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This Grad Student Eliminated Her Housing Expense to Pay Off Her Student Loans

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In this episode, Emily interviews Dr. Erika Moore Taylor, an assistant professor at the University of Florida and the founder of Moore Wealth. When Erika started her PhD at Duke, she had $65,000 of student loan debt, which she committed to paying off before her graduation. One of the strategies she used that made the biggest impact was to serve as a resident advisor, thereby eliminating her housing expense. Erika shares how her money mindset fueled her motivation to achieve her debt repayment goal and how she is now pursuing FIRE.

Links Mentioned in the Episode

Eliminate housing expense to pay off student loans

Teaser

00:00 Erika: I did factor in cost of living. So being the poor broke graduate student is a trope that we’re all familiar with, but I think some areas lend to that trope more strongly than others.

Introduction

00:16 Emily: Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. I’m your host, Dr. Emily Roberts. This is season 10, episode eight, and today my guest is Dr. Erika Moore Taylor, an assistant professor at the University of Florida and the founder of Moore Wealth. When Erika started her PhD at Duke, she had $65,000 of student loan debt, which she committed to paying off before her graduation. One of the strategies she used that made the biggest impact was to serve as a resident advisor, thereby eliminating her housing expense. Erika shares how her money mindset fueled her motivation to achieve her debt repayment goal and how she’s now pursuing financial independence and early retirement. If you want to be inspired to set an audacious financial goal and also plot your path to achieve that goal, I highly recommend joining the Personal Finance for PhDs Community at PFforPhds.community.

01:14 Emily: There are numerous courses, webinars, recordings, and eBooks to help you figure out what financial goal to pursue right now, for example, repaying student loans versus investing, and how to go about it. Just to take some examples that relate to today’s subject: I recently recorded a set of four workshops for the Community, two of which are titled, “Whether and How to Pay Off Debt as an Early Career PhD,” and, “How to Uplevel your Cashflow as an Early Career PhD.” These workshops teach frameworks and strategies for pursuing goals, like the ones Erika set during grad school, and actually can guide you for years and decades post-PhD as well. Best of all is the community aspect of the Community. There’s a forum available 24/7 to which you can post your questions and prompts, and I host a monthly live call for discussion and Q&A. We’ve spent a lot of our live call time in recent months, discussing homeownership, investing, and career and life transitions. But of course, any financial topic is welcome. To learn more about the excellent content and other opportunities available inside the Community, go to P F F O R P H D S.Community. I hope to see you in our October live call. Without further ado, here’s my interview with Dr. Erikca Moore Taylor.

Will You Please Introduce Yourself Further?

02:39 Emily: I am absolutely thrilled to have joining me on the podcast today, Dr. Erika Moore Taylor. She is actually an assistant professor at the University of Florida, and she finished her PhD in 2018 from none other than the Department of Biomedical Engineering at Duke University, which is the same department that I graduated from four years earlier. So we did overlap I think a little bit, but Erika is joining us today to tell us an incredible debt repayment story from her time in graduate school, as well as giving us some updates on what she’s been up to since she defended. So Erika, it’s a real pleasure to have you on. Welcome! And will you please tell the audience a little bit more about yourself?

03:17 Erika: Yes, thank you so much for having me Emily, or should I say, Dr. Roberts? It’s nice that we have that connection from Duke. And as you said, after I left Duke, actually before I got to Duke, I started thinking about finances and basically use my time at Duke to understand and learn my own personal finance mindset as well as what I wanted my journey to look like. And since then, I’ve been fortunate enough to start my position at the University of Florida, but also start a company focused on personal finance and financial literacy. So I think that’s all I want the audience to know about me so far.

Financial Mindset at the Start of Grad School

03:56 Emily: That is awesome. We’re going to talk so much more about that. So let’s take it back, rewind to when you were getting out of undergrad and starting graduate school. What was your financial mindset like at the time, and what did your finances look like at that time?

04:09 Erika: Yeah, so taking it all the way back to I think it was 2012, this was the year before I started graduate school and I was fortunate enough to do an internship in Boston. And I was kind of bored during the internship, and so I took up personal finance. I started reading books about personal finance because I realized that if I graduated on time from my undergraduate institution, I’d be graduating with $65,000 worth of debt. So in 2013, when I started my graduate program at Duke, I had the mindset of being shackled and weighed down with debt. I was very concerned about debt because I knew that no matter what I did after graduate school, that debt would follow me. It would be with me like a shadow that I couldn’t shake. And so it scared me because I felt like I had done the right moves in graduating and surviving undergraduate and getting into grad school, but I hadn’t made the right financial moves. So my mindset was scarcity.

05:11 Emily: It’s so interesting to me that that student loans, in particular, provoked that scarcity mindset. By the way, did you have any other debt at that time? Aside from the student loans?

05:20 Erika: I didn’t, but when I first started grad school, I bought a car for about 13 or $14,000. So then that added to my debt. So the fear amplified.

05:31 Emily: I think that some people have, I don’t necessarily want to say, like, they feel casually about their student loan debt, but especially when you’re going straight from undergrad into grad school, like you never entered repayment. So maybe the pain of the student loan repayment was not upon you logistically, although it was still there like psychologically. And so some other people I think are just a little bit more, maybe dismissive. And I’m talking about myself. I was very dismissive about the student loan debt that I had from undergrad. It was less than yours, but I was just like, “Oh, it’s subsidized. I’m going to grad school. It’ll still be deferred. No big deal.” Yes, I did know on the other side of graduate school that I would have to pay it off. But it did not bother me psychologically. So why do you think you had the view that you did instead of just feeling a little bit more comfortable with it?

06:18 Erika: Yeah. I think I had the view that I did because I knew I would have to get a job afterwards. And before I entered grad school, I had a job at a daycare working about $7 or $8 an hour. And I had never seen $65,000 in my bank account. I had never seen $65,000 in a job that I could work. And so the fact that I had that much debt was alarming to me, like you said, psychologically, because I had never secured a job that earned that much. And so I, again, was operating in scarcity saying like, “Well, if I have this much debt, I need to pay it off because, you know, I don’t know if I will be able to pay it off.” I didn’t know, you know, how much money I’d make in a job setting in using my degree. And so I was just motivated by that number by the sticker shock, I think price of my undergraduate degree, that really motivated me to pay it off.

Savings and Stipends

07:18 Emily: So starting in grad school, can you share with us did you have any savings or any kind of assets at that time, and also what was your stipend when you started?

07:26 Erika: Yeah, so starting in graduate school, my net worth was I think about negative $60,000. So I had $65,000 worth of debt. And then I had saved around maybe six or $7,000. I saved that money because I knew I would need to put a down payment on my car that I would need to buy in North Carolina, it’s not really public transportation friendly. So I knew that I needed a car as a vehicle. And then I saved a couple of other thousand dollars for a down payment on securing the place that I was going to rent. So first and last month’s rent as well as, you know, a security deposit. So I had, you know, maybe six or $7,000 in my checking account. I was fortunate enough to secure the National Science Graduate Research Fellowship, [GRFP]. And that set my stipend, I think at the time around $32,000 a year.

08:20 Emily: Yeah. Fantastic. And three years of guaranteed funding. That’s awesome. And so actually I want to rewind for a second because having won the NSF GRFP, you, I would imagine, had your selection of graduate programs. So why Duke instead of a different program?

Factoring in Cost of Living

08:40 Erika: Yeah, that’s an excellent question. And you’re right, securing the NSF GRFP, you’re kind of hot on the market, so to speak. So lots of schools will take you even if you didn’t even apply to the school. Thankfully I had already been encouraged to consider Duke because of my graduate research advisor who had just recently moved there. But specifically when I was making my list and considering what schools or programs I would attend, I did factor in cost of living. So being the poor broke graduate student is a trope that we’re all familiar with, but I think some areas lend to that trope more strongly than others. So I kind of eliminated going to Boston or going to San Francisco, even going to San Diego, where there are very strong biomedical engineering programs, but where the cost of living would make it extremely challenging to live independent of my stipend.

09:33 Erika: Additionally, I eliminated any program that had to add on top of the NSF GRFP to meet the standard of living. So that’s something that I don’t think a lot of people know. The NSF GRFP is already above the average stipend in most cases, but in some schools or programs where the cost of living is so high, they have to add on top of that. And so I was like, that means that even if I’m making above average, that’s still not enough to cover the cost of living in this area. So I eliminated those, which is how I landed at Duke.

10:07 Emily: I’m really glad you brought that up. I was thinking, you know, maybe you’re looking at, you know, $32K everywhere and then, oh, wow. It’s an easy choice to go to Durham over, you know, Boston or San Francisco or something. But even knowing that you were going to get a supplement above that, that’s really great that you consider that as well, because you’re right. Like if you look at the median cost of living in Durham, I’m pretty sure for a single person it’s still below $32K, or even below $30K, maybe at this point, I haven’t looked at the data super recently, but I know that when I was there, I did look at the living wage database from MIT. I think when I started at Duke, my stipend was $24,000, because I was getting the base stipend from the department, but I believe the living wage was something like 18, $19,000.

10:45 Emily: And so it was well above that number for a single person. That is not the situation when you go to these more high cost of living cities, but also just graduate programs that don’t pay super well. Duke pays fine for its base stipend as far as I’m aware. Okay. So I’m glad we, you know, we’re seeing how intentional you are when you are going into the selection of graduate school. Now we’re going to go back to where you are, you know, you’re entering graduate school. You have the student loan debt kind of hanging above you and you’ve talked about, you know, what motivated you. What was the exact goal that you set regarding your student loans? Did you want to pay them off entirely? Did you want to pay them off partially? Did you want to be doing retirement savings? Like what was your financial goal at that time?

Student Loan Goals

11:25 Erika: This is a great question, Emily, and I love this because it does break down where my mind was. So I had two buckets of student loans, the first were my own personal federally secured student loans, the second bucket were parent plus secured federal loans. And my parents made it very clear that I was expected to pay back both of those. So they were not going to pay back the parent plus loans. I was expected to cover both of them. The parent plus loan was in essence, a loan that they gave me through the federal government. And so my strategy initially was just to pay off the parent plus loans because I said, if I can lower the debt that I owe my parents or the federal government through my parents, then I’ll be in a much better shape. Additionally, those were the largest loans that I had. So I think I had one that was $20,000 and one that was about $25,000 in parent plus loans. My own personal federal loans were much smaller, you know, by comparison. So I said, it’d be great if, while I was in grad school, I could just pay those off. That was stage one.

12:31 Emily: Yeah. And so just to gain a little bit more clarity here. So your student loans that were in your name, those were deferred because you were in graduate school. Were they also subsidized? It wasn’t like you only took out the subsidized portion?

12:43 Erika: No, I had subsidized and unsubsidized loans.

12:46 Emily: Okay. So part of it subsidized, part of it’s un-subsidized. And then the parent loans that your parents had, those are not in deferment because they’re not yours, technically. So it’s so interesting. So you sort of considered yourself to be in repayment because your parents were in repayment for that portion of the loans. Do you remember what that minimum, like the minimum payment that they had to make that you were trying to make for them, was when you started?

13:08 Erika: Yeah, so actually, because I am the obsessive person that I am, I made a massive spreadsheet, which is something that I recommend to anyone who’s in debt, right? Making a spreadsheet of every single loan, all of the interest and all of the, you know, what the minimum payment is. So at the time, just for my parent plus loans, not my un-subsidized personalized loans, the payment was around $250 a month. The interest rates were low. So it wasn’t that high of a number.

Reducing Housing Expenses and Increasing Income

13:38 Emily: Okay. So let’s sort of progress in time through graduate school. What did you start doing during graduate school to, because I know you did, how did you increase your income? You’re already on the NSF GRFP, but I know you did even more to increase your income.

13:54 Erika: Yeah. So I was very fortunate to be encouraged to look outside of the box. And so when you look outside of the box, you start thinking about what are the most expensive items in my budget and how can I eliminate or dramatically reduce those? And for most people, the most expensive item is where you live. And so I applied to be a graduate resident at Duke, which is a very awesome program. I highly recommend it if you’re in grad school, look in to see if your university has a graduate resident program, because it allowed me to connect better with the undergraduate community, but most importantly, it allowed me to live for free. And so I applied and was awarded that role. And the first year was very challenging, but I served as a graduate resident for four out of the five years of my PhD. That was one major prong.

14:45 Emily: Yeah. Wow. So you completely eliminated your housing expense. That’s incredible. And I’m actually thinking, did that role play a part in your subsequent faculty applications? Like did that come up at all later on? Was it an asset, I guess, on your CV as it is what I’m asking?

15:00 Erika: Yes. It was an asset on my CV due to my familiarity with the administration and the structure as it relates to undergraduate curriculum and undergraduate engagement. And it also bridged me into serving as the Duke University Graduate and Professional Young Trustee. So it definitely allowed me to keep my hands in many pots at Duke and then it allowed me to leverage those opportunities into a faculty position.

15:32 Emily: Yeah. I love it when I can find something that benefits someone both financially and on the CV, and for future funding applications or, you know, whatever it might be. Did you do anything else on the increasing income side?

