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Five Ways the Tax Code Disadvantages Fellowship Income

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In this episode, Emily details five ways the federal income tax code disadvantages fellowship income, sometimes resulting in a higher tax rate and sometimes just causing a bit of a headache for fellows. Additionally, she covers two ways that the tax code advantages fellowship income and one more difference that has both pluses and minuses. This episode is for current fellows and future fellows as advance tax planning and action can mitigate some of these negative effects. At the end of the episode, Emily also shares how you can advocate for change at the federal level.

Links Mentioned in this Episode

 

 

Intro

Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance.

I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others.

This is Season 14, Episode 1, and today is a solo episode for me on fellowships and federal income tax. Specifically, I am going to detail for you five ways the tax code disadvantages fellowship income, sometimes resulting in a higher tax rate and sometimes just causing a bit of a headache for fellows. Additionally, I’ll cover two ways that the tax code advantages fellowship income and one more difference that has both pluses and minuses. Keep listening to this episode if you are currently on fellowship or expect to be in the future. Advance tax planning and action can mitigate some of these negative effects. I will also tell you at the end of the episode how you can advocate for change at the federal level.

Speaking of the disadvantages of fellowship income, it’s unfortunately quite common for fellows to have a tough time getting a mortgage. Sometimes they will be preliminarily approved based on their income numbers alone, but once under contract on a home they are dropped by their lender because of their income type and documentation! However, there is one lender who works with PhDs and particularly fellows very regularly.

Sam Hogan is a mortgage originator specializing in grad students and PhDs, an advertiser with Personal Finance for PhDs, and my brother. Years ago, I told him about the issue I just outlined, and he set to work figuring out how to use fellowship income to qualify for a mortgage. While I won’t say it’s as straightforward as using W-2 income, Sam has a great success rate in presenting grad students and PhDs to the underwriters working with his employer, Movement Mortgage, and getting them approved for mortgages. Sam can readily tell you if your fellowship income is likely to be approved or not based on the specifics of your circumstances, and if not what options you still have.

I am hosting an Ask Me Anything with Sam today, Monday, January 9, 2023 at 5:30 PM PT. Come with any question you like about the home-buying process and we will do our best to help you. You can register for the AMA at PFforPhDs.com/mortgage/.

If you’re listening to this later on, you can still check that link for the next AMA date as we hold them periodically, or you can contact Sam directly at 540-478-5803 or sam.hogan@movement.com to discuss your situation.

I wish you all success with your homebuying aspirations in 2023 and following!

You can find the show notes for this episode at PFforPhDs.com/s14e1/.

Disclaimers

Disclaimer #1: This episode is going into production in early January 2023. I rely on IRS forms, instructions, and publications for this material, and at the time of this recording most of these documents have been updated for tax year 2022, but not all of them. In those cases I’m going off the 2021 material. If any content in this episode turns out to be inaccurate for tax year 2022, I will update the show notes page with the corrections, so I suggest visiting PFforPhDs.com/s14e1/ before relying on any of the information. For tax year 2023 and later, please visit PFforPhDs.com/tax/ for my most updated tax content.

Disclaimer #2: The target audience for this episode is postbacs, graduate students, and postdocs at US universities and institutes who are US citizens, permanent residents, or residents for tax purposes. Unless otherwise specified, when I say tax I mean federal income tax.

Disclaimer #3: The content in this episode is for educational purposes only and should not be considered advice for tax, legal, or financial purposes for any individual.

Without further ado, here’s my solo episode on how the tax code disadvantages fellowship income.

Motivation

You might be surprised by the topic of this episode, because striving to obtain funding via a fellowship is a super common if not universal practice in academia. Fellowships are seen as a superior form of funding because of their prestige and that they normally excuse the recipient from teaching responsibilities or similar. In many cases, winning a fellowship results in a raise as well.

I’m not making any kind of argument in this episode that you should stop applying for fellowships or reject a fellowship that you’ve won—doubly so if you will be making more money with the fellowship than without it.

What I am doing is:

  1. Pointing out the tax issues and pitfalls that can or might come with fellowship income. There are certain groups of people who are at risk of actually paying more in income tax with a fellowship, which are people under age 24, parents, and non-students. Even if you don’t end up paying more in income tax, there are certain complexities of fellowship income that you can prepare for or even avoid if you know about them. This is to help you with taking personal responsibility for your tax situation.
  2. Suggesting changes to the tax code that would resolve these disadvantages. This is to help our community know in what ways advocacy for our workforce is needed.

Outline

Here’s where we’re going with this episode. I’m going to define some terms and tell you what I am comparing the tax treatment of fellowship income to when I say that it is disadvantaged by the tax code. I have five points to cover on how the tax code disadvantages fellowship income. The first couple points apply to most fellows but don’t result in a higher tax rate when handled properly. The next couple of points are about when having fellowship income actually results in paying more income tax. The final point is about a tax benefit that is not available to fellows. Then we’re going to switch gears and discuss two ways the tax code advantages fellowship income and one difference that I see as having both pros and cons.

By the way, I am trying to keep this episode focused on how the tax code disadvantages and advantages fellowship income. I could do an entire other episode, and perhaps I will, on the ways universities disadvantage and advantage fellowship recipients through their policies. But for today, we’re sticking with the topic of the federal income tax code.

Terms

I have to establish some definitions of terms here at the start. The subject of this episode is fellowships, but academia doesn’t necessarily use that term exactly the same way the IRS does. Therefore, I have created my own framework to explain the two types of higher education income.

The most common way the word fellowship is used in academia is to describe an amount of money that is awarded to an individual, as IRS Publication 970 states, “to aid in the pursuit of study or research.” Usually these are awarded for merit via a competitive process, such as a unique application for a specific fellowship program or your application to a postbac, graduate, or postdoc program. I call this income ‘awarded income’ in my framework.

The other type of income in my framework is ‘employee income.’ This is payment for services such as teaching or research, and the postbac, grad student, or postdoc is an employee of the university or institute. Employee income is reported on a Form W-2 at tax time. It’s unusual for programs to use the word fellowship to describe employee income, but it does happen occasionally.

For the purposes of this episode, we are only discussing awarded income, which is to say fellowship income that is not reported on a Form W-2. I will continue to use the word fellowship throughout the episode, but please understand that we’re only discussing that particular variation of the term, which is the most common in academia. If you’re unsure whether your fellowship is awarded income or employee income, reference the type of tax form or forms you receive during tax season. More on that in a moment.

Income Tax Basics

Another point I need to get out of the way at the start here is to clarify that fellowship income is subject to income tax. There are nuances and special scenarios that we’ll get into later in the episode, but very generally speaking, your stipend or salary is going to be taxed at the same rate whether it is awarded income or employee income.

When I speak about fellowship income being disadvantaged by the tax code, what I am pointing out are the ways that fellowship income ends up being treated differently or ultimately taxed at a higher rate than how employee income is treated and taxed. Conversely, in some ways fellowship income has an advantage, and again that is relative to employee income. 

If you’ve heard that fellowship income is tax-free, that is either a false rumor, a misunderstanding, or a statement that requires a lot more caveats. Fellowship income used to be exempt from income tax, but that changed with the Tax Reform Act of 1986. I’ll tell you more about why these rumors and such persist throughout this episode, but for now just know that you should expect to pay income tax on your stipend or salary, unless your gross income for the year is quite low or you can take lots of deductions and/or credits. That is true whether your stipend or salary comes from a fellowship or an employee position. You can learn more about that in Season 2 Bonus Episode 1 of this podcast, which you can find at PFforPhDs.com/s2be1/.

Now we’ll get into the meat of this episode: my list of five tax-related disadvantages of receiving fellowship income, two advantages, and 1 neutral difference.

Disadvantages

Disadvantage #1: There is no single correct way that fellowship income is required to be reported to the postbac, grad student, or postdoc recipient. This is in contrast to employee income, which must be reported on a Form W-2.

Because there is no single correct way to report fellowship income, universities, institutes, and funding agencies take a variety of approaches. The most common form issued is a Form 1098-T, but sometimes Form 1099 is used, such as Form 1099-MISC, Form 1099-NEC, or Form 1099-G. Sometimes a courtesy letter is sent in lieu of an official tax form. Many organizations choose to not communicate at all with the fellowship recipient. When fellowship income goes unreported entirely, it contributes to the rumor mill that it is not taxable income.

These approaches can mislead fellows into not reporting their income, resulting in underpayment of tax, or misreporting it, which often results in overpayment of tax.

To put fellowship income on even footing with employee income, the IRS could require that a tax form be used to report fellowship income, whether one that currently exists or a new or adjusted one. This would greatly reduce the confusion among taxpayers and tax preparers about whether and how to account for this income on tax returns.

Disadvantage #2: The issuers of fellowships are not required to withhold income tax on behalf of the recipients, and they almost never take the responsibility to do so.

Employers virtually always withhold income tax on behalf of their employees. This is the situation that most Americans experience and are familiar with. Your employer sends in income tax payments on your behalf throughout the year, and then after you file your tax return, you receive a refund or owe some additional tax.

However, for fellowship income, the issuing organizations have no such withholding requirement. With very few exceptions, they leave paying income tax entirely up to the fellowship recipient, which is typically a very unfamiliar arrangement.

This lack of withholding also contributes to the rumors that fellowship income is not subject to income tax. I have even seen university administrators label fellowship income “tax-free.” What they mean is that it is not subject to income tax withholding; they are speaking from their own perspective. But when a fellow sees that label, they read it from their own perspective, and it is highly misleading.

By default, the IRS expects to receive income tax payments throughout the year. In the absence of employer withholding, the taxpayer is supposed to make quarterly payments through the estimated tax system, unless an exception applies to them.

This typically goes one of two ways: 1) The fellow learns about the estimated tax requirement close to the start of their fellowship, sets aside money for their future tax payments as their paychecks come in, and makes their estimated tax payments if required. This is the ideal and something I am constantly beating a drum about. 2) The fellow does not realize that they are responsible for their own income tax payments until they are hit with a large tax bill and possibly a penalty upon filing their tax return. This is at minimum extraordinarily unpleasant and in some cases dangerous to the financial, physical, or mental well-being of the fellow. I further discuss this scenario of a large, unexpected tax bill in the videos titled “Why Is My Fellowship Tax Bill So High?!” and “What to Do When Facing a Huge Fellowship Tax Bill,” which you can find on my YouTube channel, Personal Finance for PhDs.

A rare few universities and institutes do offer income tax withholding on fellowship income. My alma mater, Duke University, did so when I was a graduate student there. This relieves the fellow from calculating and making estimated tax payments and prevents large, unexpected tax bills.

To put fellowship income on even footing with employee income, the IRS could require that universities and institutes at least offer income tax withholding on fellowship income. To go along with the previous disadvantage, a specifically designed fellowship reporting form could explicitly list federal, state, and local income tax withheld.

Until such reform comes about, I recommend that fellows take my workshop, Quarterly Estimated Tax for Fellowship Recipients, which you can find linked from PFforPhDs.com/tax/.

Disadvantage #3 and this is the big one: Fellowship income is not usually considered “earned income,” and without that designation many postbacs, grad students, and postdocs pay more in income tax than they would if it were considered earned income.

The term “earned income” is actually used all over the tax code and publications, and you have to be really careful because its definition can change depending on which benefit is being discussed. For example, for the purpose of calculating the standard deduction, taxable fellowship income is included in the definition of earned income. But for the Kiddie Tax, the Earned Income Tax Credit, and the Child and Dependent Care Tax Credit, fellowship income is not considered earned income.

Let’s discuss each of these scenarios briefly in turn.

  1. The Kiddie Tax, which is a colloquial name, is when the unearned income, above a certain threshold, of a person under age 24 is taxed at their parents’ marginal tax rate. There’s a whole history behind the Kiddie Tax that I won’t go into now, but you can read my article about it linked from PFforPhDs.com/tax/. What is both perplexing and infuriating to me is that fellowship income is included in the definition of unearned income. So if you are a student under age 24 on fellowship, even if you are not claimed as a dependent on your parents’ tax return, you could be hit with the Kiddie Tax. I’m not saying you definitely will because there are calculations that go into this, but it can happen. If it does, your income is taxed at your parents’ marginal tax rate. If your parents have a low to moderate adjusted gross income, the Kiddie Tax either won’t apply or won’t increase your tax liability by much. But if your parents’ top marginal tax bracket is 22% or higher, your tax liability will be much higher than it would have been without the Kiddie Tax. And, again, it does not matter if you’re financially independent from your parents, this tax can still apply. Ugh!
  2. The Earned Income Tax Credit is a super valuable credit for people who are low-income, especially if they have children. For example, if you are single with one child and qualify for the credit, you’ll receive a benefit from the Earned Income Tax Credit if your income is below $43,492 in 2022. The lower your income is under that threshold, the more of the benefit you’ll receive, up to a maximum of, again for example, $3,733 for one child in 2022. This credit is refundable, which means that if it wipes out your entire tax liability, the IRS can end up paying you money. Again, just an incredibly valuable credit for low-income individuals and families, which you know many postbacs, grad students, and postdocs would be considered. However, as the name implies, your household has to have earned income during the calendar year to qualify, and fellowship income isn’t earned income. I will never forget a heartbreaking comment I received on my website years ago from a grad student who was married with two children and supporting the entire household on his grad student stipend. He was devastated when his tax return showed that because he switched onto fellowship and didn’t have any earned income for a calendar year, that his family lost out on thousands of dollars of a benefit they had received in prior years when he had employee grad student income. Can you imagine? Why would the IRS, Congress, we the people, exclude vulnerable families like that one from this benefit?
  3. The Child and Dependent Care Tax Credit is a tax credit that helps parents, among others, pay for daycare, preschool, after school care, etc. so that they can work or look for work. The benefit inversely scales with your income, like the Earned Income Tax Credit, but for example if you had one child in care and your income was low enough that you received the maximum benefit, this credit would reduce your tax liability by $1,050 in 2022. Pretty good benefit. However, here’s that catch again, you and your spouse if you’re married must both have earned income to qualify. There is an exception for students, so grad students will still qualify for the credit for all the months in which they are students, but postbacs and postdocs won’t. This issue was brought to my attention by a married couple with a baby, both postdocs on fellowship, who were taken aback that they weren’t able to claim this credit. And why? Does being on fellowship mean that they don’t need childcare? Or do they not deserve a similar carve-out to the one that students get?

I have to stop here because I’m getting really worked up about these issues. Pretty simple change here, IRS. Include fellowship income in the definitions of earned income everywhere. Or make exceptions for fellowship income in all of the above benefits and any other relevant ones.

I haven’t even covered how fellowship income relates to the definition of “support” for determining if someone is a dependent or subject to the Kiddie Tax, and I won’t take the time to illustrate it now. It’s a similar problem that the IRS could solve by saying that fellowship income counts as support… anyway. See my tax return workshops for further discussions of that rat’s nest. Let’s move on.

Commercial

Emily here for a brief interlude!

Tax season is about to start heating up, and the best place to go for information tailored to you as a grad student, postdoc, or postbac is PFforPhDs.com/tax/. From that page I have linked to all of my tax resources, many of which I have updated for tax year 2022.

On that page you will find free podcast episodes, videos, and articles on all kinds of tax topics relevant to PhDs. There are also opportunities to join the Personal Finance for PhDs mailing list to receive PDF summaries and spreadsheets that you can work with.

The absolute most comprehensive and highest quality resources, however, are my asynchronous tax workshops. I’m offering three tax return preparation workshops for tax year 2022, one for grad students who are US citizens or residents, one for postdocs who are US citizens or residents, and one for grad students and postdocs who are nonresidents. Those tax return preparation workshops are in addition to my estimated tax workshop for grad student, postdoc, and postbac fellows who are US citizens or residents.

