Tuition Waivers vs. No Tuition Waivers: FAQs
Until about 1998, New Mexico Tech provided each graduate
assistant with a stipend and a tuition waiver. Thereafter, the
Institute altered this practice and provided what appears to be only the
stipend. The differences are more apparent than real. This
page offers a clarification of the costs and benefits of this change.
Why did NMT stop the practice of
Tuition Waivers?
But now that the tuition is part
of the stipend, it is taxable - right?
Are you telling me that there
is no downside to this new arrangement?
Doesn't this work against us in
recruiting?
Q. Why did NMT stop the practice of Tuition
Waivers?
A. There are two parts to the answer to this
question.
An interpretation by the Institute's tax consultants
indicated that the Institute could be liable for the tax due on tuition
provided to the student. Based on this interpretation, the Institute
shifted the responsibility for paying tax to the recipients - the graduate
assistants. This approach seems to have been conservative.
Many universities still provide tuition waivers without tax liability.
The fact of the matter is that NMT has never stopped
providing an amount for each teaching assistantship that is equal to the
amount of resident tuition. Stated another way, the amount of
stipends after the change = the amount of the stipend + tuition waiver
before the change. That is, the Institute still contributes the
amount of the former tuition waiver. The student does not see it.
Just as before, when tuition is raised, stipends increase
by the amount of the tuition increase.
Q. But now that the tuition is part of the
stipend, it is taxable - right?
A. Yes, the entire amount of the stipend is now
taxable, but at the same time that the tuition waiver monies were added
to the stipend, the U.S. government started the Lifetime
Learning Credit. At the time these changes were made at NMT,
the NMT Graduate Student Association ran a number of tax scenarios and
concluded that particularly domestic students benefited under the new
system. The situation for international students is less
clear. The countries from which international students come have
individual tax treaties with the U.S. Some may have
benefited more under the old system. Others benefit more from the
way stipends are handled now.
What the GSA fought for and won in 1998, was the
Graduate Deferred Payment plan (GDP). The GDP meant that not
only were tuition payments distributed over the semester, but several
fees were as well. The consequence was that students need less
money "up front" than ever before to commence their studies.
Q. Are you telling me that there is no
downside to this new arrangement?
A. There is a downside for proposal
writers. Including the tuition reimbursement into the stipend
means that these costs are subject to overhead - raising the total cost
of the grant and making the grant less competitive.
Q. Applicants seeking financial aid want to see that
tuition is waived. Doesn't this work against us in recruiting?
A. It can work against us if it is not carefully
explained to applicants. If we were to return to the old system,
our monetary awards would be smaller by $2,276. The
concept of net stipend works well for many. Net
stipend = total monetary award - tuition - fees + health care +
health insurance. A logical extension of this includes items
related to cost of living in a community like Socorro.
11/7/08
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