15:44 Erika: Yes. So the second prong of my approach was I sort of started serving as a house sitter or pet sitter. So this was a hustle that I was not able to maintain. Just because it took so much bandwidth. I was in lab, you know, a lot of time that I was also serving as a graduate resident, which took when I started out about 20 hours a week. So it was a tremendous time commitment. But I essentially wrote how much of the job was worth. And I wrote it in big letters and I just posted it on my door. And I said, you know, whenever you want to complain, just look at that dollar amount. And then during years two and three, I would house sit for professors for different professionals who were going out of town or who were in transient positions, watching their pets, doing things around their houses. So those are the main ways that I accelerated my debt repayment plan.

16:40 Emily: And you said that you didn’t maintain the house and pet sitting. It was too time intensive. Was that the main reason?

16:45 Erika: Yes. The house and pet sitting, I just found that, you know, in life you’re juggling a few balls and then you throw in the graduate resident ball, and then you throw in the stresses of graduate school and trying to complete your PhD. And then I threw in this other ball of house sitting and pet sitting. So it was just one too many balls and I had to think, what can I let drop? And it honestly wasn’t worth the time commitment always. So I definitely let it drop.

17:08 Emily: Yeah. Very, very strategic.

Commercial

17:13 Emily: Emily here, for a brief interlude. This announcement is for prospective and first-year graduate students. My colleague, Dr. Toyin Alli of The Academic Society, offers a fantastic course just for you called Grad School Prep. The course teaches you Toyin’s four-step grad boss method, which is to uncover grad school secrets, transform your mindset, up-level your productivity, and master time management. I contributed a very comprehensive webinar to the course titled, “Set Yourself Up for Financial Success in Graduate School.” It explores the financial norms of grad school and the financial secrets of grad school. I also give you a plan for what to focus on in your finances each season of the year that you apply to and into your first year of grad school. If this all sounds great to you, please register at theacademicsociety.com/emily for Toyin’s free masterclass on what to expect in your first semester of grad school and the three big mistakes that keep grad students stuck in a cycle of anxiety, overwhelm, and procrastination. You’ll also learn more about how to join Grad School Prep, if you’d like to go a step further. Again, that’s theacademicsociety.com/E M I L Y for my affiliate link for the course. Now, back to our interview.

Anything Else to Control Expenses?

18:40 Emily: Okay. So that’s on the income side. Did you do anything else on the, you know, controlling expenses, decreasing expenses side of the equation?

18:47 Erika: Yes, even though I purchased my car, I paid off my car within the first year that I had the loan. So that was really important to me because at the time that was my highest interest debt. And then I actually didn’t drive that much because I didn’t want to pay for maintenance of the car. So I think I got my oil changed about every 12 to 18 months. And because I drove that infrequently, I would, you know, get a ride with friends or I would just walk to a location or I would take, you know, some of the commuter trains into downtown. Commuter buses, excuse me, into downtown. And so I basically decreased my use of the car. And then also my friends know I’m pretty cheap or frugal as a person. So I ate out a lot, but I strategically ate out. So part of the graduate resident job comes with a food stipend. And so I would have meetings or hang out with friends, but it’d be on campus where I could use my meal points. And then also a part of the role was also facilitating community development. So that meant ordering food. And so I would go to the events because that was part of my job. But if there were leftovers, I would take that food and that would be lunch for the week. So I reduced my food expenses and I reduced my transportation expenses.

Balance Sheet and Loans at the End of Grad School

20:00 Emily: Yeah. I think the taking leftovers home from events is a very classic grad student. I think a lot of people are employing that strategy, but you combined it with the, “Oh no, I have a job that actually pays me to eat on occasion.” Okay. So let’s then jump ahead to the end of graduate school. What was your balance sheet at the time? How did you do against these student loans?

20:21 Erika: Yeah, so by the end of graduate school, I had completely eliminated my student loan debt, my parent plus loans and my personal loans. And I had, I think it was still around six or $7,000 saved.

20:35 Emily: Okay.

20:36 Erika: So positive net worth.

20:38 Emily: Yeah. Complete debt elimination. That’s amazing. Congratulations on achieving that goal. And obviously you, I mean, to pay off $65,000 of debt during graduate school while on a graduate student stipend, it’s just, it’s an amazing, amazing accomplishment. I did, if the listeners are interested and you want motivation for your own debt repayment journey during graduate school, I did actually do an interview back in season one with Dr. Jenni Rinker, who also went to Duke, who also had the NSF GRFP. And she also paid off, I think it was yeah, in the low sixties thousand dollars of student loan debt, while in graduate school. She had a different approach than yours. I think she was like a major, major side hustler, whereas you went this like RA route. They both can work fantastically. So really happy to have that. And actually also from season one, there’s another example of an interview I did with an RA. And he also had amazing benefits associated with his resident advisor position.

Would You Have Done it Again the Same Way?

21:26 Emily: So, okay. I still want to think about you back in 2018 when you defended, you’ve conquered the student loan debt. Would you have done it again the same way?

21:35 Erika: I would do it again the same way, because the skills that I’ve learned through the process of accumulating that debt and then paying it off are now with me today. So I apply them in different ways, but I think showing that I could be disciplined over wh at, at the time, seemed like a massive amount of debt to me has transitioned my discipline in so many different ways. So I’m grateful for the experience. Sometimes you kind of need to be slowed down or you need to learn a lesson. So I look at my student loan debt as the lesson that I needed to learn. And then I just try to apply those skills in many different ways.

22:14 Emily: I feel like, so when I finished my PhD, like literally, like when I passed my defense, like finished my PhD, I had this feeling, a very expansive feeling of, I can do literally anything. I can conquer any mountain, like in front of me. I felt that way a couple of other times in my life. But in the financial arena, I don’t know if I’ve had that. But did you have a moment like that? Like with the last payment that you made, did you feel, you know, you had these insights and so forth. Can you tell us about that?

22:44 Erika: Yeah. When I made the final payment, it was kind of anticlimactic. And maybe this is the scarcity mindset in me, but I have sisters and family members who had been working and contributing to their retirement accounts. I hadn’t done any of that. I was just focused on eliminating debt. And so I was like 27, I think, when I defended. No, 26, when I defended and I was kind of like, okay, now I’m really behind because I don’t have any retirement savings. So it kind of just clicked, you know, gears from debt repayment to retirement savings. And it wasn’t quite as I think, as momentous as I would’ve hoped.

Finances in Marriage

26:07 Emily: Yeah. Is there anything else you want to tell us about like, sort of what your life looks like now, financially?

26:12 Erika: Yes. So I got married, which has been an interesting journey. I think it’s been fun. But I love talking about finances. So I immerse that immediately into my relationship. And my husband actually came into the marriage with student loan debt. So there was a moment of panic where I was like, I don’t want to go back to that. And so we came up with a plan to basically, even though we’re dual income, we only live off of one income, and we attacked his debt. And now we’re just full steam ahead planning for really important things in our lives. And so I’m anti-debt now in a major way. And so we were talking about, oh, maybe in few years, we’ll buy a car. And so I’m like, okay, what’s our savings plan to afford this car? Because I’m not going back into debt.

27:01 Erika: Or we talk about going on trips. So later this summer, we’re going to Hawaii, which we’re really excited about. But we are trying to save and plan for that now. Right? All of the excursions and activities we want to go on, I’m not charging them. I want to have the cash to pay for them. And so that means we have to make sacrifices in other areas, but it’s been really fun, fine tuning. What are our shared, you know, drivers, what do we enjoy spending money on, and what things do we not care about as much? So that’s what we are continually working on now as a couple.

27:34 Emily: Yeah, that sounds amazing. I don’t want to put this in like a light where like, “Oh, it’s a great experience to have a low-income for a long time during graduate school with no hope of increasing it.” It’s not great. It’s not great. The silver lining on that very, very, very dark cloud is that in some situations you can embrace some good habits, maybe develop your mindset and so forth. And it really does sound like what you did. You mentioned the word discipline earlier. So you developed your discipline again over this long debt repayment journey. And again, within, you know, the confined circumstances that you had financially during graduate school. So I think that’s amazing. I certainly also developed really good financial habits during graduate school that have continued. And I’m happy now with a higher income to have them serving me well at this point because it’s really gratifying to have a higher income to work with when you have those good habits in place.

Moore Wealth

28:24 Emily: So you mentioned at the top that you have a company now, Moore Wealth, would you please tell us more about what you do through that?

28:30 Erika: Yeah, so Moore Wealth is kind of my love letter to what I wish I would have done when I was a younger student. And so I think one of the plights of education in the United States is a lack of financial literacy training. Like I made the joke the other day, we learned how to write cursive, but we don’t learn how to budget, which is insane because you don’t need to write cursive in life, but you do need to know how to budget if you’re going to, you know, have command over your finances. And so through Moore Wealth, we have a two-pronged approach to addressing this. Our mission is just empowerment through financial literacy. And so the first prong is our scholarships and fellowships. And so I was really excited because I finally have the income to give my money away to people who I think are deserving.

29:17 Erika: And so we established a nonprofit organization to basically grant scholarships and we had our first cohort that was awarded in February. And so that’s a lifelong dream of mine that we’re doing through Moore Wealth. And then the second prong is financial seminars, mainly targeted to high school students. So before you even get to college, take a step back and figure out what you want your life to look like and how finances are going to play a in that. And that’s what we do. So seminars and scholarships, and that’s the company, that’s the mission of Moore Wealth.

29:49 Emily: That sounds so incredible, amazing that you decided to set that up after having this journey. Tell us more about the scholarships and fellowships. Like who are the kinds of candidates you give them to, and then how does that benefit them? What do they get to do with it?

30:02 Erika: Yeah, great question. So right now we had our inaugural class that was awarded in February. And so we solicit proposals and we solicited proposals from over 50 universities. It was actually a tremendous response. That was kind of unexpected for this first year. And we awarded them to anyone who was entering into or completing a degree granting program. So we are specific in that terminology because we consider certificates and trade school or nontraditional routes of access also really important. And so it’s a very inclusive scholarship at this point. There was a Google form that’s on our webpage where people had to respond to a series of short answer questions. And then we had a blinded review that basically scored the essays based on the rubric that was established by the scholarship committee. Those were the only requirements or prerequisites for entering into the scholarship. We did have a GPA minimum of a 3.00 on a 4.0 scale. But other than that, there were no limits in terms of if the person was in graduate school, if the person was entering high school, if the person was completing their plumbing certificate, or anything else like that, we wanted to be as inclusive as possible.

31:24 Emily: And is it a grant that they then do work with, or is it just completely goes into your pocket? You can do whatever you want with it?

31:32 Erika: Yes. At this stage we awarded each of the recipients, they did have to send a follow up about how they’re going to try to implement financial literacy skills that they learned in their reflection essays into their life. And what we’re hoping to do in the future as this builds out is actually have small courses for them and potentially get them up to date with their financial literacy skills. And yeah, so currently they’ve gotten their money and they’ve reflected on financial literacy concepts. But to date, that’s it for that first cohort. So we’re looking to add additional responses and interactions with them in the future.

Best Advice for An Early-Career PhD

32:11 Emily: Incredible, wonderful. We can easily tell the passion that you have for this material in your voice. I’m so excited that you’re in the space as well. Erika, the question that I ask all of my interviewees at the end of our conversation is what is your best advice for an early-career PhD? And it could be something that we’ve touched on already in the interview, or it could be something completely else.

32:33 Erika: Yes. I love this question and I love the responses that you’ve gotten in the podcast so far to it. So I’ll echo what a few other people have said, which is to say that the advice that I have for you is two-pronged: if you have debt, understand what your debt is. Generate a spreadsheet, get clarity on that debt. It’s so important to do now than just ignoring it. And I know it’s hard because you’re like, “I live in denial. It’s the best thing, you know, it’s the best. Ignorance is bliss.” But getting clarity on your debt really can inform what lifestyle you need to live in the future and what lifestyle you want to live and how your finances interact with that. The second piece of advice, if you don’t have debt: contribute to a retirement savings account. This is something I wish I would have done. I didn’t have a lot of extra money, but I know that there were opportunities that I passed up because of ignorance and because of fear for how to interact with a Roth IRA, for example. And so you can never get back time. And so while you’re in grad school, I really recommend just contributing to a Roth IRA if you have any extra money.

33:41 Emily: Absolutely, absolutely. Totally co-Sign each of those pieces of advice. Wonderful. Erika, thank you so much for this wonderful conversation. And I hope that the listeners will find you after this. What is your website?

33:53 Erika: Yes. My website is Moore Wealth, M O O R E W E A L T H.org. And you can also just email me or find me on Twitter. My handle is @DrErika E R I K A Moore M O O R E. And then you’ll find more information there.

34:15 Emily: Wonderful. Thank you again for joining me.

34:18 Erika: Thank you, Dr. Roberts.

Outtro

34:25 Emily: Listeners, thank you for joining me for this episode. PFforPhDs.com/podcast is the hub for the Personal Finance for PhDs Podcast. On that page are links to all the episode show notes, which include full transcripts and videos of the interviews. There is also a form to volunteer to be interviewed on the podcast. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple Podcasts, Stitcher, or whatever platform you use. Two, share an episode you found particularly valuable on social media, with an email listserv, or as a link from your website. Three, recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in like investing, debt repayment, and effective budgeting. I also license prerecorded workshops on taxes. Four, subscribe to my mailing list at PFforPhDs.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps! The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC. Podcast editing by Lourdes Bobbio and show notes creation by Meryem Ok.

