the proposed elimination of the lifetime learning credit is another threat to graduate students
House Proposal to Eliminate the Lifetime Learning Credit: What It Means for Graduate Students
The Trump administration has issued a barrage of announcements in its first days in office. The onslaught of directives and proposals makes it challenging to quickly unpack each one’s potential impact. Specifically, a 50-page proposal floated by top Republicans has significant implications for graduate students.
In addition to a potential idea to make graduate student scholarships and fellowships fully taxable, the GOP manifesto suggests eliminating the Lifetime Learning Credit (LLC). This key education tax benefit has helped offset the costs of graduate school and continuing education for millions of students. While the intent behind the proposal may be to simplify the tax code and find ways to offset other tax cuts, the practical consequences could be far-reaching—especially for those pursuing advanced degrees.
What Is the Lifetime Learning Credit Tax Benefit?
The Lifetime Learning Credit (LLC) is a tax benefit that allows individuals to deduct up to $2,000 per year for qualifying education expenses. Unlike other education credits, such as the American Opportunity Credit (AOC), which is mainly for undergraduate students, the LLC applies to students of all ages pursuing higher education. This includes not only graduate students but also working professionals returning to school and anyone enrolled in courses to improve job skills.
The LLC is not restricted to a specific number of years, allowing students to claim the credit as long as they meet the eligibility requirements. This feature makes it especially beneficial for those pursuing graduate degrees. Data from a 2017 census of recent doctorate recipients found that the median doctorate completion time was 5.8 years, but that programs in the humanities and arts often take longer, with a median of 7.1 years. The flexibility of the LLC is crucial in helping students and professionals manage the increasing costs of advanced education, providing some relief as they invest in their futures.
The Proposed Elimination of the Lifetime Learning Credit
The proposal to eliminate the LLC is part of a series of measures being considered by Republicans to offset the cost of extending tax cuts that are included in the Tax Cuts and Jobs Act (TCJA) during the first Trump administration. Other suggested changes include reducing access to Medicaid, taxing income from scholarships and fellowships, and repealing tax credits designed to reduce health costs. It’s not an isolated incident but part of a broader pattern of reducing educational tax benefits to fund other initiatives. In 2017, similar proposals were made to cut higher education tax benefits and finance tax cuts.
How Graduate Students Will Be Affected
Increased Financial Pressure for Graduate Students
Graduate school tuition continues to outpace inflation, and while some graduate students receive financial aid or assistantships, many still take on significant debt to cover their costs. The LLC has served as one tool for offsetting these expenses.
Increased Reliance on Student Loans
For many graduate students, loans are already a necessity. 61% of graduate students borrow federal loans, according to the Education Data Initiative. There is significant variance within the population. Among master’s degree holders, roughly 55% have federal student loan debt. In contrast, almost 75% have federal student loan debt among those with professional doctorates. The amount of debt isn’t trivial, either. The average graduate student had nearly $85,000 in student loan debt in 2020, with two-thirds from graduate school alone.
Without the LLC, students may be forced to take out even larger loans, exacerbating the already-growing issue of student loan debt, which has ballooned to over $1.7 trillion in the U.S. The increased reliance on loans could leave graduates with even more debt to manage as they enter the workforce, potentially hindering their financial flexibility for years.
Disincentive to Pursue Graduate Education
At a time when graduate education is becoming increasingly necessary for career advancement, removing the LLC could discourage potential students from pursuing higher degrees. The cost of graduate education has risen steadily over the past few decades. By eliminating this benefit, the government risks making graduate education even more financially inaccessible, especially for low- and middle-income students.
Conclusion
The timing of the proposal to eliminate the Lifetime Learning Credit—amid growing concerns about educational debt and financial stability—could not be worse for graduate students who already face significant challenges. When coupled with other proposals, like taxing scholarships and fellowships, one may wonder if we are seeing the beginnings of a broader attack on graduate education.