While law students were hunkering down over the weekend studying for exams, the eyes of the rest of the country were on Washington, D.C.. Let me catch you up on the pertinent info for law students.
First, the Senate passed their version of tax reform. There are several differences between the House and Senate tax bills, so now both chambers need to sit down and hammer out the differences to decide what the final version (which will then go to the President for approval) will look like. Without getting political or partisan, the most pertinent issue for law students is the elimination of the above the line deduction for student loan interest. For several years student loan borrowers have been able to deduct up to $2,500 per year in student loan interest paid, without having to itemize deductions. This deduction is wiped away in both the House and Senate versions, so it’s pretty safe to say this one is going to be gone. The next most pertinent thing is the education tax credits. Law students are able to take up to $2,000 a year from the Lifetime Learning tax credit for tuition and fees paid. The House bill eliminates this credit, but the Senate bill does not. So we’ll have to wait and see how that one plays out. And finally there is the taxability of tuition waivers, which is less pertinent to law students, but a very big deal to many other graduate programs. The House bill proposes that tuition waivers (such as those offered to grad students with assistantships) will count as taxable income. This is also not in the Senate version, so I am hopeful that grad students throughout the country will be spared this burden. (But don’t worry about scholarship and grant funds—these are taxed differently than waivers and will not be affected.)
Meanwhile, while the Senate was talking tax reform, the House introduced a bill specifically for higher education student aid reauthorization. And it scares me. There are a few things I like about the bill. For starters, it would do away with student loan origination fees. And it would also provide for more intensive student loan counseling. But that’s pretty much where my happiness ends. Here are some of the proposed changes that could affect future law students:
- Graduate student annual federal loan limit of $28,500
- Aggregate grad federal student loan limit of $150,000
- The multitude of income driven payment options that we have now replaced by only one plan that would not allow for forgiveness after a certain number of years (only after the full amount of principal and interest is repaid in full).
- The end of Public Service Loan Forgiveness
- No more work study for graduate students
This bill is, of course, just the starting point. The House will be talking about it and marking it up more in the coming weeks. And then the Senate has to come up with their version, and then the whole reconciliation of the two different bills has to happen. So it’s likely that this will not all come to pass…this is the lowball offer that we’re starting with, so there will be plenty of room for negotiation going forward.
Now is the time when the constituents come into play. If you have an opinion on any of this proposed legislation, you have the right (and duty) as an American to make your Representatives and Senators hear your voice.
It’s been a busy few days in D.C.. And it definitely looks like lots of interesting (and sort of scary) stuff is coming down the pipeline. Feel free to reach out if you would like to discuss any of it with me.
And good luck on exams!