How to Handle Your Student Loans During Grad School and Following

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In this episode, Emily interviews Meagan Landress, a Certified Student Loan Professional who works with Student Loan Planner, about how a grad student or PhD should best handle their federal student loans. Meagan outlines the financial profiles of someone who should use an income-driven repayment plan to pursue forgiveness, including Public Service Loan Forgiveness, vs. someone who should consider refinancing. She answers the questions: Should a graduate student pay down their student loans while they are in deferment? How should a graduate student who needs to take out debt decide between a student loan and consumer debt? Meagan also explains how marriage affects student loan repayment under each of the income-driven repayment programs. Don’t miss this episode jam-packed with actionable information!

Link Mentioned in this Episode

student loans grad school

Trailer

00:00 Meagan: We are taking a non-traditional approach to debt and so I kind of backed that up with, make sure you know, that federal student loans are just not a regular debt. That’s one. That’s the biggest thing we need to remember.

Introduction

01:18 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education and personal finance. I’m your host, Dr. Emily Roberts. This is season seven, episode 13 and today my guest is Meagan Landress, a certified student loan professional who works with Student Loan Planner. We’re discussing how a grad student or PhD should best handle their federal student loans. Meagan outlines the financial profiles of someone who should use an income-driven repayment plan to pursue forgiveness, including public service loan forgiveness, versus someone who should consider refinancing. She answers the questions: should a graduate student pay down their student loans while they’re in deferment? How should a graduate student who needs to take out debt decide between a student loan and consumer debt? Megan also explains how marriage affects student loan repayment under each of the income driven repayment programs. If you have federal student loans, and there is any question in your mind as to how you should handle them, you should absolutely listen through this entire episode. When you have a really high stakes student loan decision to make, such as which forgiveness program is right for you and your family, or whether to pursue PSLF versus refinancing, I highly recommend working with a certified student loan professional or a certified financial planner. Student Loan Planner can refer you to one of their partners who is a qualified professional.

01:39 Emily: On the other hand, if you’re looking for assistance with determining what your current financial goal should be, evaluating your budget, or figuring out what your financial life should look like in your next position, please consider working with me. I also serve as a financial coach and I specialize in funded graduate students and PhDs. You can sign up for a free 15 minute introductory call with me at pfforphds.com/coaching to see if one-on-one coaching with me would be a good fit for you. Alternatively, if a group coaching and accountability program is attractive to you, The Wealthy PhD might be your best option. I’m enrolling for the next round of The Wealthy PhD in January, 2021 and you can go to pfforphds.com/wealthyPhD to learn more and join the wait list. Whatever the financial decision you’re facing, it can really help to get an outside perspective. Without further ado, here’s my interview with Meagan Landress.

Will You Please Introduce Yourself Further?

02:36 Emily: I am so pleased that Meagan Landress, a certified student loan professional, has agreed to join me on the podcast today to give an interview all about federal student loans for graduate students and PhDs. Meagan has her own coaching business around student loans, and she also works with Student Loan Planner, which is a really well-known brand in the space that I respect a lot. So I was really pleased to be connected with Meagan and so pleased that she accepted the invitation to be on the podcast. So Meagan, will you please introduce yourself to my audience a little bit further?

03:05 Meagan: Definitely. I’m Meagan Landress, born and raised in Atlanta, Georgia. And yes, I have my own financial coaching practice where I work with folks on the basics of financial planning. And Student Loan Planner, I consult for specifically on student loans, helping people navigate that big elephant on their chest, I would say. I’m excited for this conversation today.

03:29 Emily: Yeah. When I approached Student Loan Planner, I said, I would love to interview someone. I need someone who’s going to be able to speak to PhDs and the specifics of their situation. They said, Meagan’s going to be the perfect fit, so I’m really excited for this conversation.

Federal Student Loan Forgiveness Programs vs. Refinancing

03:42 Emily: Let’s jump right into it. I’m imagining a person who, whether they’re in graduate school, whether they’re maybe out of graduate school, they need to know whether or not they should be pursuing a forgiveness program at the federal level. One, maybe you could just remind us briefly of a few of those acronyms that are involved with the federal level forgiveness programs, and then let us know who is the type of person, what is the financial profile of a person who really should be looking carefully at pursuing one of those forgiveness programs?

04:13 Meagan: Yeah, so I think the most maybe well-known is public service loan forgiveness. That is, if you’re dedicating your career to a public service opportunity, so government, nonprofit, 501(c)(3) work. But also each of the income driven plans, there are four, each of those income driven plans have a forgiveness component and it’s really more so like their maximum repayment period. The folks that should be pursuing or entertaining forgiveness, there is a rule of thumb on balance.

Meagan: For the longer term income driven plans, if your balance is much greater than your annual income, we use 1.5 times your annual income, then you should probably be entertaining that longer term forgiveness route on the income driven plans. It’s not public service work. It’s not career-driven anything like that. You just have to be making payments on that plan for either 20 or 25 years. PSLF, I think is a little more straightforward. If you find yourself in a public service position and you can foresee your career continuing to go that route. I see this a lot in education, you know, public universities, and so that’s where we want to be entertaining, maybe public service loan forgiveness, which is 120 qualifying payments on an income driven plan. And then you reap the benefit of forgiveness. So it’s much shorter. Those would be some maybe identifying factors there.

05:42 Emily: So just to put a real fine point on this, when we’re talking about a debt to income ratio, is that the income that the person has post all education or during the course of their education

05:54 Meagan: Post-education. So I would say the first couple of years of their career.

05:59 Emily: Okay. So someone coming out of their PhD, first post-PhD job within those first couple of years, if they see that their debt is more than one and a half times, their post PhD income, that’s when they should be looking pretty hard at enrolling one of these forgiveness plans and potentially seeing it through to completion. Is there any difference in that rule of thumb, around whether if the program is PSLF, which only would take 10 years, versus one of the ones that would take 20 to 25 years,

06:27 Meagan: There’s a little bit of, because that ratio is not quite right since it’s such a shorter period of time. And so folks who have about the same, or maybe even a little less than their income, could still benefit from public service loan forgiveness. We just have to do the math on it because the payments are going to be based off of your income. And we need to project that out to see, would you just pay it off in 10 years or would you reap the benefit of some kind of forgiveness? The debt to income ratio isn’t so relevant with PSLF, but it could be maybe a rule of thumb to start with, and then you have to go and do some math.

07:07 Emily: Yeah. I’m fully anticipating there being a lot of answers like, well, this is the starting position, but really we have to fine tune it through doing some more math. So I fully anticipate a lot of those answers during this interview and that’s perfectly fine. I just want to get people a starting point, because when you’re sitting, prior to getting out of graduate school and you’re wondering whether or not you should be, your loans are probably in deferment, but you’re wondering whether or not you should pursue a forgiveness plan afterwards. It’s just helpful to see whether or not you have to go further into the details of it or not. There’s another option for repaying your student loans. Well, there’s a few options. You can do the standard repayment program for the federal government. That’s going to take 10 years, and it’s just based on your debt amounts, not based on your income at all, the repayment amounts. Or you have the opportunity to potentially refinance your loans. And there’s been a lot of advertising around student loan refinancing in the last 10 years. Very, very low rates are being offered. What is the financial profile of person who should be considering refinancing rather than potentially pursuing PSLF or another forgiveness program?

08:13 Meagan: Yeah. Refinancing is a big, you’ll see these commercials on TV all the time now. But when it’s right to consider refinancing, I think that’s when your balance is lower than your annual income, and you feel comfortable walking away from the federal system. And what I mean by that is the federal system has a lot of flexibilities that private loans just don’t offer. You won’t have very generous for forebarance availability. You won’t have access to income driven plans. There’s no forgiveness opportunity with private loans. And so if you feel comfortable with your financial situation and you can commit to the term for refinancing and you weren’t a good candidate for forgiveness in any way, then that’s when I think it’s appropriate to pull the trigger on refinancing.

09:00 Emily: Yeah. And I think what concurs with that is that you have to have a fairly low debt to income ratio to even qualify for the really good refinancing options. Like it pretty much has to be below about one-to-one anyway, to do that, which for people in my audience, PhDs, oftentimes refinancing is not going to be an option during graduate school because the income is just so low. However, if your post PhD income is going to jump up quite a lot, then refinancing might make sense once you get to that point. You may wish you could have refinanced earlier, but you probably wouldn’t qualify if your debt is maybe a few multiples of your graduate student income, but less than one year’s worth of your post PhD income. Thanks for that clarification.

09:40 Emily: I know there’s a lot of anxiety going on right now about PSLF. There was a report, I think it was in 2018 or something about how 90-whatever percent of people were being rejected by PSLF. Can you shed some light on this? Should people be concerned about the health and the future of PSLF?

09:54 Meagan: I wish I could take this article down. This one, everyone references, I feel like, when we’re talking about PSLF, but it’s funny when you go back to that article and you break apart the math in that article, you’ll see that about 70% to 80% of that 99% number of denials was due to one of two reasons. One was because people applied before reaching 120 payments. I think there’s a lot of reasonings behind that. Some people truly may have just been off a couple of payments and got denied. It didn’t mean that they’re denied for the whole program, they just have to make a couple more payments to get to 120. But I think the other big reason was there was a buzz about PSLF in 2017 and 2018. That was the first year we could have applied for the forgiveness. People in public service got excited about it and they were like, “Oh, I’ll just apply to see what happens,” and they hadn’t done the due diligence to check all the boxes and they definitely didn’t do the time. And so that’s my unofficial hypothesis on what happened there.

Meagan: Then there are some other things too, like there are some specific things you need to make sure you’re checking the box for, like having the correct type of loans, only direct loans qualify for forgiveness and being on an income driven plan. Those are two that were another percentage of why people got denied. They had either the wrong type of loans or weren’t on the right repayment plan. That article, while although looked horrifying, if that was the route you were going, it was very misleading. And I wish they would have pulled out some of that bad data. But PSLF is a great program to pursue. We just have to make sure we’re doing the due diligence and keeping a pulse on our payments over time to not have any surprises, that’s really the big important part with PSLF.

11:49 Emily: I guess I’ve also heard sort of anecdotally that I believe you have to do a recertification every year to make sure that your employer is still the type of employer where you would qualify for this program and that maybe you need to stay on top of your employer and your lender to make sure that all that paperwork is going through. Sort of you as the borrower need to take on a little bit more responsibility than you might like to, just to make sure that all the I’s are being dotted and the T’s are being crossed and everything.

12:16 Meagan: Yes. There’s what’s called the employment certification form that we recommend submitting at least once a year, even if you haven’t switched employers. What that form does is yes, it does verify that the employer still has that tax-exempt status. It also verifies and certifies that you still work there full-time. That’s one of the other requirements, working full-time for that entity. Once they get that form, then they update your payments since the last time you submitted it. And what’s nice too, they just updated their portal to where it shows your PSLF payment track, which is new because he used to have to wait for that confirmation email after submitting the ECF form to know where you stood payment-wise, but now it reports real time. So I’m excited about that. It’s a great addition, I think, to the portal,

13:04 Emily: I’m sure that gives the additional peace of mind to not have to wait for that communication to come back.

Making Payments on Student Loans During Grad School

13:11 Emily: Now I’m thinking about a person in graduate school, their loans are in deferment. They’re looking ahead to their post PhD career and saying, yeah, “I think I’m going to be able to pay these loans off once I get to that point. I don’t really think I’m going to have to do an income driven repayment program. PSLF is not an attractive…That type of employment is not really my plan.” That’s what they’re saying to themselves in graduate school. In this particular scenario, this graduate student has the flexibility to be able to make some kinds of payments towards their student loans. They’re receiving a stipend. It’s enough for them to live on. They’re able to pursue some financial goals aside from just paying for basic living expenses. Is that a good idea? And how does the person determine whether they should go that route, of repaying a bit of debt during graduate school, or whether they should just kind of defer it all and wait until afterwards?

14:00 Meagan: Yeah, that’s a good question. And I think, yes all of those things you mentioned before have to exist. We need to know that we’re not pursuing PSLF one way or another. And I would suggest before putting money down on the student loans, making sure your emergency savings is healthy. We never want to be in a position where we have thrown all of our money towards our debt, we can’t get it back out, and we need it for an emergency. That is a bad situation to be in. I think having a buffer and savings is important, but I think one thing being in graduate school, we can’t officially enter repayment until we have graduation status. We can, with some of our undergrad loans, if we wanted to, we can enter repayment on those specifically. We can make payments, we just can’t officially enter a repayment plan on our existing school loans, so if you wanted to make payments, you could.