My preferred method for enrolling you in one of these workshops is to find a sponsor at your university or institute. Typically that sponsor is a graduate school, graduate student association, postdoc office, postdoc association, or an individual school or department. I would very much appreciate you recommending one or more of these workshops to a potential sponsor. If that doesn’t work out, I do sell these workshops to individuals, but I think it’s always worth trying to get it into your hands for free or a subsidized cost.

Again, you can find all of these free and paid resources, including a page you can send to a potential workshop sponsor, linked from PFforPhDs.com/tax/.

Now back to my expert discourse.

Disadvantages Continued

Disadvantage #4: There is no mechanism for making fellowship money that pays your health insurance premium tax-free unless you are a student.

This disadvantage requires a bit of background.

Think of a regular employment situation, not related to academia. Unfortunately in the US, health insurance is tightly tied to your employer partly because of a tax benefit afforded to them. When your employer provides your health insurance plan, the cost of the premium is tax-deductible for both you and the employer. That means that you don’t pay income tax on the portion of your income that goes toward that particular purpose. It’s as if you earned less money than you actually did. This is accounted for automatically for you on your Form W-2. The income listed in Box 1 is your gross income less your pre-tax payroll deductions such as your health insurance premium. Easy peasy. If you’re self-employed, there is also a mechanism to deduct your health insurance premium.

But if you’re not employed or self-employed, the only way you can perhaps deduct your health insurance premiums is if you itemize your deductions. Even in that case you can only deduct the portion of your medical expenses that exceeds 7.5% of your adjusted gross income. If you are a relatively healthy single person who wouldn’t otherwise itemize your deductions, I doubt itemizing will help you overall. Most people in this situation effectively cannot deduct their health insurance premiums or at best can only deduct a portion of them.

I need to back up now and talk about the situation with health insurance provided by universities. If you receive your health insurance through your parents, the following is not relevant to you. If you’re an employee of the university and receive health insurance because of that status, that’s a normal straightforward deduction as I just discussed. Let’s set that aside and discuss what happens when fellowship or scholarship income pays your health insurance premium, either automatically before you receive your paycheck or out of your own pocket.

If you are a grad student, there is a mechanism to make that fellowship income tax-free. We’re actually going to discuss that in the upcoming section on the tax advantages of fellowship income. However, if you’re a postbac or postdoc, this mechanism isn’t available to you. There is no way that I know of, short of itemizing their deductions, for postbacs and postdocs to make the fellowship money that pays their health insurance premiums tax-free. And that sucks.

This conundrum has been highlighted by many postdocs and postdoc associations. If a university or institute pays postdoc employees and postdoc fellows the same amount, the postdoc fellows effectively receive a pay cut because they have to pay income tax on the portion of their fellowship income that pays their health insurance premiums while postdoc employees do not.

The general solution to this whole issue is universal healthcare, but even without going that far, Congress could change the tax code so that all health insurance premiums are tax-deductible even without having to itemize deductions. I don’t know, maybe that would have disastrous effects somehow. Another way to fix this would be to expand the benefit that students use to non-student trainees as well.

Disadvantage #5: Fellowship recipients cannot contribute to their university or institute’s 403(b) or 457 plans. These are employer-sponsored tax-advantaged retirement accounts, and they are only available to employees.

Similar to the health insurance situation, the tax code has incentivized saving and investing for retirement primarily through employer-sponsored plans. These plans are exclusively offered to employees. That goes for 401(k)s as well as 403(b)s and 457s.

Looking at the situation for postdocs again, it’s typical for postdoc employees to be able to contribute to the university or institute’s 403(b) or 457, albeit usually without a match. However, postdoc fellows do not enjoy this benefit. While the universities administer these plans, again this is a policy issue at the federal level that excludes non-employees. Side note: If you’re wondering why grad student employees don’t usually have access to their university’s 403(b)s or 457s, that is a university-level policy issue as far as I can tell.

Not exactly the same but as a related issue, there is a type of tax-advantaged retirement account that is available to everyone with “taxable compensation,” which is an Individual Retirement Arrangement or IRA. You do not have to be an employee to contribute to an IRA. Up until 2019, the definition of “taxable compensation” excluded fellowship income, but the SECURE Act changed that definition starting in 2020. Taxable fellowship income for graduate students and postdocs is now considered taxable compensation for the purpose of contributing to an IRA. We know from this example that change is possible when it comes to fellowship income and federal tax benefits. You can learn more about this issue in Season 4 Bonus Episode 1 of this podcast, which you can find at PFforPhDs.com/s4be1/.

I think the most accessible solution to this particular disadvantage is actually not to somehow extend the employee-only workplace-based retirement benefit to fellows but rather to increase the contribution limit for IRAs to solve this for everyone. The contribution limits in 2023 for someone under age 50 are $6,500 for an IRA and $22,500 for a 403(b), 457, or 401(k). Why should there be such a big advantage for employees?

Advantages

Alright, it’s time for a dose of positivity. There are two advantages to fellowship income that I have come across.

Advantage #1: Students can make fellowship income tax-free by pairing it with qualified education expenses or QEEs. Basically, if your awarded income paid for a QEE, that amount of awarded income is tax-free. You essentially get to deduct the QEEs from your awarded income before you even report it on your tax return. This federal income tax benefit is found in Publication 970 Chapter 1, and I call it Tax-Free Scholarships and Fellowships or TFSF. Again, this benefit is only available to students.

How does this work differently for grad students with awarded vs. employee income for their stipends? This comes into play when you use your stipend to pay for an education expense rather than having it paid on your behalf via a scholarship or waiver.

Let’s take as a very simple example a grad student who has only two education expenses, tuition and a student health fee. The tuition is paid on their behalf by a scholarship, and they pay the student health fee out of pocket.

The scholarship that pays their tuition is awarded income, but it is made tax-free via TFSF because it pays for tuition, which is a QEE. So that awarded income doesn’t become part of the grad student’s taxable income.

The student health fee is a QEE under TFSF, so if the grad student’s stipend is from a fellowship, the student health fee makes that amount of fellowship income tax-free. It’s like taking a deduction. However, if the grad student’s stipend is employee income, no part of it can be made tax-free by the student health fee. Furthermore, student health fees are not qualified education expenses under the other two available higher education tax benefits, the Lifetime Learning Credit and the American Opportunity Tax Credit. So in this particular example, there is no tax benefit available to a grad student employee for their student health fee, whereas a grad student fellow can use the student health fee to reduce their taxable income.

That was a very simple and contrived scenario, but it turns out that this benefit can be uniquely applied, under specific circumstances, to lots of other common education expenses, such as textbooks, computers, software, and health insurance premiums.

If you are a grad student on fellowship, I highly recommend taking my tax workshop How to Complete Your Grad Student Tax Return (and Understand It, Too!) to understand TFSF and the other higher education tax benefits fully. This goes double if you did pay out of your fellowship stipend for the kinds of education expenses I just mentioned. You will learn under what circumstances you can use them to make your fellowship income tax-free and under what circumstances you cannot. Go to PFforPhDs.com/tax/ for the link to the workshop.

Advantage #2: Fellowship income is not considered taxable income in some states. For this advantage only we are leaving the realm of federal income tax. I won’t say too much about this except that I’ve run across it in two states, Pennsylvania and Alabama, and there may be others. But this is a truly fantastic benefit that puts fellowship income at a great advantage over employee income in those states.

Neutral Difference

Finally, we have a difference with fellowship income that has both pros and cons. For this one we’re also not discussing federal income tax but rather FICA tax, which pays into the Social Security and Medicare systems.

Fellowship income is not wages, so it is not subject to FICA tax. Postdoc and postbac fellows do not pay FICA tax, but postdoc and postbac employees do. Grad students by and large qualify for a FICA tax exemption, so they usually don’t pay it whether their stipends or salaries are fellowship or employee income.

When I was a grad student, I thought these exemptions were great. I was not interested in losing 7.65% of my paycheck toward a dubious far-future benefit. I still think keeping an extra 7.65% of your paycheck is super valuable for grad students, postbacs, and postdocs. However, now that I’m older and I’ve learned more about Social Security and Medicare, I think forgoing all those quarters of credits during grad school plus any postbac or postdoc fellowship years might be a little foolhardy. For example, if you become disabled as a young adult before paying into the system for the required number of quarters, you are at risk of not qualifying for the disability benefit. That’s a pretty remote possibility, but it’s scary that people could be left unprotected by this supposed last resort insurance plan because of these exemptions. And I really don’t think Social Security is going to disappear entirely. Ideally, I’d like to have both the money in my pocket and the insurance coverage, please and thank you.

At the beginning of this episode, I told you there were two purposes: First to help you with tax planning and second to direct your attention to issues about which you can advocate for change.

On that first point, the best place to go to learn more or take one of my tax workshops is PFforPhDs.com/tax/.

On the second point, I have three ideas for you if you would like to advocate for change to one of the federal tax policies I’ve mentioned:

  1. You can write to your representative in the House and/or your senators and ask your peers to do the same explaining how the tax law negatively affects your life and in what way it could change. The component of the SECURE Act that updated the definition of taxable compensation started as a bill called the Graduate Student Savings Act, which was sponsored by a bipartisan group of members of the House and Senate for several years before it was finally included in the SECURE Act.
  2. You can submit an explanation of your issue through the IRS’s Systemic Advocacy Management System. Just search for IRS SAMS and it will be the first result. The IRS will evaluate these issues and decide which to move forward with trying to correct.
  3. You can get involved with organizations that advocate for the workforce in your field or for PhD trainees generally, such as the National Association of Graduate-Professional Students and the National Postdoctoral Association. You can make them aware of these tax problems, if they aren’t already, and partner with them to advocate at the federal level.

It’s been lovely to have you with me for this wonky episode. One final time: I offer educational tax workshops both on preparing your annual tax return and calculating and paying estimated tax. I would really appreciate you recommending my workshops to a potential sponsor at your university. If that doesn’t work out, you can purchase the appropriate one for you as an individual. You can find the links to take either one of those actions at PFforPhDs.com/tax/.

Outro

Listeners, thank you for joining me for this episode!

I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/.

Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/.

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.

Fellowship and Training Grant Tax Forms

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There is no single correct IRS tax form on which to report PhD trainee fellowship and training grant stipends and salaries. Universities and funding agencies take different approaches, which often confuses grad students, postdocs, and postbacs. This article shares the crowd-sourced information on how universities and funding agencies are reporting fellowship and training grant income.

Please contribute to this project by filling out this survey to have your tax form included in this article—and share the survey as well.

I have included the number of entries that I’ve received for each type of tax form.

Further reading:

National Institutes of Health (NIH)

Ruth L. Kirschstein Institutional National Research Service Award (T32)

The T32 has been reported on a:

  • Form 1098-T in Box 5 (5 entries)
  • Courtesy letter (3 entries)

It has also been not reported in any way (3 entries).

Ruth L. Kirschstein Individual Predoctoral NRSA for MD/PhD and other Dual Degree Fellowships (F30)

The F30 has been reported on a:

  • Form 1098-T in Box 5 + Form W-2 in Box 14 (1 entry)

Ruth L. Kirschstein Predoctoral Individual National Research Service Award (F31)

The F31 has been reported on a:

  • Form 1098-T in Box 5 (2 entries)
  • Form W-2 in Box 1 (1 entry)

It has also been not reported in any way (1 entry).

Ruth L. Kirschstein Postdoctoral Individual National Research Service Award (F32)

The F32 has been not reported in any way (1 entry).

Individual Predoctoral to Postdoctoral Fellow Transition Award (F99/K00)

The F99/K00 has been not reported in any way (1 entry).

Intramural Research Program: Postdoctoral Research Training Award (IRTA)

The postdoc IRTA has been reported on a:

  • Form 1099-G in Box 6 (1 entry)

NIH Oxford-Cambridge Scholars Program

The Oxford-Cambridge Scholarship has been reported on a:

  • Form 1099-G in Box 6 (1 entry)

National Center for Advancing Translational Sciences Clinical and Translational Science Awards (CTSA) Program TL1

The CTSA TL1 has been reported on a:

  • Form 1099-MISC in Box 3 (2 entries)

Clinical Connections-Connecticut (CNC-CT)

The CNC-CT has been not reported in any way (1 entry).

Molecular Biophysics Training Grant

The Molecular Biophysics Training Grant has bee reported on a:

  • Form 1098-T in Box 5 (1 entry)

National Science Foundation (NSF)

Graduate Research Fellowships Program (GRFP)

The GRFP has been reported on a:

  • Form 1098-T in Box 5 (13 entries)
  • Form W-2 Box 1 (1 entry)
  • Courtesy letter (1 entry)

It has also been not reported in any way (5 entries).

Postdoctoral Research Fellowships in Biology (PRFB)

The PRFB has been not reported in any way (1 entry).

Department of Energy (DoE)

National Nuclear Security Administration (NNSA) Stewardship Science Graduate Fellowship

The NNSA Stewardship Science Graduate Fellowship from the Krell Institute has been reported on a:

  • Courtesy letter (1 entry)

Department of Defense (DoD)

National Defense Science and Engineering Graduate Fellowship (NDSEG)

The NDSEG has been reported on a:

  • Form 1099-NEC in Box 1 (1 entry)
  • Courtesy letter (1 entry)

Science, Mathematics, and Research for Transformation (SMART)

The SMART Scholarship has been reported on a:

  • Form 1099-MISC Box 3 (1 entry)

The National Academies

Ford Foundation Predoctoral Fellowship

The Ford Foundation Predoctoral Fellowship has been reported on a:

  • Courtesy letter (1 entry)

Henry Luce Foundation

Clare Boothe Luce Fellowship

The CBL Fellowship has been not reported in any way (1 entry).

Simons Foundation

The Simons Postdoctoral Fellowship has been reported on a courtesy letter (1 entry).

Internal Fellowships

Cornell University

A fellowship for first-year rotating students has been reported on a Form 1098-T in Box 5.

Harvard University

The Prize Fellowship has been not reported in any way (1 entry).

Indiana University

The University fellowship has been reported on a Form 1098-T in Box 5 (1 entry).

Mayo Clinic

The Mayo Foundation for Medical Education & Research Fellowship has been reported on a Form 1098-T in Box 5 + Form 1099-MISC in Box 3 (1 entry).

Rochester Institute of Technology

A graduate research assistantship position has been reported on a Form 1099-MISC in Box 3.

University of California, Berkeley

The Chancellor’s Fellowship has been reported on a Form 1098-T in Box 5.

University of California, San Diego

The Summer Training Academy for Research Success (STARS) Fellowship has been reported on a Form 1098-T in Box 5 and a courtesy letter (1 entry).

University of Connecticut

The Jorgensen Fellowship has been not reported in any way (1 entry).

University of Michigan

The Rackham Merit Fellowship has been reported on a Form 1098-T in Box 5 (1 entry).

University of Pennsylvania

The Dean’s Fellowship in the Graduate School of Education has been reported on a Form W-2 in Box 1 (1 entry).

University of Southern California

The Merit Fellowship has been reported on a Form 1098-T in Box 5 (1 entry).

University of Virginia

The Diversity, Equity, and Inclusion Dean’s Doctoral Fellowship has been not reported in any way (1 entry).

Washington University in St. Louis

The WM Keck Postdoctoral Fellowship has been reported on a courtesy letter (1 entry).

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This Fulbright Fellow Supplements Her Stipend with Prior Savings

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In this episode, Emily interviews Dr. Caitlin Kirby, a graduate student at Michigan State University and former Fulbright fellow in Germany. Caitlin has been greatly financially challenged on the Fulbright, namely by: 1) the large amount of money needed to move and settle into her new city and university, 2) the high cost of housing relative to the stipend, and 3) the additional expense of bringing her husband with her. Caitlin and the majority of her peers are supplementing their Fulbright income with prior savings. Fortunately, Caitlin and her husband grew their net worth in advance of starting the fellowship through house hacking and savings goals.

