A new immigration reform bill introduced in the US Congress could place thousands of international students in the crosshairs of federal taxation. The proposal, tucked into the broader DIGNITY Act of 2025, seeks to end a long-standing tax exemption on the wages of foreign graduates working under the Optional Practical Training (OPT) programme, raising alarms across university campuses and among immigrant advocates.For decades, the OPT programme has served as a crucial bridge between classroom learning and professional experience for international students in the United States. It allows graduates to remain in the country and work in their field of study for up to 12 months—or up to 36 months for those in STEM disciplines. Crucially, participants have so far been exempt from paying Social Security and Medicare taxes, known collectively as FICA taxes.That exemption may now be on the chopping block.
From exemption to extraction
Under current law, wages earned by OPT participants are classified as nonresident income and are not subject to the 6.2% Social Security and 1.45% Medicare payroll deductions. If the proposed changes are enacted, foreign graduates would be required to pay the same 15.3% total payroll tax as US workers and employers, split evenly between both parties.For students already grappling with high tuition fees and living expenses, the additional deductions could amount to hundreds or even thousands of dollars annually.
Inside the DIGNITY Act
The proposed change is one of several immigration-related provisions packed into the DIGNITY Act of 2025, reintroduced this summer by Congresswomen María Elvira Salazar and Veronica Escobar. Promoted as a bipartisan attempt at comprehensive immigration reform, the bill also includes provisions for legalizing undocumented immigrants, expanding border security, and streamlining student visa policies.Yet critics argue that introducing a new tax burden on foreign students undermines the very spirit of competitiveness the bill claims to support.
A changing political tide
The OPT programme has increasingly become a flashpoint in the political debate over immigration and the US labor market. Some conservative lawmakers have long argued that the programme gives foreign workers an unfair advantage over American graduates, especially in tech and engineering fields.Joseph Edlow, recently appointed director of US Citizenship and Immigration Services (USCIS), has been vocal about his intention to end the OPT programme entirely. In public remarks earlier this year, he called the programme “ripe for abuse” and a “workaround” for employers seeking cheaper labor.That rhetoric has gained traction within parts of the Republican Party, as has a growing narrative that student visa privileges should be more tightly regulated and more heavily taxed.
Ripple effects beyond the paycheck
Beyond individual paychecks, the proposed tax could ripple outward—affecting hiring trends, university enrolments, and even America’s global standing.Employers that currently benefit from hiring OPT students without contributing to payroll taxes would be required to shoulder an additional cost. For smaller firms and startups, that shift could influence hiring decisions, pushing them to favor domestic candidates or offshoring roles entirely.Universities, meanwhile, fear that such financial disincentives could weaken the pipeline of international talent that fuels innovation and research across US campuses.
The numbers at stake
According to the latest figures from the US Department of Homeland Security, more than 200,000 international students participate in OPT each year, with a significant share employed in high-demand sectors such as healthcare, engineering, and information technology.Currently, only Social Security taxes have a wage base limit—set at $176,100 for 2025. Medicare taxes apply to all earnings. If the exemption is revoked, every dollar earned by OPT workers will fall under the tax net.For many, this could drastically change the value proposition of a US education.What comes nextThe DIGNITY Act has yet to clear key legislative hurdles, and opposition is expected both within Congress and from the higher education community. Still, the inclusion of the FICA tax provision suggests a broader recalibration of how the US approaches international education—not just as a cultural asset, but as a taxable labor resource.For students already navigating complex immigration rules, the message is increasingly clear: working in America may still be possible—but it won’t come tax-free.