Meagan: Your un-subsidized loans do accrue interest while you’re in school. So that’s anything that says un-subsidized from undergrad and from grad school, and also grad school loans are considered un-subsidized. Those loans specifically accrue interest. Subsidized loans do not. If you wanted to prioritize which loans you’re applying payments to, subsidized loans aren’t going to be growing while you’re in school. So you can maybe prioritize the unsub and I think you can apply it straight to that interest. Again, it’s going to accrue on a monthly basis, so maybe you can find out how much that is and make those payments so it doesn’t grow while you’re in school. Those are some thoughts there. Post-graduation you can immediately enter repayment if you wanted to, by consolidating. You typically have a six month grace period where you can decide what plan you’re going on, get established. But if you wanted to enter repayment officially sooner, you can consolidate and kind of force yourself into repayment.

16:03 Emily: I see. How big of a factor should the interest rate on the unsubsidized student loans play in this decision, about whether to pay them down a bit or pursue other financial goals? We already covered the emergency fund, but if a graduate student is looking at “well, I can start investing for retirement, for example, versus paying down the student loans,” what are your thoughts about how the interest rate should factor into that decision?

16:28 Meagan: Yeah, so the interest rates on student loans do a lot of times fall in a gray area where, I mean, between 5% to 7% — I’m not sure, I’m not confident that you might get a longer term return if you were to invest that extra money instead. It really just depends and it kind of depends on your risk tolerance there. But any interest rates that are below 5%, we can kind of put those lower on the totem pole because if we took that extra money and we put it into our IRA or putting it towards our financial independence, long-term investing tells us on average, we can get close to 7% to 10%. I know that’s a big range, but it just depends. So if our debt is charging us 4%, or 5% even, there is that that net value that we’re missing out on. So I would say lower interest rates, I wouldn’t prioritize necessarily. If you have extra dollars, put that towards savings or put that towards your IRA or have a split approach — put some towards the loans and some towards retirement. When interest rates are higher though, when they’re in the 7% range, which is normal for graduate students, that’s where they’re a little iffy and we might want to prioritize them a little more. Those would be ones that you’d want to prioritize and you can kind of take a avalanche approach where we tackle the highest interest rate loans first, if you wanted to do it that way.

18:01 Emily: Yeah. What if we flip the scenario a little bit and say, okay, well instead this graduate student is someone who is going to pursue an income driven repayment plan and potentially forgiveness, maybe PSLF, but they still have that disposable or discretionary income during graduate school, then I guess the weight would tilt towards starting to invest. If you know that you’re going to be enrolling in one of those plans later, my understanding is, hey, never make an extra payment, never pay more than the minimum, if that is your plan and all that extra money should be going towards your other financial goals.

18:35 Meagan: You said it. Yeah. And we can’t have a qualifying payment while we’re still in school. Sometimes that’s a misconception. People feel like they can enter repayment and start having payments count towards forgiveness. We can’t necessarily with our existing degree loans, we have to wait until post-graduation for those payments to count. So, yes, we don’t want to pay a dollar extra. So throw that towards something that’s going to serve you in the future, and that would be retirement or savings.

Commercial

19:04 Emily: Emily here for a brief interlude. If you are a fan of this podcast, I invite you to check out the Personal Finance for PhDs Community at pfforphds.community. The community is for PhDs and people pursuing PhDs who want to take charge of their personal finances by opening and funding an IRA, starting to budget, aggressively paying off debt, financially navigating a life or career transition, maximizing the income from a side hustle, preparing an accurate tax return, and much more. Inside the community, you’ll have access to a library of financial education products, which I add to every month. There is also a discussion forum, monthly live calls with me, book club and progress journaling for financial goals. Basically, the community exists to help you reach your financial goals, whatever they are go to pfforphds.community to find out more. I can’t wait to help propel you to financial success. Now back to the interview.

Taking Out Student Loans During Grad School

20:08 Emily: Yeah, I think another point that might be helpful for the listeners is to understand, if you want to take out federal, and if you have any conception in your mind that there might be a possibility you want to take out a federal student loan during graduate school, what are the steps you need to do in advance to have that be an option for you versus what you just said: well, maybe at the given time that you need money, maybe you can’t take out a loan right at that moment. What steps should a person do in advance? If they’re thinking, yeah, this might be a possibility for me down the road.

20:34 Meagan: You’d want to complete FASFA each year. As a graduate student, your parents information, does it factor in anymore so it is solely on your financial situation. That’s going to help you with the un-subsidized funding, which you can get up to $20,500 for. You’ll also might want to consider looking at signing the graduate plus promissory note, which your financial aid office will tell you to do if you need that additional funding. But it is a separate promissory note. If we need above and beyond that $20,500, then you can spill over into the graduate plus loans. That’s what I would, I would do each year: FASFA and then for the first time you borrow, graduate plus, or if you don’t have graduate plus now, maybe go ahead and sign that promissory note. Either way you have to accept the aid that you’re being awarded. It’s not like you’re just willy-nilly applying for a loan. You have to intentionally accept it, but that gears you up to be able to accept it without having to do all that paperwork in a rush or being too late.

21:41 Emily: Yeah, I guess I’m just thinking financial planning wise for graduate student, going into or in a graduate program where they just know this program is not paying me well, I can barely make ends meet, that might be a thing to do in advance. It’s actually a little bit like having an emergency fund. If you know you can’t build up your own emergency fund right now, where it’s not going to be very big because they just aren’t paying you enough to make that happen, then maybe this is a good sort of backup plan to have. Do all the paperwork in advance, if anything adverse ever happens this is another step that you could take. I don’t love that idea because of course it’s better to just have your own emergency funds and go and you go forward and of course that’s, most of the strategies that I talk about through the podcast is how to overall be building up your savings during graduate school, but just as like a backup plan, it seems like it could be prudent to take these steps so that money, the loans could be available to you if you came upon a situation where you needed it. You do need to take some steps in advance to make that happen, so thank you for clarifying that.

The Intricacies of Student Loan Repayment

How Marriage May Affect Your Repayment

22:40 Emily: Okay, now we’re getting to a couple, maybe more niche kinds of questions. I get a question sometimes from people who are either married or they’re considering getting married, but they want to know how their status as being legally married or not is going to affect things like their tax returns and therefore their student loan repayment amounts. Can you just explain how that works? I’m thinking especially for someone who is maybe considering getting married, but wondering about the timing of it and wondering if they’re going to have to do married filing separately and these kinds of questions. So with taxes and student loans, what happens when you get married and you have student loans or your spouse has student loans?

23:25 Meagan: Yeah. When you get legally married, your tax filing status, when it comes to being on an income driven repayment plan matters. If we’re filing taxes joint with our spouse, and we’re on an income driven plan, it is going to factor in our spouse’s income. We not want that to happen. We may keep our finances separately. We may be trying to keep our payment as low as possible to pursue forgiveness. One strategy we talk about is considering filing separately and what this does, depending on the plan, if we file our taxes separate and we’re on an income driven plan, either pay as you earn income based repayment or income contingent repayment, then we’re allowed to exclude our spouse’s income and keep our payment off of just our own, which can be hugely beneficial.

24:18 Meagan: There are downsides to filing separate that need to be weighed, so you want to do an analysis of what is the cost difference between filing separate and joint? Because you’re missing out on some tax discounts and maybe some benefits. And how does that compare to how much it saves us over the course of the year in our payment? I never want someone to be scared to get married because of their student loans. We can always pivot. It’s just in the year of marriage. You need to know that being married will impact the income driven plan that you’re on and you might want to take a closer look at how you file before you file.

24:57 Meagan: Then the last thing I’ll mention on that is revised pay as you earn, which is 10% of discretionary income, that plan does not care if you file separate. It’s going to count spousal income or all household income regardless. If you’re on that plan and you don’t want your spouse’s income factored in, you might need to switch to either PAYE or IBR and that can kind of solve that problem to where if you don’t want income factored in.

Choosing a Repayment Program

25:25 Emily: Gotcha. Thank you so much for clarifying that. You said earlier there are four different programs plus PSLF you mentioned a few of them just now — for someone who’s looking at this landscape and wondering how in the world do I choose which one of these programs I should enroll in. How can they do that?

25:43 Meagan: A really simplified way to think about it is if you’re going the forgiveness route, you want to choose the lowest income driven plan available. So that would be revised pay as you earn or pay as you earn. If you don’t want spousal income factored in, that would be pay as you earn or IBR, if you don’t have access to pay as you earn. From an income driven plan perspective, that’s how I would think. If our plan is to pay off the loans, then we might want to be choosing one of those amateurized options like the standard 10 year until we can commit to refinancing, or, and this might dive into one of your other topics I know we had mentioned, but if our income is really low now, and we want to take advantage of an income driven plan, but we are not ready to throw a lot towards it, then starting out on REPAYE could be really advantageous because of its interest subsidies. What that means is it has discounts on how much interest accrues when you’re in repayment, but the payment itself might not be as much as it needs to be to cover interest and principle. So it keeps that balance from ballooning and instead of being in forbearance or pausing loans during that timeframe, interests won’t continue to grow in that way. I know we were going to touch on that. I might’ve skipped ahead, but let me know if you want me to slow down on that one again.

27:11 Emily: No, I think it just gives a flavor for how complex this decision is, and how your individual career path and income path will affect the decision that you make, plus what you’re doing in your personal life, whether you want to get married or not. Who should be working with someone like you? What’s the kind of person who should be working with someone like you to figure out what the best decision is? And who’s the kind of person who, well, it’s simple enough, you can figure it out on your own?

When to Consult a Professional

27:38 Meagan: Yeah, I think if you have any anxiety or stress about making this decision, and it’s overwhelming doing this research for yourself, in a one hour consult, we will have your plan put together. If you want to save the time, save the energy and the stress, that’s somebody who would be a good candidate to work with us. For someone who might not be such a great candidate, I think if you are already very familiar with all of these repayment options if for sure that you’re going to be refinancing or just paying it off really aggressively, then I think that would be more so like a quick, “Hey, yup, I think you’ve got the right idea.” And again, that would be if your balance is lower than your income and you’re ready to walk away from those federal flexibilities. I think we won’t be able to provide as much value there, but for folks who have balance is much greater than income, and they’re a little nervous about that decision or navigating that, we would be helpful in that situation.

28:40 Emily: Yeah. I guess the way I’m thinking about it is like how high are the stakes here. If they’re pretty high, if that loan balance is pretty high compared to your income, that’s the time when you need to be sure you’re making the right decision and it helps to get some professional guidance at that point. And like you said, if you can have a one hour session and get a firm answer, that’s going to do well for you for the next 10 years, or unless and until your situation drastically changes, then that is awesome peace of mind to pay for in just an hour. That sounds wonderful.

29:09 Meagan: Yeah, and just the strategy too. There’s a lot of technicalities that go into when to file, like when to certify income, how to reduce income. There’s a lot of things that go into it, so if you wanted to get really sexy with your planning, that’s where we could come into.

The Emotional Aspect of Repayment

29:24 Emily: Okay. Yeah. Great recommendation on that front. Another question occurred to me, pulling together some of the threads that we’ve mentioned so far in the interview, if you are deciding to go in an income driven repayment plan and your intention is eventually to have a lot of that balance forgiven. We mentioned earlier never make more than the minimum payment you’re required to. Don’t make payments during deferment. Don’t make more than the minimum once you’re in repayment. Emotionally, how does a person deal with potentially seeing their balance, plus the interest increase and increase and increase, which is the situation that some people would be in pursuing that route over those 10 years, or even 20 or 25 years, while they’re in those types of programs? How do they emotionally deal with looking at that until they do get to the forgiveness at the end?

30:13 Meagan: It is something I feel like you need to compartmentalize because we are taking a non-traditional approach to debt. I back that up with make sure you know that federal student loans are just not a regular debt. That’s one, that’s the biggest thing we need to remember that if we were going by traditional debt advice, and if this was a traditional debt, we would have the opposite mindset. It would be, let’s pay this off like our hair’s on fire. But the federal system has some really unique opportunities like income driven plans and forgiveness that we can take advantage of that really help us prioritize other financial obligations. Maybe instead of getting anxiety about the loan balance increasing, maybe focus more on your savings increasing. So you have a lot more cashflow to be able to throw towards your financial independence and as long as we’re working towards that forgiveness timeline the balance will grow, but there is an end in sight. That’s something that I think can bring some peace of mind and just knowing and remembering that federal loans are not a normal debt.

31:18 Emily: Yeah. Thank you for that insight. I think I’ll add to it. The real danger here is going into one of these forgiveness plans, one of these income-driven repayment plans, and taking advantage of the lower payment and then not having any movement in the rest of your financial life — not doing the investing, not doing the saving. That’s the real danger when you get to the end of the 10 years or the 20 or the 25. And yes, hopefully everything goes smoothly and the rest of the balance is forgiven, but you kind of have nothing on the other side of it because the whole time you’re thinking, “well, I still have my student loans, so I’m not going to be investing.” If you’re making the intentional decision to pursue an income driven repayment plan and pursue forgiveness, then your high priority needs to be, “yep I’m taking advantage of this, but at the same time, I’m going to be working on my finances over here. I’m going to be building up my portfolio, building my net worth.” And who knows what might happen in the future. If it turns out that the forgiveness was taken away or didn’t happen or something went wrong or something happened in your life, I don’t know, at least you have some net worth on the other side of the equation to potentially deal with the debt or whatever might be going on. It’s really just shoring up your finances in one spot rather than paying off the debt. Thank you so much for that insight.