Links Mentioned

Fulbright fellowship stipend

Teaser

00:00 Caitlin: We’re paying about €1,025 a month for a furnished apartment with all bills included, which is the norm in Germany, and that’s 85% of my base stipend.

Introduction

00:18 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 six, episode 16, and today my guest is Dr. Caitlin Kirby, a graduate student at Michigan State University, and former Fulbright fellow in Germany. Caitlin details the financial challenges she experienced on the Fulbright, namely the large amount of money needed to move and settle into her new city and the university, the high cost of housing relative to the stipend and the additional expense of bringing her husband with her. Caitlin and the majority of her peers supplemented their Fulbright income with prior savings. Fortunately, Caitlin and her husband built up savings in advance of starting the fellowship through house hacking and savings goals. This episode is valuable, not just for future Fulbright fellows, but also anyone facing a career transition or move. By the way, we recorded this interview in February, 2020, and I’ve included an August, 2020 update from Caitlin after the interview. Without further ado, here’s my interview with Dr. Caitlin Kirby.

Will You Please Introduce Yourself Further?

01:25 Emily: I have joining me on the podcast today, Caitlin Kirby, and we’re discussing something that I haven’t had the opportunity to before, which is actually the Fulbright fellowship, super exciting, that is as a PhD student. And Caitlin will also be telling us in the second half of the episode about how to prepare for financial challenges that you don’t even know you’re preparing for, like the Fulbright. So Caitlin, I’m really excited to have you on the podcast. Dave, thank you so much. And will you please introduce yourself a little bit to the audience?

01:53 Caitlin: Yeah. Thanks. I’m glad to be joining you. I am a PhD candidate at Michigan State University in Environmental Science and Policy. My dissertation looks at environmental decision making in cross cultural spaces, and I also engage in science education research in university classrooms.

02:13 Emily: Yeah. How did you decide that you wanted to do the Fulbright? I guess maybe my own bias coming into this is that I really think of it as something people do after undergrad while not yet enrolled in a graduate program, but you know much more about this. So how did this come on your radar and why’d you decide to apply for it?

02:31 Caitlin: Yeah, so the program you’re thinking of is probably primarily the English teaching assistant program, which is primarily students who have graduated undergrad and not moved on to a graduate degree program. And then a smaller subset of the Fulbright is study and research grants for graduate students. I have always enjoyed international travel. Like I said, my dissertation is looking in cross cultural spaces. I did some research in South and so it was always something that was kind of on my radar. And actually I was thinking about doing it for a post doc. And in my last couple of years of grad school started looking at the application requirements and figured out that it was going to be simpler to apply as a graduate student, so I did, and here I am.

03:18 Emily: And is this, I know it’s playing into your dissertation, but is this kind of you taking like an extra year or is this really not extending your time to degree at all and it’s just going to go right in with your overall plan?

03:31 Caitlin: Yeah. So a little bit of both. I actually defended my dissertation in October, so it’s kind of an extension of my dissertation and degree time. Although I probably would have graduated in May anyways and now it’s August instead.

Financial Support Provided by Fulbright

03:47 Emily: Gotcha. Well, congratulations on already defending. We’re recording this in February, 2020, so for the listeners reference. Okay, so what financial support does the Fulbright give to you?

04:01 Caitlin: Yeah, so it is different for every country. I am speaking about Germany Fulbright grant. Although I also looked at a lot of the Western European ones. They get a lot of applications as well, have a lot of grants and are fairly similar in that they are relatively expensive places to live. Hopefully this is generalizable across a lot of those spaces. My understanding from folks that I’ve heard from who are in spaces that have lower cost of living is that the stipend is a little bit more generous in those spaces.

04:34 Caitlin: What Fulbright does provide in Germany, if you are a graduate student or an English TA, you get €850 a month. If you’re a PhD candidate, so you’ve passed your comprehensive exams, then it goes up to €1,200 a month. So if you are a PhD student and you can wait until after comps, I think it’s worth it.

04:58 Emily: Yeah, that’s a big raise, surprisingly.

05:01 Caitlin: Yeah and €850 is actually the lowest, I’ve seen for countries in this area. Other countries in Western Europe range from about €1,300 to €1,500 a month. These stipends are not posted on the actual application website. You have to go to the Fulbright website for each individual country to find those, and sometimes they’re not available and sometimes they don’t include all the details.

Financial Challenges of the Fulbright

05:26 Emily: Yeah. So I understand that you have encountered some financial challenges based on that stipend and also maybe a lack of clarity up front about exactly what was going into this whole package. So can you explain a little bit more about what you’ve found?

05:41 Caitlin: Yeah. There are some challenges that are specific to my situation and then some challenges that some other Fulbrighters have also experienced. I would say sort of summarizing those across from what I’ve seen from others and for myself is that the three really primary challenges are that you need a lot of savings at the beginning to cover your first couple of months and some initial expenses. Then number two would be that housing is really kind of the make or break factor in how far your stipend goes. And so if you can look ahead of time when you’re deciding what institution to work with at the cost of living in a city, maybe try and find one that’s not so high. And then the third thing would be, think about any extenuating circumstances that might make it more costly for you as an individual.

06:33 Emily: This actually sounds like really good advice for anyone approaching any financial or location transition whatsoever, so people going into graduate school, going to a post doc, going to your first job, so I really want you to expand more on each one of those points.

#1: Expected and Unexpected Upfront Expenses

06:48 Caitlin: For the initial costs,, or the one-time costs when I arrived here in Germany, first of all, like everything else in academia, the Fulbright stipend model is built on reimbursement. So you buy everything ahead of time, and then after you get your bank account in your country, they will reimburse you, which for Germany can also take a long time. It’s a very bureaucratic country. A lot of the Fulbrighters in Germany were paid late, like two or three months after their grant had started, and it was really inconsistent across different fellowship recipients. Or sometimes they were paid in consistently. So having that initial savings is really important to be able to get you through.

07:34 Emily: What kinds of upfront costs were you experiencing?

07:39 Caitlin: Yeah, so moving costs in general, right? You have to get your travel, which Fulbright covers some of, and sometimes again, depends on the country. My flight was covered and then they provided an additional, like €150 for other expenses, but I decided to fly out of Chicago, which was far away, so I needed hotel and transit and it didn’t really cover all that. Then once we arrived as well, there was a lot of traveling around the city that we had to do to get everything settled. I’m saying we, because I came here with my husband, and that transit was eventually covered by my university pass, which I also had to pay about 300 euros to enroll at a university. And some folks will have to pay tuition as well.

08:29 Emily: Wow. That is a lot, and it sounds like it’s quite variable too. Going into this situation, it sounds like actually you’re in contact with other people doing the Fulbright. And so is there like a network already of people that you can tap to find out, okay, what are all these expenses, or does the program make it really, really clear once you have a host university?

08:51 Caitlin: It was more hearing from other people that I got this information. I don’t remember how I was contacted about this initially actually, but there was a Fulbright Facebook specifically for folks in my year. And some alum had joined that as well. I believe the Fulbright did actually connect me with these social networks. So they are very good about getting you in contact with alumni and folks that you can engage with, and then beyond that, it’s kind of up to the folks in each cohort to decide what to share and how often and all of that.

09:26 Emily: This actually sounds very familiar to what I understand is the experience of many international students coming to the US — the place where they get the most information from, is the network of students from their country already at that university or who are coming in at the same time, which can be truly an amazing resource in many ways. However, if that group doesn’t already have the correct information or the best information, then it can kind of be passed along and not like optimized. It’s probably 80% awesome and then 20% maybe someone else could give you better information, but like that is really the best go to resource.

10:05 Caitlin: Yeah.

10:06 Emily: Not being paid, that is reimbursed for two to three months sounds really long. Were there any other kind of upfront reasons why you needed to tap savings or expenses that you wish you’d known about in advance?

10:22 Caitlin: Yeah. This one is perhaps unique to Germany in that when you get an apartment in Germany, when they say unfurnished, they mean like unfurnished. There are no light fixtures, there are no cupboards, there’s no kitchen sink. So your choices are to come and basically furnish a whole apartment, which I know another married grantee did this year, or you can pay a premium to get a furnished apartment, which are much less available and so much more expensive than —

10:58 Emily: Wow, so it’s typical to bring in your own appliances and like all of that? Do people move that stuff when they move from place to place?

11:06 Caitlin: There’s a reason that Ikea is a big deal here because you can just kind of pack it up and take it with you or you can sell it to the person who’s renting your apartment next, which so then if you’re renting an apartment and they’re offering the kitchen, then you can pay like 1200 euro to, I’ve seen up to like €4,000 to keep the kitchen in the apartment

11:28 Emily: Wow, that is a lot of upfront costs. Anything else to add to that list?

11:34 Caitlin: Some bureaucratic stuff in general. I think most Fulbrighters would be aware of this, but maybe not necessarily how much of it or how much it might add up. So passport photos, the passport itself, some places have expensive visa applications and then myself coming in as a married grantee, there’s extra documentation that we needed around our marriage certificate, getting that translated, paying for my husband’s visa, that kind of thing.

12:02 Emily: It’s a lot of costs. It’s a lot of costs you’re listing. Are you being completely supported by the Fulbright in this year or is Michigan State supplementing at all?

12:11 Caitlin: You’re not allowed to really have significant other income. It’s up to 450, I don’t remember dollars or euro a month is allowed as a Fulbright grantee. And that again, may be specific to Germany that amount, but still the fact that you’re not supposed to have significant outside sources of income holds true. I did receive an award in the semester that I was awarded the Fulbright, from Michigan state. I got some money from them as an award for receiving this fellowship that I then tucked away and said, okay, that’s going to supplement when I am on my Fulbright.

12:52 Emily: Yeah. That’s a great thing to have upfront going into this process.

12:56 Emily: Okay, so we’ve talked about upfront expenses. Sounds like you need massive amount of savings to undertake this. What was the second point that you were going to make?

#2: Cost of Living and Housing in Your New City

13:06 Caitlin: Yeah, housing is definitely the biggest factor in how far your stipend is going to go. That’s again where you might want to consider, because as a Fulbright grantee, you decide which institute you’re going to work with or which university you’re going to attend, and if you somehow have a choice between some different costs of living areas, you might want to choose one that’s a little bit easier on the wallet. Then the other thing that sort of made housing more difficult for myself as an older grantee, and a married grantee is that there’s not really shared housing options available as a married couple. We had to get our own apartment, and that makes it a lot more expensive. It’s a lot more reasonable if you’re able to share space, but a lot of graduate students might not be able to, or might not want to for a variety of reasons.

13:57 Emily: So when you’re talking about sharing space and that not being available to you as a married couple, are you still talking about having like individual bedrooms or is it like a dorm situation or what would other people do if they were single?

14:11 Caitlin: Yeah, so they’re called veh has in German, or WG is the abbreviation for it. And it’s basically everybody has their individual bedroom in an apartment that’s shared with people.

14:24 Emily: Okay. And you can’t share a bedroom then as a couple?

14:28 Caitlin: It’s just extremely rare, so rare that on the websites where you can like search for these housing options, there’s no option to have a couple, or like a male/female mix going into these rooms. So it’s a little bit of a cultural thing.

14:47 Emily: Yeah. Interesting. I mean this point is also super super applicable to anyone moving anywhere. Rent, or your housing expenses more generally, is most likely going to be the largest expense in your budget. It’s very difficult to change once you — I mean, you can change it maybe after a year or something, but once you sign that lease, you’re locked in for a little while. It’s so important to put really the bulk of probably the research that you’re doing into that housing choice. And it does sound like yours was further constrained by bringing your spouse along with you. Anything else you wanted to add about the housing cost?

15:22 Caitlin: I think that about covers it, but just to give an idea, we’re paying about €1,025 a month for a furnished apartment with all bills included, which is the norm in Germany, and that’s 85% of my base stipend. I do also get, I think I didn’t mention that I get some dependent support for my husband being with me. It’s about €270 a month, so not a huge amount. That really has been, that was the biggest shock to me, I think, because I could see on apartment websites, things that were cheaper, but they weren’t able to fit to our needs.

16:05 Emily: Yeah. And do you have any other source of income right now? You’ve mentioned the Fulbright grant, the additional support for having a spouse and then the upfront award that Michigan State gave you to help a little bit with that. Does your husband have any income right now?

16:19 Caitlin: No. He’s not allowed to have income either, both because of visa issues, and then if he did earn significant income, then we would just say, okay, we don’t need the dependent support from Fulbright. But with visa issues and also language issues, it would be very difficult for him to work. So it’s savings and Fulbright.

16:43 Emily: Yeah. Wow. Okay, well, we’ll get into how you’re making that work in a moment. And what was that third point that you wanted to say about everyone’s unique situation?

#3: Individual Personal Finance Situations

16:53 Caitlin: Yeah, so there’s a lot of difficulties that I’ve had with the Fulbright, but I don’t think overall it’s necessarily an unfair stipend. I think that you need to weigh it against your individual needs. So again, myself bringing my husband, that’s two people living on one income, obviously it’s going to be more difficult. If you have student loans that you’re still paying, some of them are eligible for deferment, depends on who your loan provider is, in some cases. If you have pets that you either want to try and bring with you or need to get taken care of. If you have a lease at home that you need to break or keep paying on or storage for your items, regular bills at home. So our car right now is on storage insurance, which is luckily not very much, but still something to consider. Prescription drugs — there is some level of health coverage provided by Fulbright, but they do not pay for regular expenses like that. And accessibility needs too. Our apartment would not be accessible to someone with a wheelchair. And even though there’s great public transportation, you might need to be closer to the city center than we are. Just all kinds of things that maybe are easily or more integrated into your life before you leave that become very obvious as challenges when you’re on your way.

18:20 Emily: A lot to think about there. Actually going back to your second point, I think I was getting the impression that the Fulbright grant is the same across every country. Is that right? The income, that is, that you would get as the same across the country, or is it actually different depending on which university you land in?

18:40 Caitlin: So for Germany, it is the same across the country. Some other countries vary it depending on what the cost of living is in the city that you’re in.

18:50 Emily: Okay. So in some cases you might have a cost of living adjustment built into your income, and in some cases you might not, and that’s why you were saying, okay, let’s be really careful about, which institute you choose to go to in that case.

19:01 Caitlin: Yes. And Germany did actually announce a few months into the grant that they have extra money for a housing stipend. So folks who are in those higher costs of living situations will be able to receive up to €250 a month. And there is some kind of, I think as an American, maybe kind of ridiculous size requirements and that single people get 200 something square feet for that stipend and as a married couple, you can get a 320 square foot apartment, which is tiny. That’s like a studio with like a hot plate and a toaster oven, right? For us, cooking is really important, so we opted to get a prorated stipend and have somewhere with a full kitchen.

19:47 Emily: Gotcha.

Commercial

19:51 Emily: Emily here for a brief interlude. I bet you and your peers are hungry for financial information right now, especially if it’s tailored for your unique PhD experience. I offer seminars, webinars, and workshops on personal finance for early career PhDs that can be billed as professional development or personal wellness programming. My events cover a wide range of personal finance topics, or take a deep dive into the financial topics that matter most to PhDs, like taxes, investing, career transitions, and frugality. If you’re interested in having me speak to your group, or recommending me to a potential host, you can find more information and ways to contact me at PFforPhDs.com/speaking. We can absolutely find a way to get this great content to you and your peers even while social distancing. Now back to our interview.

Making it Work Despite the Financial Challenges

20:50 Emily: So, I’m freaking out a little bit for you when you mentioned the percentage of your income that your rent takes up. How are you making this work? What have you been doing in the years leading up to going on the Fulbright that makes you not freak out right now about money?

