October 8, 2018

Towards the end of 2017, the Trump administration - with the help of a Republican-majority Congress - succeeded in passing the Tax Cuts and Jobs Act. The controversial bill brought major changes to the tax code for individuals, corporations and other entities. Supporters of the changes point to America's booming economic growth and record-low unemployment as evidence the cuts have achieved their intended purpose.

A student with college debt.

Skeptics note that the new tax revenue model has done nothing to halt the spiraling national deficit, and in fact has led to an acceleration in the increase of the total debt figure. One significant area of adjustment, however, is less-often discussed: the tax reform's impact on the higher education sector.

The new tax legislation has, for now, been a mostly positive development for the cost of tuition, but there are some exceptions. The ultimate sustainability of the subsidies that currently exist will play a central role in the competitiveness of our economy in the decades to come.

The good: Unchanged student benefits

The Tax Cuts and Jobs Act notably left out several controversial provisions that had been discussed during its lead-up. Several major benefits to students had been candidates for repeal, and that the legislation leaves them intact should be counted as a win for higher education costs.

First, the law leaves in place the student loan interest tax deduction, a provision which had done a stint on the rhetorical chopping block. It also doesn't count graduate student tuition benefits as income for the purposes of taxation. Finally, employers remain eligible to claim the maximum $5,250 tax write-off associated with providing tuition assistance to employees.

These policies were thought by some to be in danger of repeal to help make up for the revenues lost to significantly lower corporate and personal income tax rates.

The bad: Casualties of tax reform

Not every education tax credit or subsidy made it through unscathed. The $4,000 tuition and fee deduction, for which many working college students were eligible, was allowed to expire, for instance. So was the deduction that permitted employees to write off work-related expenses.

This provision will have a diverse set of impacts, ranging from the ability of teachers to claim a deduction on their own money spent on classroom supplies to the efficiency of pursuing continuing education while employed.

The neutral: Indirect or ambiguous changes to the tax treatment of education

Students line up to graduate.

Other provisions in the bill will come with effects that are hard to quantify. 529 plans, for instance, can now be used tax-free to fund K-12 education, where before they were limited for college. State law varies so widely on these specialized accounts, however, that it can be difficult to define what that might look like in a given locality.

Another change economists have had a difficult time defining involves the deduction for charitable contributions to institutions of higher learning. This deduction was itself virtually untouched; instead, other aspects of the new law are likely to hurt the volume of such donations.

The standard deduction, now an either-or proposition with the write-off for charitable giving, looks more appealing than it did before the bill passed. That makes it possible for schools to receive billions less in funding even though the deduction ostensibly remained the same.

The affordability of education in the U.S. is a hot-button topic that isn't going away any time soon. Last year's tax overhaul has the potential to complicate it further. It will undoubtedly have consequences for prospective students in the years to come, some of which won't manifest themselves until more time has passed. At least at present, however, most of the major government education tax benefits appear to have been preserved.

Help secure the future of education in our country

A sign that reads "College just ahead."

The affordability of education in our country is a topic on which tax policy is just one of the dozens of important influencers. Very few people want to forgo getting an education, but the economic reality for many students is that pursuing one after high school just isn't possible. The task of the next generation will be to find ways to leverage all our tools - including tax legislation - to make higher education feasible for all Americans.

Students and young professionals are capable of tackling this problem starting now. Up to Us is a leadership development program designed to teach college students how the actions of our generation can secure - or compromise - the fiscal future of our nation.

Awareness is the first step. Up to Us is dedicated to bringing information to current students on how the fiscal policies of 2018 can shape their realities in 2038. Our future is our responsibility. Learn more here.