What is Your Best Financial Advice for an Early Career PhD?

32:31 Emily: Meagan, I like to end all my interviews by asking for your best financial advice for an early career PhD, a graduate student or a PhD. That could be something that’s related to what we’ve talked about in this interview, or it could be something completely else, but would you please share that with us?

32:46 Meagan: I would say, I think my best coin of advice would just be to have a plan. And I know that sounds like so blah, but I think looking at your student loan situation or your financial situation head on is not as scary as it may seem. I think people avoid a lot of financial things because they’re not sure how to tackle it or they’re overwhelmed by it. I promise you, you will feel so much better if we just have a plan from the beginning. Because if you ignore it for three years, which sometimes I see, then we’re three years behind when we finally do pick up and start focusing on it. Having a plan is important for your peace of mind for your future self. It’s self-care to have a plan now. I think that would be what I’d part on there.

33:33 Emily: Yeah. I absolutely totally, totally concur about having a plan. I know looking back at myself when I was in graduate school, not having a financial plan. When you have so little income, so little wiggle room, you know you can never do everything you want to do with your money. You know that you can’t pay off your student loan debt and invest and do all the saving and all the lifestyle. You just have to prioritize and then triage the situation. So that’s what a plan helps you do and thank you so much for that advice.

Where to Find Meagan Online

Emily: Meagan, if people have enjoyed this interview and they’ve learned a lot from you and they want to potentially work with you, how can they get in touch with you? Or where can they learn more?

34:08 Meagan: Yeah. So studentloanplanner.com is a wealth of information. We write a lot of blog posts about anything student loan related. We have a podcast. And if you wanted one-on-one help, you can schedule a consult through our website, studentloanplanner.com.

34:22 Emily: Yeah. Wonderful. There are so many free resources available and it’s really nice to know that there also professionals like Meagan backing that up and there for you, if you need those consultations. Meagan, thank you so much for giving me this interview and joining me today.

34:35 Meagan: Thank you. It was fun nerding out with you.

Outtro

34:38 Emily: Listeners, thank you for joining me for this episode. PFforPhDs.com/podcast is the hub for the personal finance for PhDs podcast. There you can find links to all the episode show notes, and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, please consider joining my mailing list for my behind the scenes commentary about each episode. Register at PFforPhDs.com/subscribe. See you in the next episode, and remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is stages of awakening by Poddington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing and show notes creation by Lourdes Bobbio.

 

This Soon-to-Be PhD Is Facing Debt and Underemployment as He Goes on the Academic Job Market

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In this episode, Emily interviews Chad Frazier, a graduate student in history at Georgetown University who is about to complete his PhD and go on the academic job market. Chad’s career plans and personal finances have changed a lot during his PhD (and a master’s before that). When he received his stipend offer from Georgetown, he thought he had made it. But seven years later, the pay increases haven’t kept pace with housing prices in DC, and Chad has accumulated credit card debt. As he applies for faculty positions, Chad faces underemployment, and the grace period on his student loans from his undergrad and master’s degrees is quite limited. Chad argues that universities have a moral obligation to pay their grad students a living wage so that they can thrive academically. (Update: Chad successfully defended his PhD just prior to the publication of this episode!)

Links Mentioned in the Episode

PhD debt and underemployment

Teaser

00:00 Chad: I just spent the last 10 years at an institution, and I’m now actually financially worse off than I was when I started. At times that makes me really scared and angry. And that wasn’t something that I imagined it would be like when I would get to this point.

Introduction

00:21 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season four, episode 16, and today my guest is Chad Frazier, a rising eighth year PhD student in history at Georgetown. Chad and I discuss some really tough and even emotional issues in this interview including large student loan balances, credit card debt, underemployment, the difficult academic job market, and the feeling of being let down by your university. Chad shares quite openly the current state of his finances and career aspirations. We discuss what universities can do to alleviate financial stress among their grad students as well as what prospective grad students should think about when they look at a stipend offer letter. Without further ado, here’s my interview with Chad Frazier. You don’t want to miss this one.

Will You Please Introduce Yourself Further?

01:15 Emily: I am joined today on the podcast by Chad Frazier, who is currently a PhD student at Georgetown. And we’re going to be talking about the financial issues that arise, particularly as you’re getting close to the completion of a PhD. Right? You’re getting to to the end of graduate school, and what happens next and how do you handle that with your finances? It’s a really challenging situation for many, many, many PhDs. So Chad, I’m really delighted that you joined me today. And will you please tell the audience a little bit more about yourself?

01:46 Chad: Yeah, sure. First off, happy to be on the podcast, Emily. So just kind of a little background. I’m, like you said, just in the process of finishing up my PhD. I’m kind of planning to defend middle to late part of September. I focus on US history. Before that, I got my MA at Georgetown, which is the institution I’m currently at, BA at Dickinson. I guess those are kind of the broad highlights. I’ve been in the last couple of years, very active with the graduate union here at Georgetown. I’m part of the organizing committee and started getting more and more interested as part of that work in the last couple of years.

Evolution of Career Plans in Grad School

02:32 Emily: Yeah. Super interested here. Maybe not specifically about the unionization issues or your role in that, but just about your thinking around those issues as it relates to what we’re going to be talking about today. So, you’re almost done with your PhD. What are your current career plans, what you think you’ll be doing next, and also maybe how has that changed over the course of your degree?

02:54 Chad: Okay. Yeah. So when I started out the PhD, which would have been fall of 2012, the plan was generally that I was going to just tenure track, ideally at a liberal arts college. I was a peer writing tutor in undergrad and I really liked the experience of teaching. That said, I was kind of amenable to the idea of like maybe doing alternate career paths, kind of sidetracks, that led eventually to this final goal. But I can’t say that I really thought about them in any sort of depth. I think I figured, “Oh, I’ll just figure it out as I go.” So, like last year, I tried the academic job market for the first time, kind of a soft search. I didn’t get anything, which was not unexpected where I was with my dissertation. And then I’m going to try it again this year–be better, generally more competitive I think–and we’ll see what happens there. But over the course of the sort of last several years, I have just gotten more interested in other possible career paths. Because there are maybe some things about academia that I’m not always a fan of. And I think in particular, one would flag, like I mentioned, the unionization, maybe involvement with something to do with the labor movement, either as an organizer or researcher for a union. I’m also working with a professor here on building an online archive. So it looks at teachers in the labor movement. So it’s kind of up in the air.

When Does Your Graduate Student Position End?

04:18 Emily: Yeah. So it sounds like you’re getting other kinds of work experience. Right? Other kinds of, or not necessarily work, maybe it’s volunteer as well, but other kinds of experiences that’ll help you figure out what you want to do with your career and maybe you know, land, whatever that next job is. So you said you’re planning on going back on the job market again this fall. When does your position as a graduate student actually end or do you have an end date for that?

04:41 Chad: So I actually just put in paperwork with the graduate school. So the way this basically works is, I will defend, ideally late September. Once I do that, and generally, I am sure this is true for a lot of people, the assumption is that when you get in the room, you’re ready. Then there are revisions, which part of that is what your committee says, part of it is shaping it to the graduate school. And, as far as the university is concerned, when I’m in that mode, I’m still a student. And it’s just then once those are done, you file it with the graduate school, and then you apply to graduate, which for me the plan is to do that in December.

Plan for Income Until Graduation

05:24 Emily: And so as far as your income goes, in the meantime, do you have an assistantship that’ll still be ongoing, or what’s the plan for the income?

05:32 Chad: So the plan for the income by sort of Georgetown rules is basically after seventh year, which my seventh year technically concluded in May, I’m not eligible for any kind of assistantship, whether as a TA or an RA. So, the work I’ve been doing with the online archive is paid out of an Institute here at Georgetown called the Kalmanovitz Initiative. And I’m figuring out how many hours they will be able to pay me for that. But I’m also looking for sort of part time jobs. One of the advantages of being in DC is there’s a fair amount of work for research with journalists or stuff like that to kind of make enough money that I can make ends meet until I can have something more definite.

Are You Considered an Employee at Georgetown?

06:20 Emily: So, the position that you’ve had at Georgetown, not your assistantship, are you an employee technically or is that like an independent contractor position?

06:32 Chad: So, I’m an employee. It’s routed through sort of the student payroll office. It’s a little complicated just because the way the rules are here with PhD students, we have to estimate how many hours a week I plan to work and how many weeks. And then they are like, “Oh, this is his stipend.” And then that gets dispersed out in biweekly installments. They changed that recently. It used to be able to have been, oh, just hourly, as long as I didn’t exceed like some certain restraints, that would have been fine. Bureaucracy.

What is the State of Your Finances at this Point?

07:05 Emily: Yeah. So, it sounds like you have a part-time position that’ll be ongoing through Georgetown. And then on top of that you do need to work a bit more as well as actually finishing up your dissertation and doing the defense and all of that. So, it’s a lot going on at this juncture. It’s a time of transition and a challenging time. So, can you tell me a little bit more about the state of your finances at this point? It sounds like, well first of all, is that income that you anticipate making going to be enough to sort of keep your head above water or is that still a question mark?

07:43 Chad: So, the way it’s kind of shaping up is that income that I’m going to get from the job with KI, with Kalmanovitz Initiative, probably I’m hoping that’s enough to cover rent. And then the additional work–the idea is basically enough that I can feed myself and pay for Metro and sort of living expenses and hopefully get enough too that I can start paying down credit cards a bit more. Because I’m very cognizant of the fact that, six months after I graduate, the student loans are going to start coming due. And that’s going to drop like anvil from heaven, it feels like. So, I want to have hopefully something ready for that where I’m not getting hit from two sides.

History of Chad’s Student Loans

08:37 Emily: Yeah, totally. So, you’ve mentioned you have student loans. Do you want to share like the amount of that, or like which degree you accumulated them from?

08:47 Chad: Yeah, sure. So, I went to a private liberal arts school, Dickinson College, for my undergrad. And I got lucky. I got a pretty good financial aid package there that most of it consisted of scholarships and grants. And I only had to take out, I think, anywhere from 10 to 20,000 [dollars]. Most of the student debt I’ve accumulated was because of my master’s degree that I took before I started my PhD. And for that, I basically have to look through the records and that’s about 80 to 81,000 dollars. So that’s, yeah.

09:20 Emily: Yeah, that’s going to be a large minimum payment. Even if you go one of these income-driven routes, depending on what you’re doing the rest of the year, assuming you haven’t gotten like a full-time faculty position yet. Anyway, it’ll be a large payment, presumably. So, that sounds really, really tough, but it’s also pretty common as you might imagine. Okay, so you have the student loan debt from your earlier degrees, not from the PhD itself. And then you mentioned credit card debt. Do you want to share the amount of that, and how it was that you accumulated it?

Accumulation of Credit Card Debt

09:54 Chad: Yeah, because I’m not sure. I don’t think I can pull the dollar amount right off the top of my head. But it’s basically–so, a little background about how a PhD sort of works at Georgetown. I was admitted with a five-year package, which meant that for three years there was a service obligation, which I TA’d. Two years was non-service. And then basically, for year six through seven, the department was able to fund me kind of on a discretionary basis. I got a fellowship my sixth year where I got to teach my own class, and then I got a semester of non-service. And then this last year I was on service. And I got a decent enough job working kind of as an administrative assistant to a professor. But the big issue was, that fellowship when I was getting paid was only nine months out of the year, which is pretty common for humanities and social science students here at Georgetown.

10:55 Chad: And so that meant that like, I tried to set aside money so I could cover rent. I would basically always try to find an extra, some sort of job either during the semester where I could save up money or a job during the summer where I could kind of live off of that. Invariably, credit cards became the sort of go-to during the summer. And the usual MO is, in the summer months, pay them down during the year, and then in the summer months make minimum payments until–maybe a little extra if you can–you get back into the fall, and then start paying them down again. And that worked actually pretty well the first couple of years. It’s just in the last two, three years, cost of living has been going up in DC with rent. And also with like, you know, last summer I had three really close friends who got married, and I wanted to go to their weddings and I had to pay for that. And I went to a conference in November that I didn’t get reimbursed for that was on the West coast, which was expensive. And it’s been hard to sort of do that, pay it down this last year where, come June, they were all maxed out, and I just was boxed in.

12:15 Emily: Yeah. I think what you’re describing is super common for PhD students, for people in their twenties and thirties, generally. I mean the nine-month pay, of course, is fairly unique to our mode of work, depending on what kind of field you’re in. But yeah, I mean it sounds like you had the right idea, right? Save up during the year, so you’re cognizant of that in advance. You’re trying to plan for it in advance, save up during the year, live on that over the summer, plus you work a little bit. But it’s really hard to do that planning. It’s just a really, really challenging situation to be in. So yeah, it sounds like credit cards came into that for you as well as the whole irregular expenses thing, you know, going to people’s weddings. I also really value attending weddings.

