Navigating Student Financial Services can be headache-inducing for anyone. After giving yourself a pep-talk, you walk into an office, input your name into a kiosk, and watch it linger endlessly on a waiting list while you squirm in a chair. The experience is often not only tedious, but frustrating and demoralizing.
But let’s argue that this discomfort is simply a natural part of a university’s bureaucracy, which is bound to be slow. Especially at Penn, where the seemingly infinite array of agencies and offices resembles a Hydra, there will inevitably be inefficiencies. What cannot be so easily excused is when the University fails to communicate financial realities with its population of international students.
Thanks to varying tax treaties that the United States has with other nations, non-U.S. residents are issued a withholding tax on the scholarship awards that they receive from Penn. According to a statement from Student Financial Services, “in some cases, the University is required by the Internal Revenue Code to withhold federal income tax on grant awards to non-resident students.” Between 14 and 30 percent of that grant money is withheld, depending on the student’s country of residence and tax status.
What this means in practice is that, although all students receive their full grant upfront, some will be billed up to 30 percent of that grant during the school year depending on their country’s agreement with the United States. For domestic students, regular federal income taxes apply to “unqualified expenses” that exceed tuition.
Obviously, Penn must abide by these codes, but there are steps that the University could take to both mitigate tax inconsistencies and to better disseminate these facts to students, many of whom do not realize the facts until they are issued an unexpected billing statement that they will have to pay a tax on a significant portion of their grant. This places international students that are already in precarious financial situations in jeopardy as they struggle to budget for unanticipated expenses.
College and Wharton freshman Mariana Velasco was surprised when a mysterious billing popped into her mailbox midway through the fall semester. “I remember carefully planning ahead what coming to Penn would financially look like, and I had never heard or read about tax withholding. My family fortunately had the means to cover the expense, but I wonder about what would have happened if they hadn’t been able to.”
Much of this confusion is caused by the lack of communication that the Tax & International Operations office has with students and with other related offices like SFS. Although both offices are housed in the Franklin Building, students are not typically directed from SFS to the tax office. Consolidating these resources could help students navigate the process. International Student & Scholar Services offers general support for students, but handling taxes is not within their jurisdiction. Oddly enough, the website for Penn SFS does not directly provide information about tax exemptions, but instead links to ISSS and other resources like the IRS. Although the ISSS website does provide a brief overview of the withholding tax, this information is easy to miss.
Peer institutions handle these withholding taxes differently. At Yale, financial aid packages factor withholding taxes into cost of attendance and increase scholarship awards for international students during their freshman year to offset that cost. Their website also offers direct lines of contact to their tax office – whereas Penn’s tax office is virtually incognito – and to a tax representative that they can reach out to with any questions.
Universities like Penn receive significant federal funding, which causes some Americans to feel like they, as lifelong U.S. taxpayers, should be privileged over international students when it comes to financial aid. But Penn has both the resources and the incentives to attract talented, high-achieving students from across the world, and that includes low-income international students.
At the very least, Penn should take note of the clarity with which universities like Yale set financial expectations for international students. Ideally, financial aid would be structured to mitigate the effects of double taxation, but even an informative email would be a step in the right direction. And if international students still need to make the trek to SFS, they should be paired with a knowledgeable representative whose priority is to help them navigate the system instead of just passing them down the line.
JULIA MITCHELL is a College and Wharton freshman from Yardley, Pa. studying International Relations. Her email address is firstname.lastname@example.org.
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