21:09 Caitlin: Yeah. So one piece that I do want to say, is that I’m not necessarily unique in that I am having to use a lot of other savings. On the Facebook group, I mentioned that to the other Fulbrighters in Germany, I just did an informal poll and 62 out of 91 responded, so that’s about 70%, said that they would not be able to financially survive without significant additional savings, gifts or income. So —

21:37 Emily: Is that something that the program makes clear earlier in the application cycle or is this something that comes as a surprise once people are really starting to look into the financials?

21:49 Caitlin: I think it’s more of a surprise. They are pretty upfront about what support is provided, like you can go look at the numbers. I was surprised that that many people were struggling with it because I was thinking like, yeah, this makes sense, I’m supporting two people on this income and my savings, so of course it’s going to feel like a, a stressful year. But I was surprised that that many people expressed that they, they had to use significant outside sources. There were like 15% of people who said that they had money left over for savings, so again it’s working for some people.

22:27 Caitlin: Yeah, but not the majority. All right. Yeah, go ahead. How are you making this work?

22:33 Caitlin: Yeah, so I think like with anything else in academia or life, it’s a combination of luck and privilege and decision making. My husband and I were in a low cost of living area, Michigan State University is in East Lansing right next to Lansing, Michigan’s state capital. We were living in Lansing where houses are fairly cheap and we were able to buy a house when I started graduate school, because I had funds, enough for a down payment, from a relative who had passed away. We intentionally bought this house within biking distance from the university, so we sold one of our cars once we arrived, and we ended up having roommates for almost the entire time that we lived there.

23:23 Emily: How large is your house? How many bedrooms?

23:26 Caitlin: It was a three bedroom.

23:28 Emily: Okay. And so you had one or two tenants that entire time?

23:34 Caitlin: Yes. Usually one, sometimes two.

23:38 Emily: I love this strategy. It’s come to be known as house hacking. It’s actually something I’m excited about covering even more on the podcast. Either — well, whenever this is released — maybe in the recent past, or maybe in the soon to be future. But I love the strategy for graduate students. Of course, it’s only possible in relatively low or moderate cost of living cities, where the housing market is something that a graduate student can kind of grasp. It definitely helps to have two incomes, like presumably you and your husband have, and also to have acquired down payment money from somewhere. Those are things that are very, very helpful, although not strictly necessary, but go into the likelihood of house hacking being possible. Overall, has that single tenant paid your entire mortgage, half of your mortgage? How much of a financial boost has that situation given you?

24:31 Caitlin: We were doing it both for personal and financial reasons. Every single person who lived in our house was someone we knew, either friends or family members. So we charged the actual cost to them, of living there, which maybe doesn’t quite work out in our favor because we were also then paying for maintenance costs and that kind of thing, but it was what we decided to do. All of the income that we got from renters, we put into savings or paying off my husband’s student loans, which we had to do at the beginning of graduate school, or IRAs, retirement accounts.

25:17 Emily: What was your husband’s income like during this time? Did his income far exceed yours, or was it similar to what you were making?

25:25 Caitlin: His income was similar to what I was making, similar to a graduate stipend?

25:29 Emily: Yeah. Okay. Not a huge boost there, but good for two people living in a lower cost of living city. Great, so you were beefing up your savings. Anything else that you were doing during that time to help you prepare for this challenging year?

25:43 Caitlin: Well, so I knew relatively ahead of time that the Fulbright was a possibility and if I didn’t get the Fulbright, we were going to take a trip to travel around Europe anyway, so we had this designated savings account for a Europe trip or Fulbright supplement and we were able to put $5,000 in that. I was also keeping pretty good track of how much money we were spending, so I knew in general how much we would need to supplement the Fulbright and was able to funnel that away in the months leading up to it.

26:18 Emily: How long did you take to directly prepare for the Fulbright and, or generally going to Europe?

26:26 Caitlin: Hmm, that’s a good question. It has been a goal in my financial tracking account for over two years.

26:37 Emily: Okay. Yeah. That’s a great time horizon. I usually encourage people to think out at least a ahead, like what major expenses may be coming their way, but two years is even better, if you can do it. That’s a great kind of baseline to have to prepare. I forgot to ask, what are you doing with your house right now? Is it fully rented out?

26:55 Caitlin: We sold our house before we left. We didn’t want —

26:58 Emily: Oh wow.

26:58 Caitlin: Yeah. And because I’m graduating at the end of the Fulbright, I’ve been applying for jobs. We don’t know where we’ll land, so it just made sense.

27:05 Emily: Okay, so you’re not planning on returning to Lansing, and you’ve closed everything out there that you need to before leaving.

27:13 Caitlin: Yeah.

27:13 Emily: That’s great. So presumably you also had some capital gains from that sale?

27:18 Caitlin: We did, yeah.

27:19 Emily: That’s awesome. Anything else that you’re doing to make your financials work this year?

27:25 Caitlin: Just keeping track, basically, which is a little bit harder in Germany. It’s very much a cash economy and I like to keep track of my purchases with card, but instead I’m out paying cash and euro and then coming home and converting that and remembering what went to what. Keeping track so that we can then also have some money set aside for travel, since that’s part of the mission of the Fulbright, as well as this cultural exchange.

27:56 Emily: That sounds awesome. Anything else you want to say to another potential Fulbright applicant, regarding the finances of, of doing the fellowship?

28:05 Caitlin: I would say don’t be dissuaded based, based on what I’ve said. I think it tends to be most overwhelming at the beginning and then things kind of level out. You either figure out where to make sacrifices, or there are options for you to earn up to an extra 400 euro a month, which is pretty accessible. I would say that it’s still definitely worth it, if in your situation it’s not going to be too burdensome.

28:36 Emily: I think it’s kind of like with any other life transitions, as I was saying earlier. Having cash in your bank account and your savings account is going to help you so much through that transition, and it’s not necessarily like vital, but it is going to make it a lot smoother. And it’s something that you can then repay out of your ongoing income. Like you said, with the reimbursements coming slowly, that can go right back into refilling the savings for the next transition that will be happening at the end of the year, or whatever. So the earlier you can build up savings kind of for whatever comes your way, as you did, the better okay.

Final Words of Advice

29:10 Emily: Caitlin, I end all my interviews by asking my guest, what is your best financial advice for another early career PhD?

29:17 Caitlin: I would say find a way to enjoy or kind of make a game out of financial management, with the caveat that I understand that some PhDs are not in a position where they can really even sustain themselves. You’re allowed to feel stressed out about it if that’s the situation you’re in, but find what works for you and what interests you about your finances, so that you can keep track in a way that makes sense for you. For example, I do not like to budget out where every single bit of my money is going. Instead I set aside, this is for retirement, this is for long-term savings, this is for this specific short term savings goal, and then everything else can get spent because everything’s taken care of. But if you don’t want to even want to look at a spreadsheet, then make a visualization or make it into a presentation, make it interesting for yourself.

30:18 Emily: I love that tip. I don’t know if this is a widely used term, but I call it the “unbudgeting” method. So for those people who don’t want to be down in the weeds with this category versus this category, as long as you have that high level savings or debt repayment or whatever you’re doing, as long as that’s taken care of and ideally through like automated transactions, so you don’t even have to think about it. As long as you’re paying attention to that balance in your checking account, just spend what’s there because you know you have your big goals already taken care of. And it actually — seems like it doesn’t sound like this is your preference — but in a cash economy, budgeting without putting a ton of spreadsheet effort into it can be possible because you just say, here’s my cash for eating out, here’s my cash for groceries, and just spend that down, and don’t worry about having to keep track specifically because you did it ahead of time.

31:09 Emily: Well, thank you so much for joining me on the podcast today, Caitlin. As I said, I’m really excited to discuss the Fulbright. It’s a first for me.

31:16 Caitlin: Yeah. Great, and I’m excited to discuss personal finance.

31:20 Emily: Thank you.

August 2020 Update

31:22 Caitlin: Hi, Caitlin Kirby here with an update on what happened with coronavirus and Fulbright. In March, Fulbright programs around the world started sending people home as coronavirus was coming into those countries. For me in Germany, that meant a couple of weeks of sort of confusing communication from Fulbright, followed by eventually them suggesting that everybody go home, followed shortly by all Fulbright programs, worldwide, being suspended. Again, things were different on a country to country level. For Germany, we were given funding for changes in travel plans to head home. As per regular in the Fulbright program, that was only for the grantee and not for any dependents. And then we were also given our stipend through June 30th, which for me meant that I was receiving a month and a half less of payment. For most people that’s when the program was ending anyway.

32:31 Caitlin: And then Fulbright Germany was also able to provide folks with, I think it was a thousand euros just as additional transition funds. This information kind of all came piecemeal, so it was a little bit stressful in the moment. But I did end up then going back to the United States in March. I was fortunate enough to be able to, at least from the research standpoint, work remotely with my research team back in Germany, so I still got to complete a lot of my goals for the Fulbright, as far as research goes, but obviously missed out on the rest of that experience of being in the country, in Germany. I was also fortunate to then be able to start my postdoctoral research position at the University of Nebraska, Lincoln a little bit early, so I didn’t have gaps in funding, which obviously was really helpful.

33:24 Caitlin: Fulbright, in this coming year, again is a little bit country to country. I know some programs have been canceled because of coronavirus. Some programs are starting late, in January, and that is really all that I’ve heard. If you are just considering applying to Fulbright now, I think chances are better that things will be a little bit more normal by the time you start or at least Fulbright will have better contingency plans for what happens if outbreaks do occur so that you’re not sort of waiting week by week, or really day by day to figure out what’s happening at the commission level or with the Fulbright program, overall.

34:08 Caitlin: One other note, if you are applying this year, there is potential for you to have increased competition because Fulbright did offer for folks whose grants were interrupted to be able to reapply in the coming cycle. They don’t have any priority over folks who are applying for the first time or second time, but that is a possibility for folks who are in situations where they’re able to come home and then apply for Fulbright again, which is not for a lot of people I know who were doing the Fulbright, but it’s, again, a possibility.

34:46 Caitlin: If you want a little bit more information about some of the impacts of the changes in the Fulbright program in different countries, there is a group on Twitter called Fulbright Crisis and they have been cataloging some of the difficulties that people coming back from different countries have had, or people coming back in general. Like for example, the health insurance that Fulbright provided was only in the country that your Fulbright was in so when folks were sent back home, some of them did not have health insurance. And some folks were not provided stipends throughout the program. Like once the programs ended in March, some countries were not providing stipends for their grantees. Again, the Twitter handle for that is @FulbrightCrisis and they’re showcasing some of those difficulties if you want a little bit more information about what that has looked like and maybe what that will look like in the future

Outtro

35:49 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.

How This Grad Student Fellow Invests for Retirement and Pays Quarterly Estimated Tax

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In this episode, Emily interviews Lucy Capano, a rising fourth-year PhD student at Washington University in St. Louis. Since she started her graduate program, Lucy has been funded by a non-W-2 fellowship and training grant, which has affected her financial practices of retirement investing and paying income tax. Lucy and Emily discuss what changed for 2020 to permit fellowship recipients like Lucy to use an IRA and how Lucy handles calculating, saving for, and paying quarterly estimated tax to the IRS. Lucy shares her motivation for pursuing saving and debt repayment goals while in graduate school and her surprising best financial advice for another graduate student.

Links Mentioned in the Episode

fellowship tax investing

Teaser

00:00 Lucy: That amount would automatically withdraw to that separate checking account that I didn’t really use for anything. And then at the end of three months, when it was time to pay quarterly taxes, I knew I had that amount and I was not worried about it. Right? I never even saw it in my regular checking. It only went into that secondary checking account.

Intro

00:22 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 six, episode nine, and today my guest is Lucy Capano, a rising fourth-year PhD student at Washington University in St. Louis. Lucy has been funded by non-W2 fellowships and training grants since she started her graduate program, which has affected her financial practices of retirement investing and paying income tax. We discuss what changed for 2020 to permit fellowship recipients like Lucy to use an IRA, and how Lucy handles calculating, saving for, and paying quarterly estimated tax to the IRS. Lucy shares her motivation for pursuing saving and debt repayment goals while in graduate school and her surprising best financial advice for another graduate student. Without further ado, here’s my interview with Lucy Capano.

Will You Please Introduce Yourself Further?

01:21 Emily: I’m delighted to welcome to the podcast today Lucy Capano who’s a rising fourth-year PhD student at Washington University in St. Louis, and we are talking about my two favorite subjects in one episode, investing and taxes, particularly for graduate students, maybe postdocs as well. So, Lucy, would you please tell the audience a little bit about yourself?

01:38 Lucy: Yeah, I’d love to. My name is Lucy, like Emily said, I’m very grateful to be here. I study neurodegenerative diseases and the age-associated causes that could be implementing them in the human brain. And we have a really cool protocol, but this is not about science. This is about taxes and budgeting because as a graduate student, we have a very limited income, and really, depending on where you are, you can have excess, or you can be really, really tight-budgeted. And it took me two-and-a-half years to really figure out where I needed to be. And so, why would I keep that information to myself? I think we should be sharing it.

Estimated Taxes on Non-W2 Fellowship Income

02:19 Emily: Yeah, I see we have a similar mission! So glad to have you on the podcast. So, your personal story, when you started graduate school, you had what I call non-W2 fellowship income. Can you talk a little bit more about that and why that was particularly financially challenging and odd at that time?

02:36 Lucy: Yeah, absolutely. As a first-year, I came in, and generally, that one is non-W2, and then I was immediately transferred to a training grant, which again means that I’m on a non-W2. So, that means my taxes that I would need to pay annually to the government are not taken out of my paycheck automatically. So, I get the full, gross amount given to me, and then I need to section portions of it to be able to pay estimated taxes. So, estimated taxes are due every quarter, April 15th. Oh my gosh. Am I going to get these dates right?

03:12 Emily: I have them. It’s mid-April, mid-June, mid-September, and mid-January, except in 2020 the first two quarters–so what would usually be mid-April and mid-June–have now been bumped back to that July 15th, 2020 annual tax due date. So, three types of tax stuff all due on the same day in 2020, but you got a little bit of a reprieve. So yeah, go ahead. It’s weird, right? It’s three–two–three–four months in length throughout the year. That’s why I also had trouble remembering this for like the first couple of years.

03:44 Lucy: The July has definitely been throwing me off because I’m used to June and now we’ve got July. So, when you get this money, how do you even make sure that you’ve got enough to pay per quarter? And do you want to do it all upfront, which you can totally do? Do you want to actually do it by quarter and hope that you remember? There’s a lot of ways to tackle it. You just need to find what works best.

Grad School Pay Frequency and Investment Goals

04:05 Emily: And so for you, are you being paid monthly? Or what is your pay frequency?

04:10 Lucy: We are paid on the last business day of the month. So, everything comes to me in one large lump sum. And that’s also slightly problematic, right? You need to be able to budget so that your entire month can be paid without overdoing it while waiting for that monthly paycheck to come in.

04:28 Emily: Yeah. Pay frequency is one of these really weird things about graduate school, where most people I think are once per month, but there are some people every two weeks or bi-monthly. And then there are some people on fellowship who receive an entire term’s worth of income two, three times a year. So, that’s a whole other sort of budgeting challenge. It’s nice that you get it up front, but it also causes problems. But that’s what I was wondering about when you mentioned paying the estimated tax. So, let’s talk a little bit more about estimate tax at the end of the interview and switch to talking about investing. So, when you started graduate school, what was your situation around investing? Was it a goal of yours, and were you able to do it?

05:06 Lucy: Yeah, so I moved here from an East Coast city. I’m now in the Midwest, and I love the East Coast, but it is not cheap. Just like the West Coast. And so, we pretty much didn’t have any disposable income. It was paycheck to paycheck. I was working both my lab tech job and a supplemental just to help kind of keep us afloat. And so when we moved here, the cost of living is a lot less. And so, we actually had a surplus after a certain bit of time. You know, after all the moving expenses when we paid those off. And the problem became, I always knew that I wanted to save for retirement and start savings, but I kind of didn’t know where to start. And in addition to that, I had never really had excess money before.