13:00 Emily: I love being able to go, I always had to travel. It was a challenge, financially. And what you mentioned, of course, the conference thing. We all know inside academia that conferences either are not paid for at all for students, or the student has to pay upfront and then the reimbursements, and it’s months later. That can definitely get people into cycles of credit card debt as well. It’s a huge, widespread problem, I would say. So, I’m sure all of this sounds very relatable to the audience, and I’m really thankful to you for sort of bearing yourself this way and sharing this because it is a really difficult thing to talk about publicly. So, thank you so much for doing that. Is there any other debt that you’re dealing with at this point aside from the credit cards and student loans?

Any Other Debt Besides Credit Cards and Student Loans?

13:41 Chad: I think those are the two biggest sort of issues. Like, yeah, there’s nothing else really out there. I rent so I don’t have to worry about like a mortgage. I don’t like to drive. I don’t own a car. So, it’s public transit. So yeah, it’s pretty much just credit cards and student debt.

14:01 Emily: Yeah. And it sounds like, given that you don’t own a car–which is one of my very go-to suggestions for people trying to reduce their expenses–you live in an expensive city. That’s how it is. You pay a lot in rent. You don’t own a car. Rent’s been going up, presumably, as is almost always the case. Stipends do not keep up with rising rent costs and yeah, it’s just a really, really tough spot to be in. I’m curious actually what your thought process was about choosing–and maybe it’s not really like a conscious choice, but like you have been accumulating credit card debt over the past couple of years. You know, at first, you said you were in a cycle of, “Okay, I build it up and then I pay it down.” But as you said, the last couple years, it’s been more building up than paying down.

14:43 Chad: Yeah.

14:44 Emily: Why did you go that route instead of taking out additional student loan debt?

Why Credit Cards Over Additional Student Loans?

14:50 Chad: I think part of that was I was just being cognizant of the fact that I had a fair amount coming in from my master’s program in particular. I actually had this conversation with my mom a couple of times. Where she’s like, “Well you should just put in for FAFSA and try to get more. You should try to get another student loan or something.” And I was like, “But I’ve already got at least 80,000 perhaps up to a hundred thousand, and it sort of seemed like I would be mortgaging my future even more so than I did. In the early years of the program, kind of you brought up the whole idea of stipends not keeping up–throughout sort of my time here at Georgetown, usually the stipend has gone up in each year by about a thousand dollars, which in year one that meant I went from 22 to 23 thousand. That was like a 5% increase. And that I think helped keep ahead of a lot of stuff.

15:50 Chad: And then, more recently it’s like now that last year–the university introduced a wage freeze this year, but the year before it was like–that amounted about 3.5%. I don’t have terribly many expenses. I used to joke that I only allowed myself sort of three very basic luxuries, which was food, like going out to eat. Not that I go out anywhere very expensive. Booze. I like beer, but I like cheap beer. Weirdly enough. And then books. And those, even there, I’m like, “Oh, I won’t spend more than like 25 bucks.” So, it was like, “Oh, these are really small things.” And it’s not like I was going on trips to Europe or anything that expensive. So it was like, “Okay, the credit cards just seemed more manageable.”

16:48 Emily: It really seems like just mentioning those little luxuries that you allowed yourself–which again, like you just said, did not amount to a lot of money–it really illustrates for me how large a chunk of your income must be taken up by your necessary expenses. Because what you mentioned as discretionary expenses have not been outrageous by any means of course. So, it just for me really illustrates this like probably 60, 70, 80% of your income has probably been taken up by like your rent and your basic food and you know, basic transportation and all that kind of stuff, which is a really, really, really tough spot to be in. There’s a benchmark that I like to reference which is called the balanced money formula, which I don’t know if it was created, but it was definitely popularized by Elizabeth Warren and her daughter in their book from, it must be 10 plus years ago now, All Your Worth*.

[* This is an affiliate link. Thank you for supporting PF for PhDs!]

The Balanced Money Formula

17:43 Emily: And they introduce this concept of the balanced money formula. And in that, a person’s necessary expenses–so you know, stuff to keep you alive, housing, food, et cetera. Also, all the contracts that you are in, your insurance, that kind of stuff–that should amount to no more than 50% of your net income after-tax income. And that’s to live like a balanced life. On a sustainable basis, it shouldn’t be more than 50%. If you go above that, it’s like warning, warning, warning. This is not going to feel sustainable for you. It sounds like you’ve probably been in that warning zone your entire time you’ve been in graduate school most likely. And again, really, really common for graduate students, especially those who live in higher cost of living areas. So, that benchmark can feel really discouraging to people who have lower incomes. And it’s just kind of something that like, I don’t know, just you need to acknowledge. It’s going to feel really difficult to live on your stipend if you can’t fit your rent and your transportation and your food under that 50% figure. And is that something that’s worthwhile to attend the institution you want to attend and do the research and pursue our passions in our careers. It’s a tough spot to be in.

Commercial

18:59 Emily: Emily here for a brief interlude. As a listener of this podcast, every week you hear strategies that another PhD has used to improve their financial picture. But listening and learning does not automatically translate into action in your own financial life. If you are ready to change how you think about and handle your money but need some help getting started, I can be of service. There are two main ways you can work with me to create and implement a financial plan tailored for you. First, I offer one-on-one financial coaching, either as a single session or a series as you make changes over the longterm. You can find out more at pfforphds.com/coaching. Second, I offer a group program called The Wealthy PhD that is part-coaching, part-course, and part-community. You can find out more and join the waitlist for the next time I open the program at pfforphds.com/wealthyPhD. I believe it’s possible to succeed with your finances at every stage of PhD training and throughout your career. Let’s figure out together how to make that happen for you. Now, back to the interview.

Anything Else You Would Like to Share?

20:14 Emily: I wondered if you had any additional thoughts, feelings that you wanted to share regarding what we’ve been talking about. Your career transition upcoming, about the state of your finances right now. Anything you haven’t said so far?

20:28 Chad: I think in terms of sort of the way this has all been. Because again, I don’t come from money. My dad works as a supply manager at a college bookstore. My mom recently started working for Chick-fil-A. Like, working-class family. And there was even this weird stretch when I started the PhD in 2012, my dad who had gotten fired from his job like just after the financial crisis and just took the opportunity to go back to school himself, to finish first his undergrad degree. He could only find a job working part-time for a big-box retailer. And you know, there were moments where mom was calling me up and having to borrow little bits of money from me and then she’d pay them back to make their ends meet. And there was just this sort of sense of like, “Oh, I made it. I’m okay. Like this is not a lot, but it’s going to be kind of uphill, you know, all going up from here.”

21:35 Chad: And then now to be in this position where I kind of feel like at times I just spent the last 10 years at an institution, counting the same institution for both my MA and my PhD, and I’m now actually financially worse off than I was when I started. And I think at times that makes me really scared, and at times it really also bothers me–like now, my mom has to front me money for stuff like getting a new cell phone. Because my old one was four years old and couldn’t hold a charge for like a few hours–and angry. And that wasn’t something that I imagined it would be like when I would get to this point. I felt like it would be tough. There’d be an adjustment, but I didn’t think there would be quite this type of problem.

Supporting Family Members During Graduate School

22:27 Emily: Yeah. Thank you so much for sharing that. Yeah, just thank you for sharing the point that you’ve gotten to here. I think that graduate students supporting their family members to a degree–and it could be their parents, it could be a sibling, it could be a dependent child–is something that is, in my opinion, not really talked about that much openly. But it happens a lot. And your degree of like, you know, maybe short term loans to your family that happened over what seems like a relatively short period of time is a more brief, just smaller kind of support that you were able to provide at that time, which is awesome. And other graduate students support their family members for a significant fraction of their stipend for years.

23:19 Emily: And maybe it’s remittances they’re sending to another country. It could be within the US. That situation happens all the time, too. And so, I’m glad to share your perspective on the podcast of thinking, “Okay, I made it into my PhD program. I’m no longer taking out student debt. I have an income. I’m making it. I’m living in DC. The future ahead of me is bright. I’m going to be a professor.” And then, you know, seven years later coming to this point, like, “I’m not so sure what my career is going to be. I have a lot of student loan debt. I have consumer debt. I don’t quite know how I’m going to be making it from month to month starting in just a few months.” So, really, really tough spot to be in. But again, I don’t think it’s that uncommon for PhD students. What has been your observation about how your situation maybe compares to some of your other peers?

How Does Your Situation Compare to That of Your Peers?

24:11 Chad: Actually, I think you’re right. In talking with my peers, there are a lot of similarities. Like you were talking about grads supporting other grads. I’ve got friends in my program, other departments that I’ve gotten familiar with thanks to my involvement with the union, where they’ve got families–or like one of my really best friends in my cohort was from the Philippines and throughout the program he was sending money home to Manila to help his family out. And yeah, it is very common. It’s just, the more jarring thing about it is that for me, on one hand with history, more and more of an awareness of like, “Okay, the job market has sort of changed. Higher ed: We’ve seen this sort of adjunctification of labor. Okay, we need to start thinking about alternative pathways or career diversity.” Different labels get used for different fields. But there really has never been this sort of awareness about the financial dimension. I think the only time it’s ever come up in conversations with faculty are like, “Oh, the stipend’s enough, right? You’re doing okay.” Or, “You’re not having to take out loans for this, are you?” And I’m like, “No, I’m living within my means. I’m fine.” And part of it is, this stuff is kind of new-ish. It’s not necessarily out of the blue, but it is new-ish. And for a lot of faculty, this is wasn’t their experience and isn’t their experience now. So yeah, those are kind of two broad impressions.

Universities Do Not See All of Our Financial Struggles

25:45 Emily: Yeah. I think what I’ve observed from maybe more of the university perspective is they track things like amount of student loan debt taken out. And so, if they don’t see a lot of, let’s say, PhD students taking out student loans–like you have consciously avoided student loans because of your existing level of debt–then they may not be aware of the hardships that people are undertaking outside of the university system, like racking up credit card debt or like borrowing money from other sorts of lenders or from family members or whatever it might be to again sort of keep their head above water. And also, the whole side hustling thing, which is super, super common. And I’m generally a fan of side hustling, especially when it advances your own career, like what you’ve been doing with your other position. Like that’s exposed you to a new area of work and maybe you’ll keep going in that area.

26:40 Emily: So, what can be really beneficial in a lot of ways, but it’s something that can be distracting from the degree, especially if a student has a lot of other responsibilities going on too, like they have a family or whatever. So, it’s not great if a student has to side hustle. It’s okay if they want to and they can balance it or whatever. But it’s not a good situation when they have to do it to just keep their heads above water. So, all of that can be very stressful. Of course, of course it’s stressful and can affect career decisions. And I think what you’ve been talking about–that we’re specifically talking about transitioning out of graduate school–the idea that your stipend is enough to make it on like a month to month basis is kind of one thing. But is it enough to actually bridge you until you get to the kind of job that you’re supposed to have as a PhD?

27:27 Emily: And we know as you were just mentioning from the academic job market that it can take multiple cycles of going through this before maybe you get a possession or maybe you don’t. And what are you doing in the meantime? Are you adjuncting? Like that’s not a really solid situation either. So, it’s not only a stipend needs to serve you in getting, you know, from month to month, but it also should be enough that you can actually transition into the next position, you know, and not have to take on let’s say a bunch of credit card debt or whatever it is in the transition. Like to have to move and to have to have a lapse in employment and all the expenses as you enter the job market. Anyway, that’s me going on for a while about that. So, these challenges are definitely common. What do you think are some solutions or better practices that either the universities could be doing or individuals could be doing or anybody else could be doing to kind of alleviate this situation?

Solutions for Universities and Individuals

28:21 Chad: Yeah. Well, I think universities kind of start from the top and work down. Because I very much do believe in sort of this idea of agency and personal responsibility. But you have an obligation to make the best of the cards that you’re dealt. But you’re also not the one dealing the cards. And I think universities really do have an obligation–for PhDs or master’s students who are working– to pay them sort of a living wage. And there are definitely forces that are nudging them in that direction. Whether it’s like Washington DC, which has passed a referendum that I think will eventually set the minimum wage to $15 an hour which has started leading new improvements for friends that I know or master’s students who work hourly. Graduate unionization, kind of nudging for upped stipends. Also just, there’s the competitive angle of this, you know, trying to get the best recruits. I know with Georgetown we want to get the best people and we’re competing against universities like, for example, Emory or Vanderbilt that actually pay better and are also in cheaper cities compared to Washington DC. So I think universities have an obligation there.

29:40 Chad: I also think sometimes with just like master’s students, it’s a thing that is kind of maybe a joke or a truism, at least with the people I’ve talked to here, that, “Oh, master’s students, your job is basically subsidizing the PhDs or you’re subsidizing the department,” so you have an incentive to bring in more people. And it’s not necessarily going to be a funded program. And you know, okay, I paid in my $80,000. So as a PhD, I don’t always feel bad when I go into the department supply closet and be like, “I need a notepad.” But part of the function of some master’s programs is to recruit people, like identify people that would be good in PhDs. And I don’t know, the sort of like treating folks as a revenue source in that way. It’s just deeply unsettling. And not that I necessarily have an answer to that, but I think universities thinking of alternative ways to handle that or to control sort of tuition is important.

Are Students Primarily Producers or Consumers?

