkin transfer credit requirements and credit by examination like the people at https://www.degreeforum.net/

Or you can do like I did and fart about for years and go straight to getting a Master’s in Finance for ~£10,000 from CEFIMS by starting off studying Master’s modules as individual professional awards or in Software Engineering from Oxford more or less the same way.

https://www.cefims.ac.uk/programmes/ipa/

http://www.cs.ox.ac.uk/softeng/study/apply.html

> Admission criteria Applications are invited from anyone with sufficient experience or proven ability in software, security, or data engineering. An appreciation of the challenges and practices facing professionals in the field is expected, together with an appropriate level of logical, mathematical, or analytical skills. A typical applicant will have at least two years' experience in a professional environment, and an undergraduate degree in a related subject. However, more extensive experience may compensate for a lack of formal qualifications

> unwilling to take on debt, while working 40 hours a week and living at home.

Does community college cost that much now?

I went to community college, lived at home and worked less than 40 hours a week without debt. I just checked and they charge about $800 per semester to county residents, which sounds even less than what I paid.

People find ways to say that about a lot of things, from housing to first-run movies. You'll have to do better than simple assertion to defend the claim that cash assistance for college should be universalized rather than means-tested.

Because education is good for society and should be encouraged.

Hopefully the Lambda School model largely does away with this problem.

There's sometimes other options available, but people who most need them don't necessarily know about them. And there's also a lot of predatory elements, like near-worthless diploma mills, that people have to know to avoid. It sounds like you did the best you could, under the circumstances (even back-and-forth didn't work).

I got turned down for financial aid that I needed for college (didn't even know I could try to appeal or argue it), and had to take a roundabout way to further education and credentials.

In my case, I was the eldest of six kids, my family couldn't help at all with college, I was already pretty much on my own, I didn't have anyone advising me, and apparently that part of the system didn't work right that time.

Thank goodness for community college, another part of the system, which I happened to hear of. Only ~$25 per credit hour (IIRC) while I worked in a store part-time. The community college had very dedicated instructors, and it also got me a lucky industry internship, with which I managed to support myself.

I wouldn't recommend the community college low-status route, iff you have the chance to go to an elite school, where further opportunity doors are not only opened, but you're practically carried through many doors. If you're not going to an elite magical door-opening college anyway, and you can't afford the 4-year college experience, then maybe it makes sense to do 2 years for a community college before transferring for 2 more years (find someone at the school you plan to transfer to, who will talk with you about that, and get something official about transferable credits, in writing).

(I eventually did get degrees from two fancy-pants schools, thanks in part to altruistic mentoring I was very lucky to receive. And also thanks to the willingness of the first fancy school to give me a chance.)

You need to go through process to be declared emancipated minor. You need to not be declared as a dependent on their taxes.

https://www.nerdwallet.com/blog/loans/student-loans/fafsa-gu...

Went through this process with my school and was continually denied. Had letters from relatives, a psychologist, and a school counselor and was not declared as a dependent on my dad's taxes throughout undergrad. I didn't live with or speak to my father for the entirety of undergrad and beyond...still didn't make a difference.

Grandparent is talking about a legal process, not letters from random folks.

There’s nothing about getting emancipated that legally obligates schools to care.

Federally, it helps and a lot of financial aid comes from the federal government.

>> fathers income HAD to be included in my application even though he didn't contribute anything to me and my mother was on disability, they were divorced and I hadn't seem him in years.

I don't know how that works in US, but in my country you can sue your parent for child support payments until you reach the age of 26, if you are still in college. I mean: you sue them on your own behalf, since you're adult, the other parent does not need to participate.

Which country? I absolutely would've tried to use this option if I had known it existed/if it was available.

The United States. https://www.yahoo.com/news/21-year-old-sues-parents-for-coll...

There is a process to declare that a parent isn't helping out financially but it's a little confusing. My grandmother knew about it because she's a lawyer, but there are also financial aid experts to help people navigate this system. You have to fill out some forms and get some people to sign some documents under oath that your dad isn't contributing.

> Are you still required to combine both parents income (even if they're divorced and you're estranged from one or both of them) before you qualify?

If either of them claim you as a dependent, then yes.

IIRC not tax/dependency status; in order to be free from parents’ income you need to be above 24, emancipated from your parents, a ward of the court, etc..

source: https://www.fastweb.com/financial-aid/articles/federal-finan...