05:52 Lucy: And so a lot of money was escaping places that I didn’t really notice it was escaping. And that was kind of the big “Aha” moment for us was when we shifted. And I’m saying “we,” I live with my partner, we’ve been together for quite some time, was realizing that we had to make a decision. Do we want to go out to eat a bunch of times this month? Or do we want to have the retirement savings and the flexible savings accounts that will get us to the goals that we want, which is probably to move back to a coast, which again, not cheap. So, we need to do a lot of good saving while we’re here.

Retirement Investment: IRAs

06:33 Emily: So, was retirement investing in particular on your mind at that point?

06:38 Lucy: Yeah, so I had worked a number of jobs before coming to grad school. So, I had a 403(b), which is the nonprofit version of a 401(k), and I also had a Roth IRA from that same time. But when I became a graduate student in 2017, I knew that I couldn’t contribute with any of my stipend. So, I couldn’t do much other than build kind of the flexible savings that you keep within your bank account. And so, I knew I was just kind of in limbo and I was going to live there. And then in 2019, the SECURE Act was passed. And that changed the game for graduate students.

07:14 Emily: Yeah. Just to go back and explain that a little bit further because still a lot of people are kind of unaware of all these different laws and so forth. So, 2019 and prior, I think going back to like the eighties, the 1980s, what I referred to earlier, non-W2 fellowship income–so, any kind of fellowship training grant income that you get that’s not on a W2–at that point was not eligible to be contributed to an IRA. It was not considered taxable compensation or earned income. So, that was the situation until the SECURE Act passed. Not to say that everyone receiving that kind of income was totally unable to contribute because if you had a side hustle you could, if you were married to someone with taxable compensation you could, so there were some workarounds. But for plenty of people, it was just a hard “No.” If your stipend, your non-W2 fellowship stipend was your only income in the course of the calendar year, nope. An IRA was not an option for you. But pick up again, please with what the SECURE Act did.

How the SECURE Act Supports Grad Student and Postdoc Savings

08:06 Lucy: Yeah. So, the SECURE Act stands for Setting Every Community Up for Retirement Enhancement Act, which is great. I love that it ends on enhancement and then adds the Act back in. And what it says is that the term compensation shall include any amount, which is included in the individual’s gross income and paid to the individual to aid the individual in the pursuit of graduate or postdoctoral study. So, that meant that anything that I could claim as my gross individual income was now able to be used to be saved for retirement.

08:45 Emily: I think that was always a point of confusion prior to 2019, is that, wait, wait a second. My income as a graduate student is taxable? Like I have to pay income tax on this, and yet, I am not allowed to contribute to an IRA? It was very incongruous, hard for people to understand. It was there in black and white in the tax code. It was unambiguous, but it’s just a hard thing logically to come to grips with. So, it’s so great that the SECURE Act, which originally this Act was called the Graduate Student Savings Act, and then it was folded into the SECURE Act. I have a great podcast episode from last fall–two, actually–that I did on the SECURE Act’s passage. So, I’ll include those in the show notes in case you want to go back in time and listen to those. But yeah, end of the day, the great news is starting in 2020, people like you with only this type of non-W2 fellowship income, now you can contribute to an IRA again. So, have you been? How are the savings going?

09:37 Lucy: Yeah, great. We absolutely have started putting money into the Roth. It’s important to start early, right? In high school, we learned about compound interest and investing, and the earlier you start, the more you get out of it in the end. And so, when we talk about budgeting, we usually try to have around–I was taught about six months of your important and unmovable expenses, right? Your rent, your car, your car insurance, whatever else you may have that you know you have to spend monthly in a savings account. But then after that, there’s no point in continuing to build that up. That stuff should now move to retirement savings and kind of investment options. So, now we have automatic, biweekly–which is every two weeks because biweekly is a fun word–directly into the Roth IRA account for me and both my partner. And so, then I go in and I take those and I apply them directly to whichever funds I want to purchase with that.

Why Make Retirement Savings a Priority During Grad School?

10:38 Emily: Yeah. That’s awesome. Can you expand a little bit more about why it is important for you? Like why you have decided to make retirement savings a priority during graduate school? When, first of all, I mean, yeah, we need to acknowledge a lot of people can’t. You said that earlier. Some people are just plain not paid enough. That’s an unfortunate reality of some programs underpaying their students. But for the people who are able to, it might not necessarily be a goal. Maybe they want to do some other things with their money. So, can you expand a little bit more on why this early start is so important?

11:10 Lucy: Yeah. I mean, absolutely. It is definitely personal preference, right? Some people it’s just not on the radar and that’s alright if that’s what makes you feel comfortable. But for me, with the experience that I’ve had growing up and the experience that my partner’s family has had. I think it’s just so important to have that kind of a safety net for when retirement occurs. Both my parents are now retired. They go on trips whenever they feel like it because they have a really wonderful nest egg of savings and retirement funds that they can pull from at any time. And thankfully, they are very comfortable in that regard. And the earlier you start, like I said earlier, it compounds, right? So, every dollar that my Roth IRA makes, I have it reinvesting automatically. Because that’s just more money that gets to live there and build through the market value.

12:02 Emily: I, like you, worked only for one year before I started graduate school. And during that time, I embarked on learning about personal finance and I read this, “Oh, you have to save 10% of your gross income for retirement” rule. And I love rules. So, I was on it. It was challenging, but I was determined to do it. And I kept that up during graduate school. Thankfully, I, like you, also lived in sort of a moderate cost-of-living area and my stipend was fine for there. And so, obviously in more expensive places, as you were mentioning earlier, graduate student stipends don’t really get that much higher. So, it’s quite challenging there, but I was in a good position in that case. So, I was investing for retirement all through graduate school, as well as building up some other kinds of savings.

Investing in Your Future Positively Impacts Your Present

12:44 Emily: And I just have to make a plug for this in case anyone listening to this is not that motivated around it. Because what we found, my husband and I, who was also a graduate student at that time, not only is this like you’re saving and you’re investing for the far-off future, but it actually had an impact in the here and now. Well, after a few years after we really saw the balances building up, and that was actually during quite a strong, bold market. So, the compound returns were coming fast and furious. When we got out of graduate school, we had quite a good nest egg, both in our retirement accounts, and also in cash. And it actually enabled us to make more risky career decisions than we would have otherwise that were actually very well-suited for us. So, having that security of something that we had built during graduate school to be able to fall back on in case that risky decision didn’t turn out so well, that was instrumental in us actually making those decisions to go for our maximum career fulfillment, even at these riskier kinds of jobs. Obviously, I’m referring to my business, which is quite a risky endeavor, especially at the beginning. So, that’s kind of how I found that this mattered for me even decades earlier than I expected it to.

13:54 Lucy: Yeah, we have always known that we would like a house. And in order to have a house, you have to have a down payment. And in order to have a down payment, you have to have savings for it. Right? And there are certain rules surrounding specific savings or retirement accounts like Roth IRAs, where you can actually withdraw a certain portion for a first-time home purchase. So, there are absolutely benefits, and who doesn’t want to imagine being 70 and being like, “I’m just gonna fly to some beach and sit down and have a cocktail.” Right? That sounds really nice. It’s hard to imagine at this current time, but it is going to happen again.

14:34 Emily: True. We are recording this in May, 2020. Yes. Enough said there.

Commercial

14:43 Emily: Emily here for a brief interlude. The deadline for filing your federal tax return and making your quarters one and two estimated tax payments was extended to July 15th, 2020. I never expected to still be talking about taxes into the summer, but here we are. Postbac fellows, funded grad students, and postdoc fellows still need major help in this area because of their unique situation. I provide tons of support to PhD trainees preparing their tax returns and calculating their estimated tax. Go to pfforphds.com/tax to read my free articles and find out if one of my tax workshops is right for you. I have one workshop on how to prepare your annual tax return, and one on how to determine if you owe quarterly estimated tax. Both workshops include videos, supplemental documents, and live Q&A calls with me. Go to P F F O R P H D S.com/T A X. Don’t struggle through tax season on your own. Visit my website for the exact information you need in the most efficient form available. Now, back to the interview.

Strategies for Handling Estimated Tax

16:00 Emily: Okay. I want to return to the situation around estimated tax. If you wouldn’t mind explaining a little bit more about how, you know, you said earlier that your mileage may vary, people handle estimated tax in different ways. I’m curious, what is the best solution that you’ve come to for handling your estimated tax?

16:18 Lucy: Yeah, I was kind of pseudo-mentored by another graduate student, and he was always on this camp that he would save up four or five thousand dollars and pay his entire year’s estimated tax in January of the start of that year. And he would send in four different checks, one with each estimated tax document. And that would be it for the entire year. Now, at the time that he was trying to convince me of that, we did not have that kind of money. And so then I had to find some other way. And of course, I have an old checking account from when I was in high school. And so, what I decided to do was I calculated my estimated tax. Those forms look scary. They’re not that bad. Talk to somebody, talk to your friends, somebody knows how to do it. And once I had kind of figured out my estimated tax, I said, “Okay, well, this divided by four is, let’s say $400. And a quarter of the year is three months. Right? Okay. So, now I have $400, divided by three is, whatever. I can’t do math on the fly like this, but that amount would automatically withdraw to that separate checking account that I didn’t really use for anything. And then at the end of three months, when it was time to pay quarterly taxes, I knew I had that amount and I was not worried about it. Right? I never even saw it in my regular checking. It only we went to that secondary checking account.

17:38 Emily: Yeah. This system that you’re describing is absolutely the one that I recommend. Actually, I featured it in a past interview as well, which I’ll link from the show notes. The interview is with Lourdes Bobbio, and she is an NDSEG fellow. And so, this is exactly what she did to handle her estimated tax. It’s what I did in graduate school as well, and still do, because as a business owner, I also pay quarterly estimated tax. So, I think it’s a perfect system. It’s actually the one that I kind of recommend for everyone. Like you said, to pay all of your estimated tax upfront is a really high amount of savings to have on hand which would be unusual. So, that’s not for everyone.

PF for PhDs Resources on Estimated Tax

18:20 Emily: By the way, I do have a resource on estimated tax. I have a couple, so I’ll link them from the show notes, but if you also just want to go to pfforphds.com/tax, I have an article there called, “The Complete Guide to Quarterly Estimated Tax for Fellowship Recipients,” free article. And I also have a paid workshop. You can join anytime throughout the year. And I have videos that I’ve recorded. There’s like a spreadsheet that is included with that. And I also do live Q&A calls every quarter to answer any kind of final questions you have after you’ve gone through the material. So, that would be a great one to join if estimated tax is a concern for you.

18:53 Emily: As you said, Lucy, look at form 1040-ES if you think you can handle it, fine. It’s really not that hard for fellowship recipients, but I do know some people get a little intimidated. They want that live support. So, like you said, you know, you can turn to–I really hesitate, actually, to say to turn to a friend, because this is an area that people mess up a lot. It sounds like you got really good counsel, but you never know. You don’t know what you don’t know. Right? And so you don’t know if counsel that you’re receiving is good or not. So, I’ll just say, come to me, come to my site. I have the references for you. Yes, listen to your classmates, but trust, but verify. Let me put it that way. When it comes to tax and rumors running around graduate schools.

19:34 Lucy: Yeah. We just recently were talking about taxes with some of our upcoming, or now upcoming second years, asking them how they did and what they felt like, and how we can support them in the future. And they were like, “Oh my God, estimated taxes.” And then it was just like a flurry of papers and pens. And imagine that kind of cartoony instance. And it ended up half of them just decided they weren’t going to pay it because they weren’t sure what to do. And then two of them overpaid by $2,000, which I’m not really sure how that’s possible on our current stipend. Because I think we pay less than $5,000 a year. So, I’m not sure what they were doing for that one quarter, but they totally miscalculated, which is perfectly fine. But that is when finding a resource like Emily might be really helpful if you just don’t want to worry about it. You can go to her. I mean, I’ve never used Emily. I’m sure she’s great. But she seems to know what she’s talking about. And so, if you just don’t want to worry about it, if you pay a little bit upfront, you don’t have to worry long term.

Use Your School’s Tax Resources or Bring in an Outside Expert

20:34 Emily: Yeah. And I also love, you know, you mentioned before we started the recording that your university of WashU is providing–and in particular, your program is providing tax support in the form of workshops, which is amazing. Anyone who’s in a program in a school that does that, I definitely encourage you to attend one of those seminars. If no one is doing it and you feel competent, you can always try to start it doing some peer support in that area. And hey, I am also available and I have a live seminar that’s sort of a live version of the tax workshop that I just mentioned. So, if you want to bring in an outside person and you have a budget, I am available to do that. Because this is such, I mean, this is an area that, I cannot tell you the number of people I talk to every tax season who have maybe been surprised by, “Oh, it’s April and turns out I owe all this tax that I thought was being withheld from my paycheck, but it turns out it wasn’t,” that’s a really tough situation to be in.

21:28 Emily: I’ve talked to people who have gone three, four, five years of that happening and just wake up to the fact that they have all these back taxes. That is so tough. And you know, an ounce of prevention is worth a pound of care. So, we can just say again, if you’re on fellowship, if you’re on a training grant, look into estimated tax, it’s possible, you won’t have to pay them in your first year. Don’t forget about them. Look again in the second year, it could come up at that point. So, please tell your friends. Tell your friends about estimated tax. Send them this podcast episode. And as I was just saying, look for resources at your university. They may be there, or you may be able to start them or bring them in.

22:03 Lucy: And even if they don’t have them, you can let them know that it’s something that the students are interested in. Right? So, I’m the co-director of a student body group, and that’s what we do. We think students need this, so we advocate for that with the administration. And unless they know, they’re not going to be thinking about kind of dealing with this type of stuff.

Any Other Financial Goals?

22:25 Emily: Yeah. I think actually taxes at the graduate student level got a lot more attention after the Tax Cuts and Jobs Act passed because there were those couple months where we thought maybe tuition waivers would be taxed, so anyway, it got a lot of attention. I think after the Act ultimately passed, which thankfully did not have that provision in it, people were just a little bit more aware like, “Oh, okay, I have to deal with taxes. Maybe there are some resources out there that can help.” So, going back to your personal story Lucy, aside from the retirement investing, which is incredible and awesome that you’re doing that, you mentioned saving up for a house. Do you have any other financial goals that you’re going to be working on for the remainder of graduate school?

23:04 Lucy: I mean, really, it’s trying to find that financial stability that we couldn’t find while we lived on the East Coast. So, we were building that initial six-month-ish nest egg that you might want to refer to it as. Now, that’s done. So, we’ve shifted to building kind of the large expense nest egg, right? Like, the next time we have to buy a car, if our fridge breaks, right? Those things that you never want to have to think about, but they absolutely exist within life. And at the same time, we also obviously are working to pay off student loans. And we are working to invest in retirement. It seems like that’s not really feasible, and I’ll be completely honest, I put $50 in every week to that large expense. That’s not a lot, but assuming, and this is all assuming I don’t have a large expense for a couple of years, I’m going to have plenty of money in that.

Even a Little Bit (of Savings) Matters

23:58 Lucy: So, even a little bit matters. You might think $20 doesn’t matter to a Roth IRA, but it does build up. Slow and steady, it builds up. Can you imagine $20 every week over the course of however long your PhD is? I don’t want to say a number because it jinxes us all, but it’s really important to start kind of building these ideas because you don’t want to be caught out in the rain.