30:38 Emily: What I’m thinking about when you’re saying this is whether the student is primarily a consumer of what the university produces or a producer of that work. And scholarship is part of what a university produces, right? As well as the teaching and everything. So, for undergraduates I guess we kind of accept that they are consumers of the university, and they or the government or whoever should be paying for them to get this lovely education. PhD students we generally see as producers. They’re either teaching and spreading their knowledge and mentoring people, or they’re producing scholarship that is worthwhile. Master’s students I feel like could fall in either category and maybe are viewed mostly as consumers, yet as you were just saying, especially if they’re going onto the PhD level and producing scholarship of their own, even at the master’s level, maybe they should be viewed more as like producers.

31:40 Emily: But anyway, all of this is so, so complicated. And I’m really glad that you brought up like the unionization movement and how that’s affecting this conversation, as well as the competition thing. Of course. I was just thinking that, if we are going to view PhD students as producers of work, it makes a lot of sense to pay people enough that they don’t have to feel stress. Because if what the university wants is a product out of a graduate student, whether it’s a class or whether it’s a paper or whatever, it makes sense to give them an environment where they can produce a good product. And paying them enough that they don’t have to side hustle and they don’t have to take out debt and they don’t have to feel stressed, and it’s not a cloud looming over them all the time. It makes sense to me in terms of producing the best product out of those people as possible. I don’t know what your thoughts are on that.

Quality Work Requires Quality Pay

32:30 Chad: No, I absolutely agree with it. And I think it’s interesting because for me when I first got involved with the unionization effort here at Georgetown–it’s really funny if like, someone had tried to talk to me and get me involved by talking about how low my pay was, that wouldn’t have worked. It would have just been like, “Well no I make enough. It’s not a lot, but I make enough to just get by, and I have a little extra if I want to go out to eat with friends, I can do it.” For me the issue was sort of more transparency about things like job listings and responsibilities. But kind of over the last two to three years, as I have gotten closer and closer to the sort of end, it’s now much more about sort of money and like the awareness that, like what you were talking about earlier, a stipend that just allows earning a living in a livable wage that kind of also gives people a cushion. I’ve been lucky. I haven’t had any sort of serious medical problems or family issues that would’ve required like a massive outlay at one time. But there are a lot of people that don’t have that privilege. So, that’s for me like the big part of the unionization effort. Now it’s just like, we want people to do good, so we should create conditions where they can do good. Like, can do the thing that they signed up to do, whether that’s research, whether that’s teaching.

34:04 Emily: Yeah, absolutely. Thank you so much for that part of the discussion. I think we’ll just conclude the interview here by asking you what is your best financial advice for one of your peers? Maybe someone who’s anticipating the end of the PhD coming up fast.

Best Financial Advice for Your Peers

34:21 Chad: I think probably my best advice would maybe be more geared towards people earlier on, which is recognize that you’re going to change. When I started, I was 25 years old. $22,000 sounded like a lot of money. And like I said earlier, I felt like I kind of had made it. Recognizing that by about now I’m 31. I’ve had friends getting married and needs change. And seven years is a long time to be in one place. So, be aware of that, and when you’re starting out, make a plan kind of on that basis. You’ll hear some of the faculty here talk about, “You need to have like a 10-year plan for academic stuff.” Like when you’re going to publish and do all this sort of stuff. But I think also just the idea of having some sort of longterm financial plan, especially when you’re a graduate student and you’re dealing with pretty thin margins already.

Consider Long-Term Financial Goals and Changing Needs

35:17 Emily: Yeah. I totally agree and want to just underline what you said. To someone who’s in their early twenties or mid-twenties or something, that first stipend offer can seem great. Totally adequate. Fine. You’re looking at your rent, whatever it’s going to be fine. And then you get a few years down the line and your life changes and your career goals change and your responsibilities increase, often. I had another interview in season three with Scott Kennedy and he talked about getting married and having children during graduate school, which is not something that he had in his plan when he accepted that first offer letter. But it was, you know, over the years that he spent in graduate schools, something that came into his life. And so an amount of money that can seem workable at a younger age doesn’t necessarily seem so workable later. Not just because of the individual and your own life changes that you incur, but also as we were just talking about, because stipends don’t keep up generally with the cost of living and inflation, especially in these higher cost of living cities.

36:12 Emily: So, it could be that you’re actually falling behind in terms of an indexed amount of money as well as you yourself are getting older and having all these changes occur in your own life. So, it’s just an argument for prospective graduate students to be not accepting of something that seems “okay,” but really looking, as we were just saying, for competitive offers that will offer you well above the living wage for whatever area you’re moving to. Another thing which we didn’t discuss in detail, but tuition and fees–the responsibility that falls upon the graduate student for paying those–that can sometimes change. And universities who are facing funding shortfalls can change the package that you receive. So, hey, maybe your stipend doesn’t decrease or maybe your stipend goes up, as you were saying. Maybe it’s $1,000 a year, but maybe your fees are also going up by hundreds of dollars per year. That could easily be the case too.

37:04 Emily: And once you start in a program, you start feeling stuck and you’re invested, and there are sunk costs and so forth. And so, it’s just something to think about at the beginning to have more margin than you anticipate that you’re actually going to need because over five years, over seven years, whatever it is, a lot can change. So, Chad, thank you so much for this interview. It was really a pleasure to have you. Thank you for sharing so openly about your situation.

37:26 Chad: Yeah, thanks for having me. It was great talking with you.

Outtro

37:29 Emily: Listeners, thank you for joining me for this episode. Pfforphds.com/podcast is the hub for the personal finance for PhDs podcast. There, you can find links to all the episode show notes and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple podcast, Stitcher, or whatever platform you use. Two, share an episode you found particularly valuable on social media or with your PhD peers. Three, recommend me as a speaker to your university or association. My seminars cover the personal finance topics PhDs are most interested in like investing, debt repayment, and taxes. Four, subscribe to my mailing list at pfforphds.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is “Stages of Awakening” by Podington Bear from the free music archive, and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

This PhD Student Is Paying Her US Student Loans with Her Swedish Krona Salary

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In this episode, Emily interviews Crista Wathen, an American PhD student in archaeology at Stockholm University. As a PhD student in Sweden, Crista is considered more of an early-stage researcher than a student, which was one of the reasons she chose to study there. Crista’s salary and frugal living habits permit her to pay down her US federal student loans from her master’s degree. Finally, Emily and Crista discuss her blog, Richful Thinker, and why she is pursuing FIRE as a graduate student.

Links mentioned in episode

student loan repayment from Sweden

0:00 Introduction

0:58 Please introduce yourself

Crista Wathen is a US citizen doing her PhD in Sweden. She is in the field of archaeology. She’s from Florida and went to the University of Florida for her undergraduate degree. She did her Masters in the UK.

1:51 What made you choose to go abroad for your Masters and PhD?

Crista says when she was an undergrad, she did an archaeology excavation trip in Ireland. She met another student who was applying to Masters in the UK, who explained that a Masters is cheaper in the UK.

Crista says that a Masters in Archaeology in the UK is only one year. This makes the degree half as expensive as a two year Masters degree in the US.

3:24 Was a Masters degree from the UK viewed differently than a degree from the US?

Crista says the degrees were viewed the same. For PhD programs in Sweden, they looked for people who could speak English or Swedish. She says most people speak English. Crista started learning Swedish, which helped her when she first arrived. However, she does not have a proper immersive language experience in Stockholm because most people speak to her in English.

5:24 What are the differences between doing your PhD in the US and doing your PhD in Sweden?

Crista says in Sweden, she is considered an early stage researcher as opposed to just being considered a student. When she applied, she had to propose a project and submit a research plan. She has two years of classes and two years of only research, though she does research all four years.

Crista says that many Masters degrees in Europe are research based. PhD programs in Sweden require applicants to have a Masters degree. Crista says she already has experience creating a project, and she built upon what she did for her Masters for her PhD application. She explains her PhD classes emphasize reading theory, and do not focus on lab or skills training.

8:33 How is your pay for your PhD research?

Crista shares that she has a salary for her PhD and she doesn’t have to worry about applying for grants. She receives monthly pay. The university pays into an annual pension fund on her behalf. In Sweden, she receives socialized healthcare. She pays up to about $100 US dollars out of pocket. She receives dental and vision care, and she has access to several other benefits such as parental leave.

Crista says she thinks she can take her pension with her if she leaves Sweden, or she can leave the pension in Sweden until she retires. When she moved to Sweden, she was given a person number and is always in the tax system.

Emily says that PhD stipends in the US are not generous, and in many cases they are barely enough to live off of. Crista says that she lives frugally. She lives in subsidized student housing, which she is able to stay in for the duration of her degree. She estimates she is paid about the median income for Stockholm, about $2,000 to $3,000 per month. She explains that the pay for PhD work increases each year. She gets 28 days of holiday leave.

14:26 Tell me about your student loans

Crista had a full ride for her undergraduate degree, the the state of Florida Bright Futures. Her loans are for her Masters program. When she exited her Masters, Crista’s loan balance was $60,000 and now it is $45,000.

Crista has federal student loans, even though her Masters was at a UK institution. When she was accepted into the PhD program in Sweden, she called the loan offices to learn about income based repayment. The loan offices told her that her pay in US dollars is effectively zero, so her loan payment is zero.

Because of compounded interest, Crista wanted to make loan payments even though she wasn’t required too. Crista is considering whether to keep her savings and make payments or to take her savings to pay off all her loans. The interest rates on the loans are nearly 7%.

Crista says the loan payment process has been smooth except for the fees to send money to the US and the exchange rate. Recently, the Swedish krona has been worth a little more than the US dollar.

22:02 Do you have any advice for a US citizen who is doing graduate work abroad and has student loan debt?

Crista says she was looking for a university that would take her project. It’s a new culture and experience, which is worth a lot. She advises to save up because it’s expensive to move. She says take logistics into account.

23:21 Where can people go to learn more about your story?

Crista has a blog called Richful Thinker. After her Masters, she worked in banking. She learned about the benefit of having a banker and all the things a banker can do for you. She thinks more people should know about this. She also talks about what it’s like to be an American doing her PhD abroad.

24:30 What is the FIRE movement and why are you part of it?

Crista explains that FIRE is financial independence, retire early. She is most interested in financial independence. She says most people who retire early are in their 30s or 40s. But since retiring is typically 65, even retiring at 50 is retiring early. Crista says she wants to be comfortable without worrying where her money is coming from.

Emily adds that for many young adults learning about personal finance, financial independence refers to being independent of parents. In the FIRE community, financial independence is being independent of a job. This could be through passive income, like making money from rentals or investments.

Crista says she knows it can be difficult to find a job after your PhD, so financial independence is a way to assure she finds a job that she will like. She doesn’t want to take the first job that’s open. Emily shares that financial independence can make having a job more fulfilling.

28:49 Conclusion

How the Promise of Public Service Loan Forgiveness Has Impacted This Prof’s Career and Family Decisions

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In this episode, Emily interviews Dr. Jill Hoffman, an assistant professor at a university in Portland, OR. Decisions around finances, family, and career are bound tightly together for Jill because of her family’s student loan debt. Jill and her husband Mike are aggressively paying down his student loans while counting on Public Service Loan Forgiveness for hers. Required minimum payments also factored into their decision for Mike to become a stay-at-home parent to their toddler after they moved for her tenure track position. Emily and Jill discuss the rationale behind these decisions and how Jill is documenting her life as an assistant professor and mother on her website, Toddler on the Tenure Track.

Links Mentioned in the Episode

PSLF Professor

Will You Please Introduce Yourself and Your Family’s Finances?

Jill is an assistant professor at a university in Portland, Oregon. She has a PhD and master’s in social work and a bachelor’s in psychology. She has a husband, Mike, and a daughter, Ellie, who is almost three years old. Mike is currently a stay-at-home dad, but his background is in counseling psychology (master’s). When they moved to Portland for her job, it made more financial sense for him to stay home with their daughter than to get a job due to the high cost of childcare and cost of living overall.

Jill and Mike both still have one loan each from their undergrad degrees (2.5%-ish interest). Jill’s loan balance is $8300, and M’s loan balance is $6800. The bulk of their student loan debt from their master’s degrees. Jill has $16,000 remaining on one loan and $38,000 on another loan, both at 7.0% interest. Mike has $5,900 remaining on one loan and $6,300 remaining on another loan, both at 6.5% interest. Their student loan balance totals just under $82,000 as of April 2019.

Their recent focus has been on paying Mike’s student loans. In December 2018 they re-evaluated their debt and had a balance of just over $100,000, and they used some savings and cash flow to pay down the debt to its current balance.

Why Are You Attacking Mike’s Debt and Paying the Minimums on Jill’s Debt?

They are paying the minimum payments on the 2.5% undergrad loans. They are low priority due to the low interest rate.

Jill is enrolled in Public Service Loan Forgiveness (PSLF). Theoretically, after 10 years in the program her master’s degree loans will be forgiven, so they are paying the minimum for now. They are crossing their fingers that it will work out. The minimum payment doesn’t cover even the accruing interest fully or pay down principal at all. (This is because Jill is enrolled in an income-driven repayment plan with a repayment period of greater than 25 years.)

