Low-income college students are being taxed like trust-fund babies

May 21, 2019 | The New York Times

A little-noticed provision in President Trump’s sprawling new tax law is treating middle- and low-income college students as if they are trust-fund babies, taxing sizable financial aid packages at a rate first established 33 years ago to prevent wealthy parents from funneling money to their children to lower their tax burdens.

Higher-education leaders are calling on Congress to fix the provision, which drastically raised the tax rate on so-called unearned income for children with assets and young adults in school. Students with large financial aid packages are finding their nontuition assistance for items such as room and board taxed by as much as 37 percent, even if their family income tax rates are much lower.

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