24:19 Emily: It sounds like you really have been able to accomplish a lot with the stipend. And I think your experience of moving from a higher cost of living area to St. Louis is really helpful in that way. Unfortunately, a lot of students go the other way and they end up in Boston, New York, San Francisco from a less expensive place. And it’s jarring that way, too. So, you put in your time in the higher cost of living cities and then experienced a bit of relief moving to St. Louis. That’s really great. And you know, I totally agree that even these small amounts of money make a huge difference given enough time. And as you were saying, the PhD is actually pretty significant amount of time. Over the course of five plus years, it can really add up, like it did for me and my husband. And so, anyway, I’m just really pleased to hear that you’re making your stipend work for you so effectively. That’s wonderful.

Best Advice for an Early-Career PhD

25:10 Emily: So, as we’re finishing up the interview, this is a question that I ask everyone who comes on the podcast, what is your best financial advice for another early-career PhD? And it could be something that we’ve mentioned in the course of the interview, or it could be something completely else.

25:23 Lucy: Yeah. I have to fully admit it’s an allowance. Like, I’m over 30 and I have an allowance. When we finally had kind of spare money, every month I would go on and get a graph at the top of my bank account that shows me my personal value and it would stay flat. And I’m like, “What are we spending our money on? This doesn’t make any sense. Okay, I bought this. Okay, I bought that. But it’s really not that bad.” So, we decided to implement an allowance. We’re two over 30-year-olds with an allowance. I mean, I can’t say that enough. And what we figured out was, “Do I really want to spend the money on this, right? Is this really what’s going to make me happy where I can’t necessarily save for retirement?” Which again is my goal. “Is this a thing that I need?” And it really showed us where our money was going, which was just little knickknacks and doodads. And after a year of that allowance, our personal value went up by like $3,000 because we weren’t accidentally spending $500 a month on whatever we felt like. And so, I recommend it. It’s hard and weird to say, but I recommend allowances. It keeps you a little bit honest about it. We have a post-it note on our fridge and we have to write everything we purchase that is for us specifically and not household.

Give Yourself an Allowance for Discretionary Funding

26:48 Emily: So, I want to make sure that I understand what you mean by allowance. So, what you’re saying is like, aside from the necessary expenses, and as you were just mentioning household joint expenses, allowance is, it sounds like something that is just for you as an individual. And it’s probably discretionary, is that right? And as long as you fit it within your allowance every month, or maybe you build up a balance over some time, as long as the purchase fits within that, you’re good to go. If not, you have to say, “Well, I need to wait on it.” Is that right?

27:16 Lucy: Right. Exactly. So, you know, let’s say you’re going to a conference and you need a new suit jacket. That does not count as an allowance. That’s something that’s important for your personal development. Let’s say there’s a really cute dress that has just come out from your favorite company. That is not something that’s related to household or even professional development. So, that’s probably going to go on allowance. I just spent actually the last of my allowance already on a gift for a friend for her birthday. I knew it was something I wanted to do. And so, that was in my budget for the month, or my allowance for the month.

27:55 Emily: Yeah. So, it’s kind of just another way of framing budgeting. Like it’s just a more like catch-all category and you’ve specified it just for you as an individual. I know you’ve mentioned your partner. I mentioned my husband. Like the whole couple money management thing, people do it a lot of different ways. And you really have to find what works for you. I know my experience in graduate school, my husband and I were both graduate students and didn’t have a lot of discretionary income. And so, we didn’t use the allowance system, but it was kind of because there wasn’t that much money left for an allowance after we were doing all of the goals and all the joint spending. So, thankfully we found a way to navigate that over time. But yeah, I think if we had had a little bit more discretionary income, having some autonomy over that money because we do keep joint finances, but having some autonomy over a portion of it, that’s a system that works very, very well for a lot of people. So, I’m really glad you brought it up. Well, Lucy, this has been just a delight and I’m so glad that you came on the podcast. And I hope to have a chance to meet you in person before too long. Because it sounds like you’re doing some incredible work there with your program at WashU. So, thank you so much for joining us and sharing your story and sharing your expertise in this area.

29:03 Lucy: Thank you for having me. It’s such an important component of life and graduate school for those that are interested. And I appreciate that you exist and you’ve been thinking about this and building things around it because it didn’t really seem like it existed when I first started.

29:19 Emily: Sounds good. Thank you so much.

29:21 Lucy: Thanks, Emily.

Outtro

29:23 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 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 Podington Bear from the free music archive and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

The Financial and Career Opportunities Available to National Science Foundation Graduate Research Fellows

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In this episode, Emily interviews Kelsey Wood, a National Science Foundation (NSF) Graduate Research Fellow who now teaches others how to write competitive applications for the Graduate Research Fellowship Program (GRFP). They discuss the decisions that new fellows have to make regarding when to start receiving the funding and the internship opportunities available. Kelsey also issues a warning regarding paying quarterly estimated tax and gives great insights from her course for GRFP applicants. At the end of the interview, Kelsey shares her best financial advice for current graduate students and postdocs.

Links Mentioned in This Episode:

Further Reading:

NSF GRFP finances

Teaser

00:00 Kelsey: I think that a lot of times the graduate groups or the administration will attempt to get as much free labor out of graduate students as they can, but there is actually a lot of money there to pay people, so I think a lot of times grad students need to be proactive in asking for money for things like leading workshops or teaching classes, TA-ing, et cetera.

Introduction

00:26 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 five, episode 16, and today my guest is Kelsey Wood, a graduate student at UC Davis and National Science Foundation Graduate Research Fellow. We discuss the decisions that new NSF fellows have to make regarding when to start receiving the funding and the internship opportunities available. Kelsey also issues a warning regarding paying quarterly estimated tax. Throughout the interview, she shares her insights into how to best manage your finances as a fellowship recipient. Kelsey now teaches others how to write competitive GRFP applications, and she details some excellent strategies from the online course she developed. Without further ado, here’s my interview with Kelsey Wood.

Will You Please Introduce Yourself Further?

01:15 Emily: I am so delighted to be joined on the podcast today by Kelsey Wood. She is currently a graduate student at UC Davis, and she is also a former NSF GRFP fellow. And she’s going to be talking to us about that program and also the advice that she gives people in her course regarding applying successfully for the application. So, Kelsey, I’m so glad to have you. Welcome! Will you please tell the audience a little bit about yourself?

01:39 Kelsey: Sure. Thanks for having me on. I am a PhD student about to graduate in integrated genetics and genomics at UC Davis and I currently am studying plant pathogen interactions. I got my bachelor’s in biology from Reed College where I studied animal behavior and then I happened to get a job in the biotechnology industry working on potato disease resistance. And I really liked my time in industry, but I found that I was frustrated that I couldn’t pursue my own independent research questions. So, I realized I needed to go to graduate school.

02:14 Kelsey: And so, I applied for the NSF GRFP during my first year. Mostly due to peer pressure from a senior grad student who was a GRFP fellow, and he actually gave a workshop on the fellowship where he basically convinced everyone to apply. And I’m glad I did because I actually got it. And then after I received the fellowship, I decided take over that workshop and also encourage other people to apply and give them tips on how they can actually get it. So, I’ve offered a variation of that workshop for the last five years, and I did an online version last year. I held some free webinars that were attended by over 200 people all across the U.S., and then I also offered an intensive workshop with additional webinars, one-on-one and personalized editing services. Participants said that was really helpful in preparing their applications. And actually, out of the 10 people who submitted in the workshop, three of them got it this year and one honorable mention. So, I’m really proud of them and happy that I kind of helped people to get it.

Kelsey’s NSF GFRP Workshop Updates

03:18 Emily: That’s incredible. Oh my gosh. I would have loved to participate in something like that when I was early on in graduate school. Tell people right up front where can they go to find more information about that course?

03:27 Kelsey: Right now, the best place to probably get updates on what I’m going to be offering it–and I’ll also be posting a lot of the materials–is my Twitter. It’s @klsywd (Kelsey Wood), but without any vowels. So, K L S Y W D.

03:42 Emily: So, it sounds like you were a fellow between your second and fourth years of graduate school. Is that right?

03:49 Kelsey: Let’s see. I started the fellowship–it would have been in June, 2014–the summer before my second year. Yeah.

Major Decision Points for NSF GRFP Recipients

03:58 Emily: Okay. And so, what are the decisions? Okay, so let’s say we’re speaking to one of the people who has just found out that they received the GRF. Amazing, congratulations! But they’re faced with a few decisions either right away or during the course of their tenure. So, can you talk through–kind of give them a little preview, what are those decisions that they need to make, and what are some things they should consider as they’re making them?

When To Start Receiving the Stipend

04:23 Kelsey: Sure. So, I mean the first one is when to start receiving the fellowship stipend. So, you’re technically a fellow for five years, but you’re only receiving the stipend for three of those years and then the other two years you’re on tenure–you’re either on tenure or on reserve. Anyways, you only get paid for three years and then the other two years you just you have additional benefits that you can receive from the fellowship, but you’re not paid any longer. And you can start that at any time. What you really want to consider is potentially what other funding sources you might be encountering during graduate school. For example, there are a number of fellowships that you can get after you’ve passed your qualifying exams, which usually happen second or third year. So, if you think you’re going to be applying and getting those fellowships, it can be really good just to start the GRFP right away.

Consider Timing (and Adequate Payment) for TAships

05:14 Kelsey: And then the other fellowship will take over once your GRFP funding runs out. Some really lucky people got multiple fellowships, actually, right at the beginning. Somebody I knew got the GRFP and the Ford fellowship this year, actually. So, they need to decide which ones, what order to get those because you can’t get them both at the same time. But that’s a pretty lucky problem to have. I would say that. And then the other thing is, some people have to do TAships in order to satisfy a degree requirement. And you can’t do a 50% TAship while you’re doing the GRFP. That’s not allowed. So, you might want to maybe get that out of the way first so you can pass your qualifying exams and have that TA under the thing. What I did is I actually TA-ed for free. But in retrospect, I don’t know if I would make that same decision again because it was a lot of work, and I don’t know. I’ve kind of changed my feelings on just doing things like volunteering and for free because there actually is–I think that a lot of times the graduate groups or the administration will attempt to get as much free labor out of graduate students as they can. But there is actually a lot of money there to pay people. So, I think a lot of times grad students need to be proactive in asking for money for things like leading workshops or teaching classes, TA-ing, et cetera. So, that’s what I found. I started asking for stipends for my workshop and I got them. I started asking for stipends for TA-ing grad level classes. They weren’t offering them before, and I started to get them. So, I think in retrospect I maybe would have tried to get paid for a TAship to meet my degree requirements and then taking the GRFP.

07:09 Emily: It is kind of strange that universities have different policies around who gets paid for doing what exactly, because TA-ing–sort of similar to your situation, but–in the department that I was in, in graduate school, we had what they called, a graduation requirement to TA for two semesters, and it was not tied to our stipend. So, we were all being paid in some manner, either research assistantship or on fellowship or something, but we just had to do this TA work on top of it during a couple of semesters. So, that was the way they structured it. It wasn’t tied to our income. But in other places, of course there are some people who are TAs and that’s their stipend and that’s their funding and that’s the source of it. But then there is even another option that I’ve heard of which is essentially sort of being hired as an adjunct, as a graduate student. So, it doesn’t have to do with your base stipend. That could still come from a fellowship or research assistantship or whatever else. But if you take on an additional class as a TA or even as the lead instructor, you could be paid like an adjunct would be paid. So, different places do things different ways.

Check with Your Advisor About Research Grant Cycles

08:11 Emily: But I think to your original point about deciding, “Okay, when do you want to be paid for these three years when you’re in those three years of having the GRF?” You said that you should think about, “Are you going to be applying for different kinds of fellowships post-quals or post-prelims? Are you going to need this TA thing?” You could potentially get it out of the way first and have your funding come from there, initially. I would also want to throw in there, maybe ask your advisor about research grants, and are they at the end of a grant cycle, the beginning of a grant cycle? Because that could also play into it. You don’t want to take the fellowship when your PI has tons of money and then, you know, three years later, maybe there is no funding there for you. So, that’s a potential risk too. So, it’s just kind of being open about what are all these financial factors within your department, within your group, that could play into this.

09:03 Kelsey: Yeah. And actually, that’s a really good point. Because for a lot of people, getting the GRFP actually influences what lab they can join because you’re coming in with your own funding. So, you might be able to join a lab that you wouldn’t have been able to join otherwise. And in that case, you’d probably want to start using your funding right away. And then, you know, you can essentially help your PI get other grants that will take over once the funding runs out. So, that’s a big benefit.

Are You Listed as a Dependent on Your Parents’ Tax Return?

09:33 Emily: I wanted to add one more point. It’s tax season right now. So, I’m thinking a lot about taxes. And so, this weird thing happens with fellowship funding when you’re under the age of 24. I don’t know how old you were when you first started, were you under 24?

09:48 Kelsey: No, I don’t think so.

09:49 Emily: Okay. Yeah. Because you had had at least one year of work experience. But if you’re starting when you’re 22 or 23, anytime that you have fellowship income in a year when you’re age 23 or younger, some weird stuff can happen with your tax return. Namely, your parents might be able to have more of a claim on you as a potential dependent on their tax return, which is not good for you if it turns out that way. And secondly, you might be hit with this weird high tax called the “Kiddie Tax.”

10:16 Emily: And so, I don’t want to go into all that right now, but if you go to my website, pfforphds.com/tax, there are articles there about both of these issues. But my point is just when you have fellowship income and you’re under the age of 24, sometimes it can have these weird effects of making you pay a lot more in tax than you would normally if you were over the age of 24. So, to me that’s just another factor that I want to throw in there of, “Hey, if you’re under the age of 24, maybe consider delaying a year until you actually turn 24, and then take the fellowship if your alternative is having a research assistantship instead, which is W2 income, which is treated somewhat differently tax-wise. So, more details about that if you want to talk with me about it or read about it more, but I’ll just throw that in there for those of you on the younger side.

25% TAships Possible During GRFP

11:00 Kelsey: That’s a really good point. Oh, and I actually thought of one more thing regarding TAships, which I think a lot of people don’t know–or I didn’t realize at first–is that it usually is possible to get a 25% TAship while getting the GRFP. So, that might be an option if that will satisfy your degree requirement. And the other benefit is that you actually get paid on top of the GRFP additional money for the 25% TAship, and that’s allowed within the GRFP rules. So, it’s just something to consider. I did that for one quarter, and it was really nice.

Financial and Career Opportunities for GRFP Recipients

11:34 Emily: Yeah, I love hearing all of these different ideas. Okay. So again, speaking with a new fellowship recipient, what are some of the financial and career opportunities that come along with receiving the fellowship?

11:46 Kelsey: Well, probably the biggest one is just the fact that the stipend is a lot higher than most standard stipends offered for grad students. And so, that makes a really big difference to be able to afford cost of living, which has really gone up in a lot of places, especially in California. I’m sure other places as well. And then another benefit for your career is that winning one fellowship usually leads to winning additional fellowships and awards. And I think one reason for this is that the reviewers look at your CV and they’re like impressed that you have the GRFP so they are more likely to give you these other awards. And then the other reason is that I think that just the practice of writing the fellowship in grants, you become better and better at it. And so you’re able to write more convincing applications.

12:35 Kelsey: So, for me personally, after I got the GRFP, I won research funds from UC Davis. I got like three or four travel awards for conferences. I got the USDA predoctoral fellowship. And then I also applied for a Dean’s award for mentorship and got that. And I’m pretty sure the GRFP helped me a lot in that. And also writing these and teaching classes on fellowship writing probably helped me also become a lot more convincing. So, that’s a huge benefit for your career.

Get the Snowball Rolling, Start Early

13:05 Emily: I’ll actually add in there that I think it makes a ton of sense, like what you’re doing with your course, or the students in your course, it makes a ton of sense to focus and put so much effort into these really early funding applications like before you enter graduate school in your first, maybe second year of graduate school. You don’t have to say, “Okay, this is going to be my bar for every application I’ll ever do.” But as you said, if you can get that snowball rolling of receiving awards right away in the start, it does make the rest of it easier and is very impressive. It’s a wonderful fellowship to win. So, I’ll just say, go take Kelsey’s course. Or somebody else’s. Just get these resources and make sure that you are putting as much effort as you possibly can into these early applications. And like you said, the skill of writing the application itself, that is something that carries over into the future. So, yeah, when you have your time before you’re deep into your research and you’re still doing your classes or whatever, make time for this. Make it almost like a course in your schedule in that semester that you’re applying. Because it really is worthwhile to put in the effort.