They are paying the minimum on one of Mike’s loans and attacking the higher-interest loan with all extra money each month.

Jill’s undergrad loans do not qualify for PSLF because they were taken out before 2007 (if she recalls correctly). At least for her, just her master’s degree loans qualify for PSLF. She was in undergrad between 2002 and 2006.

How Does Public Service Loan Forgiveness Work?

PSLF is for people who are in certain career types: non-profit and/or government employer may qualify. As Jill works for a public university, she is a state employee and her institution qualifies. Her job post-master’s also qualified for PSLF.

The applicant will make 120 payments perfectly while enrolled in one of the income-driven repayment plans (20-25-year repayment period). At the end the remaining balance will be forgiven. The forgiven balance is not taxed for PSLF, though it is for the income-driven repayment plans.

This is sort of a game because you are supposed to stick to making only the minimum payments even if you could pay more. often, and the payments often don’t even cover the full interest so the loan balance may be growing throughout that time. You have to do everything letter-perfect and hope that your loan balance is forgiven

The first crop of people became eligible for forgiveness in 2017, but the reported rate of actual forgiveness is quite low (1%). Many people who thought they were doing everything right for PSLF have been denied forgiveness.

Further reading:

Given the Low Rate of Actual Forgiveness Occurring, How Does Jill Feel About It?

It’s a daily struggle deciding which loan to prioritize because Jill’s loans are at a higher interest rate.

Mike has loans and is staying home right now. He might qualify for PSLF if he got a job, but it would still take 10 more years of repayment before he would qualify for forgiveness. That time frame was not appealing for them.

If Mike’s 6.5% interest loans are paid before Jill’s four remaining years in the PSLF program are up, they might consider repaying more of Jill’s loans. However, she doesn’t project that to happen within that timeframe. Since they will have to pay for more than 4 years, they’ll wait and see what happens with PSLF and hope for the best.

Emily likes that Jill and Mike are not resting on their laurels and going for the lowest possible minimum payment by both enrolling in income-driven repayment programs and only paying the minimums. Instead, they are attacking the debt in a strategic way. They are being proactive instead of just signing up for everything available to minimize payments.

What Else is Going on for You Financially Aside from Student Loan Repayment?

Jill’s employer contributes to her retirement funds. She is in a pension plan calculated based on years of service and highest gross salary upon retirement eligibility. In addition, they contribute 6% of her salary into a targeted retirement account (doesn’t come out of her paycheck). Jill doesn’t add anything to this for retirement for the time being. This does make her nervous.

Jill and Mike both have retirement funds from previous jobs, but they are not adding to them.

They recently started thinking about contributing to a Roth IRA given their lower current tax bracket vs. their likely higher future tax bracket. They are 34 years old and would like to be doing more on retirement, but they aren’t doing much for that right now.

Once they have the debt paid off, they will have much more cash flow to direct toward retirement or another goal.

How Did You Decide for Mike to Be a SAHD and Did Finances Play a Role?

When they moved to Portland for Jill’s job, Mike didn’t have a job lined up. Their plan was to move and find childcare, and then Mike would get a job. Infant care is really hard to come by and it’s very expensive. They were on a lot of waiting lists and had to pass the time until a spot became available. During that time, they were figuring out finances.

When a spot became available, it was $1,500/mo for full-time infant care at a childcare center. They enrolled and Mike started looking for a job. Jill set up her FSA to pay for the childcare. Ellie was enrolled for about a week when they really delved into their finances if Mike got a job. Their loan payments would go up to at least $1,000/mo, they would be paying $1,500/mo for childcare, plus they would have higher transit expenses and higher income taxes. Then they would be all the time spent at the job and commuting! To them, it didn’t make sense time-wise and financially for Mike to work given his employment prospects. In Ohio, he was making about $45,000/year, and the cost of living was much less. In Oregon, his salary wouldn’t be as much as Jill was making, and his salary would go largely toward loans and childcare. They thought, why not stay home? He was excited to stay home as well.

Emily thinks that what you want for your family doesn’t come into play as much as it should. There are financial arguments for one parent to stay home and financial arguments for both parents to work. But what about what the parents want individually and as a family? Personal finance is not just about numbers and money! In Jill and Mike’s case, there wasn’t a huge financial hit for Mike to become a stay-at-home dad.

Before Mike and Jill had Ellie, they joked about Jill working and Mike being a SAHD without thinking that was a real possibility. It’s kind of cool that it worked out.

What Financial Advice Would You Give Your Past Self?

Jill could have done a few things differently. She would have ended up with significant loans anyway, but could have reduced them by a lot. She went out of state for both her undergrad and master’s degrees, which adds a lot to the debt! Staying in state for the tuition reduction would have been a good idea. For her master’s degree, she could have worked in Pennsylvania first to establish residency and even asked her employer to pay for her master’s degree in part or in full. She didn’t need to go straight from undergrad to master’s. This would have reduced financial burden in the long run.

Out of state vs. in state designation doesn’t matter much to funded PhD students though it does to their departments at public universities. However, for a master’s degree being paid out of pocket, this matters a lot! Employers do fund master’s degrees, especially part-time. Doing the PhD was always Jill’s plan so doing the master’s slower would have been fine.

Mike’s master’s degree was helpful for him to get a better job in Ohio. However, he also chose to go to a private university for his master’s instead of an in-state university, so the costs were a lot higher. Now he thinks he should have gone to the state school he got into and reduce his debt. Once Ellie is in school, having the master’s will help him get another job.

Emily also went to private college and it was a huge price tag that her parents paid. Now, she wants to make public in-state university seem very attractive to her children!

What Is Toddler on the Tenure Track?

Jill started Toddler on the Tenure Track in December 2018 and is still figuring out what it’s about. She wanted to create a space to talk about how she’s doing her junior faculty job with young kids, such as how to be a whole person in a job that’s trying to consume 100% of your energy. It’s her way to document the process of being a whole person in academia and not be sucked into working 24/7 and to document her path through the tenure process. She writes about what’s worked for her and not worked in terms of planning and organization of being a faculty member. That’s a huge part of her job that’s not widely discussed. Some of the strategies she writes about might work for others.

Jill has written some logistical pieces, such as on the process of becoming a tenure-track faculty. She moved cross-country for the job! As a grad student, she would have wanted to know what being a faculty looks like on a daily basis. Educational debt is also a huge part of the lives of people who work in academia, she so also shares about her finances and loan repayment journey.

Go check out Toddler on the Tenure Track if you are a faculty member and parent or aspire to be!

This PhD Student Paid Off $62,000 in Undergrad Student Loans Prior to Graduation

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In this episode, Emily interviews Dr. Jenni Rinker, a mechanical engineering PhD currently working as a researcher at the Denmark Technical University. Jenni paid of $62,000 of student loans from her undergraduate degree while pursuing her PhD at Duke University. Her average payment was approximately $1,500 per month on a post-tax income of $2,700-$3,000 per month. Jenni shares her motivation for setting her lofty debt repayment goal and the practical strategies she used to accomplish it. After paying off her student loans, Jenni even saved enough money to take six months off from work post-defense.

Subscribe on iTunes!

Links mentioned in episode

0:00 Introduction

1:10 Please Introduce Yourself

Dr. Jenni Rinker is a postdoc researcher at the Denmark Technical University. She attended Harvey Mudd University for undergraduate studies in engineering then went to Duke University for graduate studies. Her PhD is in Mechanical Engineering.

2:28 We’re talking today about your debt repayment journey. Can you tell us about this?

After undergrad at Harvey Mudd in 2011, Jenni had $62,000 student loan debt. She set the goal to repay the full debt during her PhD. She accomplished this goal, paying off the debt in 3 years and 7 months.

3:48 Can you tell us more about what kinds of loans you had?

Jenni kept a spreadsheet, a valuable tool that she used to track her debt repayment. She only had the option of unsubsidized student loans because she comes from a middle class household. At the time she started graduate school in September 2011, Jenni had $62,00 total from nine different loans. Federal student loans from Sallie Mae and Nelnet made up $28,000, at 6.8% interest rates. Jenni’s private student loans came to $34,000 total. Her single largest loan was from Alaska Advantage, a loan of $8,500 at 7.3% interest. She had several low interest (3-4%) private loans from Wells Fargo.

5:54 What was your income during your PhD?

Overall, Jenni’s post-tax income varied from $2,700 to $3,000 per month throughout her PhD. Before she started graduate school, Jenni was awarded the National Science Foundation Graduate Research Fellowship. This fellowship provides an annual income of $34,000 for 3 years. When she started, Duke University offered her income in addition to her NSF fellowship. After the NSF fellowship period ended, Jenni won another external fellowship through the Office of Science that offered $3,000 per month.

However, Jenni started graduate school in debt and did not have any savings or assets she could use to reduce her debt.

10:50 Why were you so determined to pay off student loans during grad school?

Although student loan repayment could have been deferred while she was in graduate school, Jenni was uncomfortable with debt and letting interest accrue. She thought that keeping the debt would limit her choices after graduate school. The student loans felt like a weight over her head that was growing every day, and she wanted the freedom that would come after debt repayment.

Jenni decisively started paying off her student loans as soon as she started graduate school. She saw that her income was higher than her monthly expenses, so she made it her priority.

13:53 How did you pay off your student loans?

Jenni committed to her financial philosophy that the money earned from her job goes to rent, utilities, food, loans and other essential expenses first and foremost. Money for her other interests had to come from side income. Jenni earned extra income as a technical copyeditor. She had private clients and worked for the American Journal Experts. She funded several trips from her side income.

Spreadsheets were Jenni’s most important tool. She had a spreadsheet for each year, where each month had a tab. She calculated that $1,300 per month needed to be budgeted for student loans in order to pay off the debt in 4 years. Her living costs, the “monthly nut,” were $800 to $900 per month. She kept frugal habits, such as rarely going out to dinner.

Jenni implemented the strategy of paying herself first. Right after receiving her paycheck, she made her loan payment so the $1,300 was out of her account immediately and she wouldn’t be tempted to use it elsewhere. However, Jenni paid her student loans instead of building up her emergency fund, which was drained after she needed a car repair.

Jenni paid her loans manually, so she could pay the highest interest loans first. Her biggest loan also had the highest interest rate, so she prioritized this one first. Though she had nine different loans, she focused on paying off one loan completely before paying towards another loan.

Her story is an example of the debt avalanche method. Jenni prioritized bigger loans with higher interest to pay off first. She was motivated by paying as little interest as possible. This is in contrast to the debt snowball method, where a person pays off the smallest loans first, to feel motivated by these easy wins.

Jenni also identified where she overspends. She would take out cash to be more aware of her expenses.

28:23 Did you have any speed bumps during your debt repayment journey?

Though Jenni had one instance where she paid for car repairs, she feels like she got lucky with no major financial setbacks. Paying her student loans was her highest priority, and she ended up paying about $1,500 per month on average over three years and seven months. She paid her loans back faster than she expected.

29:53 How did you feel after paying off your student loans? Did anything change in your life?

Jenni realizes that this is an unusual accomplishment. She posted on Facebook and got many congratulations. At the time she made the final student loan payment, Jenni was still working on her dissertation.

She was so used to immediately using $1,300 for student loans, that she started saving that amount each month for travel. After she defended her PhD, she had stress-free travel for 6 months. She went to Patagonia, Europe, and traveled around the United States. Jenni already had a job lined up, so her travel was a true vacation to celebrate finishing her PhD and repaying her undergraduate debt. Jenni learned that traveling is very important to her, so this experience rejuvenated her and put her in the right mindset to start her postdoc.

34:30 Is there anything you wish you had done differently?

Jenni wishes she had rebuilt her emergency fund after she drained it for her car repair. Overall, she’s satisfied with her debt repayment journey. She balanced frugality with having a good quality of life.

During debt repayment, Jenni allowed herself flexibility for how much she paid every month. In the beginning, her repayment was more aggressive but she relaxed as time went on. She knew that in an emergency, her family could support her and she could pay her parents back for financial help in a tough situation.

38:14 Did this experience affect how you approach personal finance?

When Jenni moved to Denmark, she stopped tracking her daily expenses so carefully and has allowed herself to indulge in treats and go to cafes.

However, her budget spreadsheet is still her most valuable tool. She created her own spreadsheet template that makes sense to her. Jenni briefly considered using software budgeting tools like Mint, but never ended up trying one out. By using her own spreadsheet that she updates manually, she feels like she has more control of her budget. This manual system forces her to actively consider how she’s spending her money.

43:00 What advice would you give to someone starting graduate school with student loans?

First, Jenni recommends that graduate students with student loans set realistic goals. Your income must be more than your expenses, and you still need to have a good quality of life. Figure out your “monthly nut” and compare it to your income. Then, identify your problem areas in your expenses.

Second, she encourages graduate students to reevaluate their financial strategies. As graduate students, we have to educate ourselves about finance and learn from our mistakes. If your financial strategy is unsustainable, you can change it.

46:37 Final Comments

Jenni’s inspiring story is applicable to anyone in any kind of debt repayment scenario. The financial strategies Jenni used can help graduate students pay off their own student loan debt.

47:47 Conclusion