These criteria are really shitty for some people. My middle class parents spoiled me and paid for the entirety of my college tuition and expenses, but I had friends from families with similar income whose parents completely refused to pay for any college expenses, and they had to survive on whatever scholarships and student loans they could get, but couldn't get any FAFSA aid. I'm not sure what the alternative is, and I'm sure they were more privileged than many/most of the people who do qualify for FAFSA aid, but it still felt really unfair to me.

I guess they should've gotten sham marriages to qualify as independent? (Why is marriage a qualifying criterion for independence? Seems really antiquated to me...)

Or married, I think.

Married, yes.

Veteran also works -- I qualified not to include my parent's income. But the $10k I made the year before put be above the threshold for a household of one. I think I got a state $500/year and that was it. Everything else was loans.

It was a perverse position I was in during the 6 months between military service and returning to college. Any money I saved during that time was considered to be 100% applicable to that next year of college. So I basically had to deplete all savings before any aid or even loans were allowed to kick in.

Incidentally, the GI Bill, which is often advertised as $xxx per month is pro-rated to the day.

Are you saying that one divorced parent claiming me as dependent means that both of their incomes are automatically combined when applying, or that both likely claimed me as a dependent?

I haven't been aware of where my father is since I was a teenager, so it's entirely possible that he was in fact claiming me still. The fact that that disqualified me from any assistance is pretty sad. I'm very lucky to be where I am right now.

I recall us explaining this to admissions but there being no budge at all.

Your situation really sucked. However the reason that is that way is because the schools want to avoid financial aid fraud: a rich dad is “out of the picture” when in fact he isn’t — people use that strategy to get more financial aid. In your case, it was horrible. Getting classified as an independent student under the age of 24 is very difficult; it depends on the school’s financial aid administrator. Only .9% of students got an override. However, being married, a veteran, having legal dependents, or being an orphan are the only automatic ways to be considered independent for the FAFSA. If that were my situation, I would have joined the National Guard for two years: that makes you independent and gets you additional money from the GI Bill. However, that’s not for everyone.

I’m sorry you had that situation. In your case, it was clearly unfair.

I saw that there is the ability for an Admissions person to do an override in a link posted in this thread, I was curious how often it was done as it wasn't recommended to me at all. So that makes sense.

I was very close to joining the USMC/Army to deal with all of this. USCG/USAF (admittedly didn't try USNG) and everyone else were "full" back then if I didn't have a Bachelors. I graduated right after 9/11..

This doesn't only effect undergrads, this is also horrible for graduate students. I'm going to be directly effected by this tax this year if the law doesn't change. It will tax my fellowship stipend (used for living expenses such as rent, food, and transportation) equivilant to an ESTATE.

It's basically like saying that grad students are not "earning" this income and thus they don't deserve to be taxed on it as if it was a wage.

But not quite like an estate since you have to have an estate larger than $11.4M before any taxes will be applied to it. That raised limit was also part of the tax bill; you’re just offsetting the cost.

In this case the problem seems to be the university trying not to treat the grad student as an employee.

> "The impact on full-time undergraduate and graduate students under the age of 24 went largely unnoticed until the waning weeks of tax season."

I disagree. So many Phd. students were complaining about it. I guess it has hit them hard.

So the problem is that all unearned income that isn't for tuition is being taxed the same, regardless of who it's coming from and who it's going to? Am I reading it right?

Thats the gist. The main problem is the lack of distinction between finincial aid or graduate fellowships and other forms of "unearned income". This lack of distinction leads to a graduate student's only source of income (a fellowship) being taxed as if it was a gift handed down by a rich parent.

It is a gift handed down by a rich parent — the parent in this case is the university. There is no difference. Someone is handing you thousands of dollars and they say: “here is some money for your school, in order to keep getting this money, you have to get good grades and volunteer as a teaching assistant.” How is that any different than a rich parent giving you the same money with the same conditions? At the end of the day, some benefactor is handing you a pile of money to get an advanced degree.

It seems you may be unfamiliar with STEM Ph.D programs. The way it works is professors "sponsor" a graduate student to do reserach for them. The student will either work on existing projects started within that professor's lab or start their own related projects. The goal of this research is to contribute novel material into scientific literature.