14:08 Kelsey: Yeah. And a lot of people don’t want to apply, for example, because they just don’t think they’re going to get it, for various reasons. And I encourage them just to do it anyways as an exercise. And usually by the end of it, I always ask my students during the course evaluation if they thought that the class was worth it, even if they don’t get the fellowship. And like 95% of them say yes, just because it’s the skill, it’s writing about your research. A lot of times if you’re actually writing about your real research, you can use that GRFP application in other grants or your qualifying exams, which is really useful. So yeah, definitely a good skill to get and to get early. And then if you get it, like you said, it’s just a snowball effect.

Internship and International Travel Opportunities

14:54 Kelsey: I was going to mention just the internship and the international travel opportunities that GRFP fellows are able to apply for. So, I didn’t actually apply to either of these, but I have known people who have done the Graduate Research Opportunities Worldwide, the GROW program, and that just allows you to do like three to six months research abroad. You identify a host in another country and then you apply for it. And I heard it has around like a 50% acceptance rate, and they fully fund your travel and living expenses abroad. So, it’s just a nice way to kind of get some international experience, maybe learn a new technique, or use some instrumentation that’s not available at your home lab. And it’s just another fellowship you can add to your CV.

15:49 Emily: I’m also thinking that that’s just an incredible thing to be able to talk about in future job interviews, or whatever. Just having a different kind of experience that broke up graduate school a little bit. Expanding your network, you know, seeing things from another perspective. It’s in the name, right? It’s a real growth opportunity.

Even Without the GRFP, Talk to Your PI About Collaborations

16:08 Kelsey: And I mean, something to consider too is even if you don’t have the GRFP, if your PI does have enough funding, this is something you could probably set up on your own basically doing research in a collaborator’s lab internationally or in the U.S. So, I think it’s something to consider just to diversify the experience that you get and you can talk to your PI about it and it might be something they go for.

16:34 Emily: Yeah. I know actually one of my labmates while I was in graduate school did the Whitaker Fellowship. I don’t know how subject matter-specific that is, but he was able to spend nine months in East Asia. And yeah, I think it was a great experience.

16:48 Kelsey: Yeah. The NSF has another one too that I think is open to all, not just GRFP fellows, that’s just a travel abroad or research abroad fellowship. There are other ones out there too. So, it’s definitely something to look out for and apply for.

17:03 Emily: Okay. So, that was the GROW fellowship, but there’s another internship program, right?

17:07 Kelsey: Yeah. So, there’s the GRIP program. So, it’s the Graduate Research Internship Program, and that one you do research at a federal agency. I don’t know all the ones, but I know like you can do research in the Smithsonian for example, any of the agencies, basically the governmental agencies.

17:28 Emily: That also sounds like an incredible career opportunity.

17:32 Kelsey: Especially if you want to go into government research. You know, I think that nowadays more and more graduate students are realizing that the academic path of being a professor–there are so few opportunities for that and so many graduate students trying to get those, that a lot of people are considering alternative career paths like industry or government jobs. I had a lot of people who took my class who really wanted their end goal to be to work for a governmental agency and do research in that respect. And actually the NSF really encourages that for GRP applicants. So, I tell people, if that’s their career goal, to write about that in their application.

Timing of Internship Programs During Fellowship

18:16 Emily: Just to add on to that, I think having outside work experience before you actually finish your PhD is incredible for finding whatever your next job is. Even if you decide to stay within academia. Again, it gives you multiple perspectives, broader network. But a question I have about the internship programs, is that something that you have to do during your funded years or is that something you can still do on the remaining two years?

18:39 Kelsey: Yeah, that’s a good question. So, both the international program–the GROW program–and the internship program can be done while you’re on reserve. So, while you’re not receiving the stipend. So, it has to be done within the five-year period of when you first start the fellowship. But yeah, that’s really one of the benefits. And I think the GROW is really something you’d probably want to do towards the end of your graduate career–probably both programs–because one, it’s additional funding? So, maybe your GRFP funding has run out and now you can get some more funding for your travel and living expenses.

Design a Custom Internship

19:16 Kelsey: And then the other thing is that you really are probably better able to identify a lab or a governmental agency that would be a right fit for your research at that point. And actually something else regarding internships is, you know, there was a program at UC Davis that’s like the biotechnology program. It’s like a degree, an “emphasis,” and they require that you do an internship as part of the emphasis. But one thing I realized is, even if you’re not in a program like that or even if you’re not a GRFP fellow, you can a lot of times arrange an internship in industry towards the end of your graduate career. Potentially, the company will fund you to do that, too. And it can be a really good chance to explore these career opportunities.

20:07 Kelsey: A lot of times, if you end up doing a good job, the company will be really excited to hire you and it kind of lets you trial industry or trial a company and maybe contribute something else to your research, too. So, I just have realized that a lot of times you can kind of design your own programs. Obviously, you want your advisor to be on board with this, but a lot of times, especially if you can get funding from the company, then they’re going to be very happy about that and they also want to see you grow in your career. So, I think that’s something that people should consider. Even if you’re not a fellow or even if you don’t have an official program, you can kind of craft your own internships during graduate school.

20:51 Emily: Yeah, I totally agree. I think it’s one of the most powerful things you can do for your career, prior to finishing your PhD, while you know you have something to go back to after the summer ends, or whatever. I actually did a science policy fellowship that was three months, the Christine Mirzayan policy fellowship. It’s at the National Academies. And I did it after I finished my PhD. I applied basically around the same time that I was defending, but it’s open to current graduate students as well. In retrospect, sort of like you, I wish I had done it while I was still in my program and I think it would have informed some of the decisions that I made as I was finishing up. So, internships, great for everyone. I know not everyone thinks that internships are for them. I’m from an engineering field, so it’s sort of more normal to think about doing an internship. And of course in computer science or similar fields like that. But I think it’s expanding and it should expand more to other disciplines where it hasn’t been a traditional part of the PhD path.

Commercial

21:50 Emily: Hey social distancers, Emily here. I hope you’re doing okay. It took a few weeks, but I think I have my bearings about me in my new normal. There is a lot of uncertainty and fear right now about our public and personal health and our economy. I would like to help you feel more secure in your personal finances and plan and prepare for whatever financial future may come. You can schedule a free 15-minute call with me at pfforphds.com/coaching to determine if financial coaching with me is right for you at this time. I hope you will reach out, if only to speak with someone new for a few minutes. Take care. Now, back to our interview.

Financial Advice for Fellowship Recipients

22:36 Emily: So, let’s broaden this line of questioning a little bit. Not just for people who have just received the NSF GRFP, but people who have received it in previous years who are still receiving that higher stipend. And maybe other people who’ve received outside fellowships that also have some stipend augmentation based on that. What’s your financial advice for people who have received one of these lucrative outside fellowships?

File Estimated Quarterly Taxes (NOT Yearly)

23:00 Kelsey: Yeah, so I think the biggest pieces of advice I have are regarding taxes and savings. And so, the thing you should do immediately is start to file your taxes quarterly instead of yearly. And you can estimate how much taxes you’re going to have to pay quarterly so you can start to save up. My personal sob story is that I did not do this the first year and I ended up filing my taxes and I owed about $5,000, which I didn’t have saved up. So, I ended up having to do a payment plan with the IRS which charges interest, actually quite a bit of interest. So, I ended up having to pay way more in taxes than I would have if I had just started filing quarterly. So, do that right away. I know taxes are not fun, but it’s actually not too hard to calculate if you’re only getting the stipend income, and that’s way better than having to owe it.

23:56 Emily: Actually, let me pause there because this is one of my big areas, right? It’s tax for fellowship recipients. So, was that $5,000 just the IRS or was that split between California and federal?

24:08 Kelsey: Oh, yeah, it was California and federal, split.

24:10 Emily: Okay. That’s within the more reasonable realm. Okay. Yeah, definitely. I mean I’ve actually had, I think, two other people interviewed on the podcast who have also set up payment plans with the IRS based on this exact same situation. So, this is not at all uncommon, and it’s one of my big areas of focus is to get this information in front of new fellowship recipients. No longer is income tax–this is the case at almost all universities–no longer is income tax going to be automatically taken out of your paychecks. It’s something you now have to take responsibility for, like you were just saying.

Personal Finance for PhDs Tax Center

24:43 Emily: So, most likely you are going to be required to pay quarterly estimated tax. And I have a ton of materials about this. Again, if you go to pfforphds.com/tax there’s an article there. And in particular, I have actually a workshop for people in just this exact situation. If you go to pfforphds.com/qetax for quarterly estimated tax, it will forward you to my most recent workshop. And probably similar to yours, Kelsey, I have prerecorded videos for that, and I also do live Q&A calls to help people with questions as they come up through tax season. So, just because of when we’re recording this though, I want to add in that part of the response to the coronavirus crisis actually has been to delay the first, like the Q1 payment for 2020. So, just like with your annual tax return, right now, this year in 2020, it’s no longer April 15th, but rather it’s July 15th.

25:34 Emily: So, for those fellows out there, you have a little bit extra time to figure out what’s going on in 2020 regarding your quarterly estimated tax and making those payments. So, the first payment as of this recording is actually due [July] 15th, which is the quarter two payment. But yeah, totally a common story, like you were just saying, Kelsey, is just to not realize the change that had gone on with your income tax and catching up with it when you actually file your annual return and realizing, “Gosh, now I have all this money that I owe to the IRS.” So, how did that payment plan go for you? Like was the increase in stipend more manageable, or what were your tips around saving I guess?

Start Saving Immediately

26:11 Kelsey: Yeah, so I think I’m still paying off some of my taxes monthly for that. So, anyway, just do it ahead of time and you won’t have to worry about it. And then in terms of saving, the other thing is that, because the GRFP stipend is a lot higher than the normal grad student stipend, you can kind of get used to a certain style of living. Like you’re able to go out to eat more or buy more expensive groceries. And then as soon as the stipend stops, it can be kind of a shock. So, what I’d advise doing is actually just start saving almost immediately. And I use automatic monthly withdrawals to a mutual fund. And the benefit there is I don’t see the money. Like it’s just automatic.

27:02 Kelsey: The savings are out of sight, out of mind. And then when I actually really need it I can go and be like, “Okay, here’s how much I have.” And I’ve done that a few times. I used that to fund a vacation to Europe. And so I advise just like setting something up right away and make sure you can’t see the money. Save up for when the GRFP ends, and also just because you have all this extra money that you wouldn’t be getting otherwise, so you might as well save part of it and not just spend it all.

27:33 Emily: Yeah, I definitely echo what you’re saying. And I think especially where you’re living, it’s a high cost of living area. It’s probably already challenging to live just on that GRFP stipend and it’s certainly less than we’d be making if you were having a regular job. But, think about your peers who are somehow probably managing to survive, hopefully without debt, on that lower stipend level and see if you can maybe keep your fixed expenses, like your housing, your transportation, at that lower level, so that if your income does drop after the fellowship ends, you don’t have to move or you don’t have to sell your car. Or you can adjust the groceries and adjust the restaurant spending. And it’s much easier and more palatable than having to go through those more major upheavals. So, I totally agree with what you’re saying.

Stipend Negotiations and Bonuses for Fellowship Recipients

28:19 Emily: So, something I know that some fellowship recipients do–and it sounds like maybe you didn’t or maybe it wasn’t possible for you–is that once they know that they’re receiving the fellowship, they actually negotiate to have their stipend stay at that fellowship level. Even after it ends, instead of going back down to the baseline level. Or, alternatively, sometimes programs give out one-time bonuses to fellowship winners. Have you heard about that or have any experience in that area?

28:47 Kelsey: It’s something I thought about asking my PI, because after the fellowship ended, I was struggling a little bit, financially. I ended up doing the 25% TAship to recover that income. But I do think that, I mean it’s really going to depend on your PI and their sources of funding, but it is something that is possible, potentially.

29:15 Emily: Yeah. I think it’s kind of a “no harm in asking” situation. And actually, if you happen to receive this fellowship when you’re not yet committed to a program, so prior to starting your first year of graduate school, that is something I would take to every program that you’re heavily, heavily considering, saying, “Okay, I got this fellowship. Can you augment, can you extend the guarantee?” Like what more negotiation room is there now that you’re bringing in all this money for them, right?

29:46 Kelsey: I mean, exactly. You’re bringing in just about a hundred thousand in your stipend dollars alone, not to mention tuition and fees. So, it is pretty lucrative. It’s lucrative for a program and a lab to want to accept you because you’re coming in with all this money and you just asking like, “Oh hey, can I get an extra $5,000 a year?” When you’re bringing in $100,000, it’s really still a pretty good deal for them. So, I definitely encourage people to do it. I’d love to hear if anyone is successful at this.

Details on Kelsey’s NSF GRFP Course

30:17 Emily: Yeah, I always want to hear negotiation stories. Absolutely. Email or tweet me those. So, let’s hear more about your course and the content that you create there. You said the best place to find out more about that is your Twitter, could you repeat your handle?

30:34 Kelsey: Sure. It’s @ K L S Y W D (@klsywd). So, it’s my name without any vowels. It’s pronounced Kelsey Wood.

30:41 Emily: So, tell us a little bit more about the structure of the course. I know you’ve mentioned this a little bit upfront, but last year for example, you ran it between what month and what month and you know, what goes on in that time period?

30:53 Kelsey: Yeah, so one of my biggest pieces of advice for the GRFP is to start it early. So, it’s due in like October now. And if you’re on the quarter system, like UC Davis, classes start at the end of September. So, it’s basically due during the first month of classes and it’s also your first month of grad school. So, you’re either just starting in a lab or doing rotations, and that month is just crazy. So, if you don’t start the fellowship early, it’s going to be really hard to do it all and do it well. So, my course actually starts in August, so then you have kind of a full month to start to think about stuff, outline it.

31:35 Kelsey: And then you have September to really refine it before classes start. And then we do all the final drafting and editing in October. So yeah, my course is a three-month thing. And that’s one of the benefits of doing it online. I wasn’t able to start in August at UC Davis because not everyone had come to Davis yet because it was still summer. So, doing it online, I was able to get people just at least starting to think about it and getting ideas rolling. And so, what I do is I had four different webinars on different topics. So, I covered the two NSF criteria, which are intellectual merit and broader impacts. Basically like a full 45-minute webinar on both of those topics. And I think that’s really important because especially the broader impacts one is really confusing to a lot of people.

Focus on Broader Impacts, Know Your Audience

32:27 Kelsey: It’s something that you pretty much probably have never heard of until the NSF fellowship. And it’s a really important part of that fellowship, too. So, I really emphasize the importance of that. And also, it’s really important that you get broader impacts experience before you apply. And if you’re starting the application early or even people who are listening to this, thinking about applying for next year, should basically right now find some activity that you can do that you can write about in your broader impacts section. So, volunteering, outreach, teaching, et cetera. Because if you don’t have any experience, you’re not going to get it. And then I also do a webinar on writing tips. The biggest one that I’ve learned in all my years of writing is probably just like really knowing your audience and writing for them.

33:21 Kelsey: So, you really want to just imagine who’s reading it and who they want to fund, and you really want to just be that person that they want to fund. I help people do that in their essays. Something else that’s really interesting, and it actually might be a regional difference, is in the way that you want to sell yourself in these essays. So, a lot of people are really understated or humble, and I’m like, “No, you have got to really come off like a rock star and show off all the awesome things that you’ve done.” And apparently, somebody told me that that’s actually frowned upon in the UK or in Europe to do that in your grants.

