(UNITED STATES) A new bill in the U.S. Senate, called the OPT Fair Tax Act (S. 2940), is raising alarm among international students and their employers because it targets a long‑standing tax break for people working on Optional Practical Training (OPT). Introduced by Senator Tom Cotton in September 2025 and now before the Senate Committee on Finance, the proposal would end the current exemption from FICA payroll taxes for F‑1 students on OPT, cutting their take‑home pay and increasing hiring costs for companies across the country.
What the bill would change
Under current rules, most F‑1 visa holders on OPT do not pay FICA taxes, which fund Social Security and Medicare. That exemption has made OPT slightly cheaper for both sides: students keep more of their paychecks, and employers avoid part of the payroll tax burden they would face with U.S. workers.
The new bill would:
- Treat wages earned on OPT the same as regular domestic employment for tax purposes.
- Force both the student and the employer to pay 7.65% each in FICA contributions on those wages.
FICA is composed of:
- 6.2% for Social Security (employee) and 6.2% matched by the employer.
- 1.45% for Medicare (employee) and 1.45% matched by the employer.
Example impact — a concrete illustration
For an international graduate earning $50,000 a year on OPT:
- Employee FICA: $3,825 (7.65%)
- Employer FICA: $3,825 (7.65%)
- Total additional annual cost per OPT worker: $7,650
These amounts reflect direct payroll tax changes and do not include other taxes or deductions.
Why this matters to students
The financial hit is significant for many students who:
- Often have heavy student loans
- Rely on family savings
- Face high living costs in cities like New York, Boston, Seattle, or the Bay Area
A 7.65% reduction in net income can change basic living decisions — for instance:
- Sharing a crowded apartment vs. moving farther from campus
- Sending money home vs. holding back
- Paying down debt quickly vs. carrying it longer
Analysis by VisaVerge.com notes many students already budget tightly for rent, health insurance, transportation, and food; an added FICA burden would tighten those budgets even more, especially in high‑cost job markets.
Employer perspective
Employers face the employer share of 7.65%, which affects hiring costs.
- Large tech and finance companies may absorb the cost with little change.
- Mid‑size firms and lean start‑ups may have hired OPT candidates partly because the current exemption made them slightly cheaper on paper.
- Some HR managers suggest higher payroll costs could tilt hiring toward domestic graduates or lead to slightly lower starting salaries for international hires.
Senator Cotton and supporters argue the change will “put American workers first” by removing a perceived hiring advantage for foreign labor. Critics say many companies hire international graduates for unique skills and that ending the exemption does not create new rights for U.S. grads — it only makes life harder for international ones.
Who is affected
- The change would apply to all F‑1 graduates on OPT, regardless of nationality.
- Data cited in debates show Indian nationals account for roughly 25% of OPT users, but the rule is universal.
- Families in lower‑income countries would feel the impact more severely due to exchange rates; a 7.65% reduction can be particularly painful for parents and sponsors who had planned finances under current rules.
Broader context and timing
OPT is a central part of the “study here, work here” pathway: many students use OPT to gain U.S. work experience and then apply for visas like H‑1B or permanent residence.
At the same time:
- Department of Homeland Security (DHS) officials and some lawmakers have questioned OPT’s scale and structure.
- Past proposals include stricter duration limits, closer employer review, and even calls to narrow or end the program.
- Policy debates project possible enrollment drops; some warnings mention a potential fall of more than 50% in fall 2025 if visa rules harden and the climate worsens.
Legal mechanics and official guidance
Under current IRS guidance, most F‑1 students considered nonresident aliens for tax purposes and working on OPT do not pay FICA, provided certain conditions are met. The bill would override that treatment by explicitly subjecting OPT wages to Social Security and Medicare contributions, the same as U.S. citizens and permanent residents.
For official IRS detail, see: IRS guidance on Social Security and Medicare taxes for foreign students
Practical considerations for students and families
Students and advisers recommend preparing now because the bill is still pending:
- No change takes effect unless Congress passes the measure and the President signs it.
- Current OPT participants remain covered by the existing exemption while the bill is under committee review.
- Many advisers urge students to create backup budgets that assume they might lose the FICA break mid‑OPT.
📝 The bill is not law yet. OPT exemptions remain in place while it moves through the Senate; monitor IRS guidance and credible immigration sources for official updates and timelines.
Prospective students abroad must decide well in advance and may compare the U.S. against other destinations such as Canada or the United Kingdom, where post‑study work rules are often positioned as more predictable.
Potential behavioral responses
Students may:
- Work extra hours or seek second jobs where allowed.
- Relocate to lower‑cost areas.
- Consider remote work for U.S. companies while living in lower‑cost countries.
Employers may:
- Continue hiring international talent but adjust salaries.
- Favor domestic graduates to avoid higher payroll costs or political scrutiny.
Political and symbolic stakes
Supporters say the bill removes a quiet subsidy and levels the hiring field. Opponents argue the bill ignores the extra costs international students already pay (higher tuition, visa fees, travel) and that it could push students to other countries offering clearer post‑study pathways.
Key takeaway: At its core the OPT Fair Tax Act is about a 7.65% slice of a paycheck, but behind that number stand thousands of young people balancing dreams, debts, and shifting policies in the country where they chose to study.
What’s next in the legislative process
- The Senate Committee on Finance will decide whether to advance, amend, or stall the bill.
- If it leaves committee, it still needs to pass the full Senate, the House of Representatives, and then receive the President’s signature.
- Business groups, universities, student associations, and worker organizations are expected to lobby on both sides throughout the process.
What universities and advocates are doing
- Universities plan to include explanations of the proposed change in pre‑departure briefings and orientation sessions.
- Many will expand financial literacy programs to help students:
- Read pay stubs
- Plan for payroll deductions
- Adjust spending if FICA becomes applicable
- Some warn that enrollment drops from key sending countries could strain university budgets and affect programs relied upon by domestic students.
Final considerations
- The bill adds financial pressure to an already complex pathway from study to work to potential long‑term settlement.
- Some students will still find OPT worthwhile despite FICA deductions; others may rethink their plans or destinations.
- Anyone affected should monitor the IRS and trusted immigration legal outlets for updates.
For official IRS rules and ongoing guidance, consult the IRS page linked above and follow reputable immigration news and legal sources.
The OPT Fair Tax Act (S. 2940), introduced in September 2025, would eliminate the FICA exemption for F-1 students on OPT, requiring both employee and employer to each pay 7.65% for Social Security and Medicare. For a $50,000 salary, that means roughly $3,825 extra from the worker and $3,825 from the employer, raising total annual costs by $7,650. Critics warn it will reduce take-home pay, increase hiring costs, and could shift hiring or enrollment decisions; supporters argue it levels the playing field for U.S. workers.