It's also usually NOT a rich parent. For example a big funder is NSF or NIH, these institutions grant money to labs with the expectation that they will perform research.

Don't think of it as being paid to go to class, think of it as a job where you work 40 hours a week (usually way more) doing reserach, then go to class, then on top of that help teach those classes through being a TA.

Those cases really should count as earned income then.

Indeed, and I'm surprised it wouldn't be. When I was a graduate student we got tuition waivers but beyond that it was a salary for being a teaching or research assistant. TAs were definitely considered employees, because they were also union-represented.

That’s the standard, not the exception, for PhDs. Which is why it’s not really “those cases” that should be earned income - its the entire category.

Graduate students work to earn their keep. They are more properly treated as employees: https://www.npr.org/sections/thetwo-way/2016/08/23/491090762...

Are you telling me you have a hard time discerning between a trust fund and an educational grant or stipend?

From a taxation perspective, yes. If it’s earned income, then the university should put the “student” on a W2 and pay then as such. Otherwise, it’s unearned income and I mean “unearned” in terms of tax treatment; that doesn’t imply that it isn’t deserved. A day trader makes unearned income, but nobody could argue that doing that isn’t “work.” But the IRS still considers that also unearned.

I am all in favor of cutting taxes on unearned income. However ironically, those most opposed to that also like to complain when it’s their unearned income being taxed as in the case of a stipend or fellowship.

shouldnt the annual gift exclusion of 15k apply then?

Is this only an issue if the students are claimed as dependents? (I might be misunderstanding)

No. The test are similar, but actually being claimed as a dependent has nothing to do with it. If you meet all of these tests, you may be subject to the tax.

1. You had more than $2,100 of unearned income.

2. You are required to file a tax return.

3. You were either:

a. Under age 18 at the end of 2018,

b. Age 18 at the end of 2018 and didn’t have earned income that was more than half of your support, or

c. A full-time student at least age 19 and under age 24 at the end of 2018 and didn’t have earned income that was more than half of your support. (Earned income is defined later. Support is defined below.)

4. At least one of your parents was alive at the end of 2018.

5. You don’t file a joint return for 2018.

https://www.irs.gov/instructions/i8615

Edit: But being eligible to be claimed as a dependent can reduce your standard deduction, potentially causing more of your income to be subject to tax. Even if they choose not to claim you, your standard deduction is still reduced.

College education should not be the primary route out of poverty, that's the real issue. Not everyone can or should get a college education.

College should just be cheaper for everyone. Eliminate federal-backed student loans, eliminate useless classes, eliminate remedial classes, utilize more technology, eliminate excess administrators, eliminate ever-expanding resort-style amenities.

> Eliminate federal-backed student loans

Or make them available to everyone irrespective of their income, make sure it covers the entirety of tuition and board cost, subsidise interest, and require repayments after an income threshold. Offer discounts for people that pay upfront. Get rid of "free ride" tuition in its entirety. This is the Australian and UK model.

I agree with the other stuff though: eliminate useless classes, remedial classes, etc. Also 2 years of courses should be allowed to be completed at community colleges and transfer in directly.

There also needs to be more incentive towards vocational work and apprenticeships.

College education is likely not the primary route out of poverty. That medal would likely go to the military right now, and I hope I shouldn't need to mention the myriad issues of having an entire class of citizen whose only potential route out of poverty is by joining the military industrial complex.

Everything that you mentioned otherwise comes as a result of universities designing for-profit over for-education. Because they have to attract the people with the deepest pockets, which means resort-style amenities. The easiest way to solve this problem is to just make college free and give people the choice of going the traditional route, going to a technical school etc.

If people want to get a college education, they should be able to.

Military is only a good route if you win the lottery and don't go to a battle zone and get injured and then thrown away

Why don't we just be honest. The housing mortgages crisis bailout with many other blunders by the government... has resulted in using the new generation as the potential piggybank to pay it all back. The generation in power doesn't care if one generation is sacrificed with all the downfalls that occur to the young persons who have no help from their parents or whatever reasons.

The government got back the money from the bailout with interest, so there's no debt left from it for future generations to pay back.

Paid back by the people who this was passed down to.

That money was already paid back, not sure what you're talking about.

I'm really having a hard time following your connection between the "housing mortgages crisis bailout" from 10 years ago and unintended consequences of the tax cut 2 years ago.

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