34:10 Kelsey: But in the U.S., at least, it seems to be more popular or more of a winning technique. And so, the other part of the course is that I read people’s essays and give them a ton of tips and just help them write it and rewrite it to just have a better chance of getting the fellowship. And I also set up peer editing groups, too. And I do think that that’s something you want to do, if you take a class or not. Just find somebody who, especially who’s experienced with the NSF, and have them read your proposal and give you feedback. So, for example, when I applied, I was really lucky to have a former NSF reviewer read my application and give me feedback. And he pretty much destroyed my initial draft. It was red everywhere and he’s like, “Get to the point. Be more concise. This is too vague.” And so, I kind of have internalized his feedback and I use that now when I’m editing people’s essays.

35:13 Emily: Yeah, that sounds incredible. Thanks so much for telling us about the course. And were there any other tips you wanted to add in? I know you just gave several already, but any others?

35:23 Kelsey: I guess the last one would also just be to read a lot of example essays, too, for inspiration. And there are a lot out there. I have my own personal collection. I actually have quite a few in my personal collection that I share with people in the course. And then the ones that are okay to share publicly, I’ll probably be posting on my Twitter or on my website once I get that up.

Best Financial Advice for Early-Career PhDs

35:46 Emily: Yeah, that sounds great. Well, Kelsey, thank you so much for joining me for the interview today. And final question that I ask of all my guests is what is your best financial advice for another early-career PhD?

35:59 Kelsey: Well, I think the number one is to apply for fellowships and you know, cast a wide net and apply for anything that you’re eligible for, pretty much. I think it’s totally worth it. I have a quote that’s from that previous grad student who helped with the NSF workshop, which is, “You win 0% of the fellowships you don’t apply for.” So, I think it’s worth it. You can do it. And I guess the other thing is that I think it is important to consider the cost of living and the stipend amount when you are choosing a graduate school. I don’t know. This wasn’t really made apparent to me. And you know, you’re just like, “Oh no, you just choose the best school or the best lab.” But there is kind of a range in stipends across the U.S. and cost of living. So, I think it’s something to really consider because your finances are a part of your happiness in grad school. So, apply for fellowships, and consider that.

36:58 Emily: Totally, totally concur. Absolutely. Well, Kelsey, thank you so much for joining me today and telling us more about these decisions that come up for GRFP recipients and your own experience and about this fabulous course. Thank you.

37:10 Kelsey: Yeah. Thank you.

Outtro

37:12 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 Podington Bear from the free music archive and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

This Grad Student Is on the Lowest Rung of the Pay Ladder and Side Hustles to Compensate

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In this episode, Emily interviews Sarah ‘Frankie’ Frank, a grad student in sociology at the University of Wisconsin-Madison. Frankie describes the hierarchy of grad student positions at UW; the positions she’s primarily held over her years in grad school, teaching assistantships, are on the lowest level in terms of hourly pay. To make ends meet, Frankie side hustles doing activities that she truly loves, chiefly tutoring and baking. She concludes the interview with excellent advice for a grad student who wants and needs to do it all.

Links Mentioned in the Episode

Teaser

00:00 Frankie: You feel so subjected to whatever the institution tells you you’re worth–what you can do, what you can’t do–and the honest truth is that you have a little bit of bartering that you can negotiate. If you are in a position that you can make that kind of offer, you should because it’s possible that they find that money somewhere.

Intro

00:22 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 five, episode six, and today my guest is Sarah Frank who goes by Frankie, a grad student in sociology at the University of Wisconsin-Madison. Throughout most of grad school, Frankie has been a teaching assistant, a position that receives the lowest hourly pay rate at her university. We discuss the various types of positions a grad student might have and the advantages of being paid through a fellowship or research assistantship. Frankie’s $15,000 per year stipend isn’t enough to make ends meet, so she is engaged in many side hustles, the best of which were tutoring NCAA student athletes and her cake business. You won’t want to miss the advice Frankie gives at the end of the interview to grad students who are juggling a lot of responsibilities and activities at once. Without further ado, here’s my interview with Frankie.

Will You Please Introduce Yourself Further?

01:22 Emily: I’m delighted to be joined today on the podcast by Sarah Frank who goes by Frankie. And we’re going to be talking today about TA-ing, having a teaching assistantship and how that compares to other jobs you might have on campus as a graduate student. So, Frankie, thank you so much for joining me today.

01:38 Frankie: Thank you, Emily. I really am excited to be here. I feel honored.

01:42 Emily: Oh, well that’s lovely to hear. Would you please tell us a little bit more about yourself, you know, where you go to school and so forth?

01:48 Frankie: Yeah. So, my name is Frankie. I am a PhD candidate and a lecturer now at the University of Wisconsin-Madison in the Department of Sociology and in the Department of Legal Studies. I’ve previously spent three years as a teaching assistant and lecturer. I’ve also worked for athletics. And yeah, I think I have about two years to go before I have a job somewhere, hopefully.

02:10 Emily: Sounds good. So, you’ve already mentioned you’ve had a few different positions, so let’s talk about what your current position is and what your pay is right now.

02:20 Frankie: Yeah, so current position for lecturers, right now it depends on how many students will be enrolled in the course, but at a 33% appointmentship for one course in the fall, I’ll make about $7,000. So, over the whole course of the year, that can fluctuate to about a $15,000 baseline salary. And then adding in other jobs thereafter, I don’t make more than about $22,000 a year.

Level of Pay Variation at UW-Madison

02:45 Emily: Okay. So, that gives us a good idea of the range. So at a 33% appointment, if you did that approximately for the whole year, it would be about $15 K. Plus, your side hustle and such, have other jobs on top of that, of course, to make that work, naturally. Okay. And how has that level of pay varied over your time in graduate school?

03:06 Frankie: Yeah. So, when I first came as a TA in 2016, University of Wisconsin had one of the lowest pay rates for TAs. So, in our tiers of graduate studentship, being a teaching assistant was at the very lowest, at about 15 and a half thousand dollars per year at a 50% appointmentship. And then the union here, there’s a teaching assistant union that put a lot of pressure on our administration to raise that salary. So, we have gotten substantial raises. And then just this year, lecturers also got another bit of a raise. So, it has increased a little bit as we’ve gone on. But we still pay student fees. So, we pay segregated student fees that go into like student clubs and student rec centers that are mostly undergraduate. So, we lose a little bit of our salary there to the tune of six or $700 each semester that you’re taking full load.

03:55 Emily: Yeah, that is a huge bite. Okay. So, I just want to add in like a couple of notes there for the listener. So, if you want to see what other people are being paid at Wisconsin or in other places, one of the websites I run is phdstipends.com. So, go there and check out what TAs and RAs and other types of grad students, fellows are being paid in various places and enter your own data. So, there are a couple of things you mentioned I want to follow up on. You mentioned that TA pay was the lowest among the different sort of options, the way graduate students might be paid. So, what are those other options at Wisconsin?

04:31 Frankie: So, typically the lowest tier would be teaching assistants. The next tier up would be research assistant, and the tier after that would be project assistant. And then the top tier is obviously fellowship. So, if you’re on fellowship, you make the most. After the raise, teaching assistant and research assistant are more in line with one another. So, this is the first year that they’re really in line.

04:54 Emily: Yeah. That was something curious that you said that I wasn’t really sure about, that TAs and RAs had been paid differently. Now you mentioned that the union was just a TAs union, or does it also cover RAs?

05:09 Frankie: Right, so it’s strange. It’s called the Teaching Assistant Association, so it would sound like it’s just for TA’s, but it’s actually for all graduate student workers. So, it includes RAs, PAs, and it includes people on fellowship actually as well. So, graduate student workers generally.

What is a Project Assistant?

05:23 Emily: Okay. That’s really interesting to hear. I would love to follow up more on that actually with you, but I actually have multiple episodes scheduled with other people talking specifically about unionization movements at their own university. So, I’m excited to dive into that more in other episodes. But I’ve never heard of this job title, project assistant before. Can you tell me what that is?

05:43 Frankie: So, there are research assistants and project assistants, and it depends wholly on the grant that a supervising faculty applied for or the amount of responsibility or ownership that the student is taking over the project. In the mix, there is something called a traineeship, which seems to be blended with both project assistant and research assistant. I think it’s a matter of just titles, honestly. Because I’ve heard very different projects, very different gamuts, it depends on the department, what they call a traineeship versus a research assistant or project assistant. To me it sounds like, as far as hours worked, I know that teaching assistants have the most, and then research assistants have the second most followed by project assistants and trainees, and then fellows should have the least amount of work. They’re not required to do any specific work activities.

06:34 Emily: Okay. So, you mentioned a 50% appointment for a TA position, so that’s ostensibly 20 hours per week, is that right?

06:42 Frankie: Yeah, it’s supposed to be 20 hours a week. Yeah.

06:43 Emily: Yeah. Well, we all know how that really goes. So, what is it for RAs and PAs then? Do you know?

06:49 Frankie: They’re supposed to be 20 hours a week as well.

06:52 Emily: But in reality…

06:54 Frankie: Yeah, so the common thread is people know that RAs and PAs don’t work that much. They usually do closer to like 10 or 15 hours a week, if that.

RA-ing Does Not Always = Dissertation Work

07:04 Emily: Okay. So, this is something that I and other people get a little bit confused or conflate together. So, are you talking about for an RA position, a research assistantship, is that distinct from the student’s dissertation work?

07:22 Frankie: So, this is a really good question. It can be. It may be that’s the way you are earning your income, working on a supervising professor’s work and using their data. And depending on your relationship with that professor or what you want to do for your dissertation, their data might be your dissertation. And in some cases it is, but in other cases it’s not. So, the way that those things help you out in the long run dissertation-wise varies. The variation is incredibly wide.

07:52 Emily: Yeah. Because it’s always seemed to me–so, I come from a STEM field, biomedical engineering. And so what was common in my field and others that I observed in STEM is that most of the time most people had RA positions, and their RA work was the same as their dissertation work. So, it was like, really, once your classes were done and so forth, your full-time efforts could go towards your dissertation. And, you were also being paid off of the grant to do that work. Now, that means you don’t have as much freedom in what you do because it depends on what the grant is, of course. And so it’s all worked out between you and your advisor. I do think that it was more rare in my observation to see someone have an RA position that was different from their dissertation work. But it sounds like that is maybe more common where you are. And I’m sure this is very like field-dependent, right?

08:40 Frankie: So, in sociology, because someone might be working on some specific project long-term, or like a demographic project that takes many years of data collection, people might use some part of a dataset. Or you know, they’re becoming really familiar with the general science survey through their research assistantship, and then they use another element for their dissertation. Or, they end up meeting their professor who will chair their dissertation based on that project or find out who shouldn’t be their advisor via those kinds of projects. But I mean it does vary incredibly widely. I have heard that sociology is one of the few disciplines where it’s not a direct relationship, like you are working on what you will dissertate on. But I know very few people who are earning their income on exactly what they’re dissertating on. They’re usually right next to it somehow. Particularly, in sociology here we have demography. So, you have a lot of quantitative people working together. As far as qualitative researchers, not one of them have I heard is working on the same data set that they will use in their dissertation unless they get some sort of fellowship or specialty grant or something or have access to a professor’s previously collected research.

Perspective on Assistantship Tiers

09:51 Emily: I see. This is really interesting for me to hear because it’s such a different field than where I’m coming from. So, it’s good for me to learn about this. So, what I’ve always found as the important distinction, let’s say as a prospective graduate student, when you’re looking at different offers and different programs, I’ve always found an important distinction to be what percentage of your time is going to be available for you to work on your dissertation versus doing some other thing. You know, classes, TA-ing, RA-ing not for your dissertation, whatever that might be. And I would think that the advantage would be going towards programs where you can put a higher percentage of your time towards your own dissertation work. Now, that’s not to say you can’t find value from these other activities, but I don’t know, that’s kind of what my thought has been. Do you agree with that or what’s your perspective on that?

10:40 Frankie: So, for me and where I’ve been located, the more lucrative offers coming into graduate school are the ones that have more money or the fellowships. So, it’s sort of like you have to be higher ranked I suppose, or like at a higher admit level. So, then you have to take classes, right? But you can only take so many classes if you’re a teaching assistant, especially for the first time. And you know you have the highest workload, but you have the lowest pay, so you have to take on more classes or you just have to stay in graduate school longer. So, the system seemed really backwards to me when I first got here. Like, why would TAs be your lower tier? Or like, you know, not your highest admit student. Not that the people who teach are necessarily not as smart or anything, but the grant money is really in that quantitative data that the demographers are collecting.

11:33 Frankie: But then you have to work really hard, possibly more years while you’re taking classes. And at the same time, the expectation to publish is exactly the same across the board. And some people are given data from professors or they have quantitative data, but then you have qualitative people who have to conduct their own studies from the ground. So, IRB approval, to recruitment, to interviewing. And so, the people who are teaching have to do far more hours, far more work, but they’re also the least paid, so they may also have to take on these outside jobs. So, I think that those are the people who I see being the most stressed out. I think that they have the highest turnover as far as dropout rates as well. I think it’s just incredibly stressful to have little money and not enough time to accomplish every single thing you’re supposed to accomplish. At the same time, you’re supposed to be applying for every grant in the book while you’re doing all of this.

12:20 Emily: Yeah, it does sound to me like we’re on the same page. If you can land a fellowship, either an outside fellowship or something that’s provided by your university or whatever, that’s going to free you from these other responsibilities, it’s going to pay you better and as many years as you can do that for, that’s amazing. Minimize your TA responsibilities. If that is the thing that has the highest workload at your university, it sounds like it’s the case for you. Not to say that teaching experience isn’t valuable. Maybe you need to have that for moving onto your next stage, but you don’t necessarily want to do that every single semester. That’s a lot of teaching. Anyway, so really glad to hear your perspective on those things. So, it’s a very complex issue, especially for prospective graduate students who may not be that familiar with the academic system.

Determine the Standard Offer in Your Field Ahead of Time

13:01 Emily: I mean, I’ve been through graduate school and I’m still struggling to understand the structure that you’re talking about, you know, in the fields that you come from. So, this is just kind of a plug to do as much field-specific research as you possibly can. Well, I actually wrote an article about this a little while ago. It was titled something like “before admission season starts, determine what a standard offer in your field is.” So, is a standard offer going to be, “Okay, you’re going to TA the entire time”? Or is a standard offer, “Well, you’ll TA a couple semesters and then you’ll be an RA and if you want a fellowship that’s cool”? Like, what is that standard? So, then you can know if any individual offer you receive is at the standard, a good offer, a really not good offer. It’s just something you have to do your homework on before you even start like looking at those offers, and it’s very difficult. It’s very field-specific. So, I’m really glad to hear from you about that.

13:50 Frankie: I was going to say I feel really lucky, actually. So, for two reasons. One, my program decided to fully fund five years. So, students who come to sociology at UW Madison will be funded for at least five years. After that, they cannot guarantee you funding. But the second piece is I came here to teach. I’m becoming a professor to teach, which is not always common at an R1. I have been discouraged from teaching multiple times, but I think I would have left graduate school without it. So, I feel really lucky that it’s in my heart because it makes it worth it. It’s still very challenging, but I feel luckier in some ways than I know other folks in other universities.

A Deep Dive into Frankie’s Side Hustles

14:24 Emily: Yeah, well it totally makes sense. If it’s part of your career path and you want to go that direction, it’s great to have that experience and for you to get better at your own craft before you move on to that next stage. So, totally valuable in that sense. For people who don’t want to stay in teaching, it’s something probably to be minimized. Yeah. So, are you ready to talk about your side hustles that you have to put on top of this graduate student stipend to make it?

Tutoring for the Department of Athletics

14:49 Frankie: Yeah. So, the first one I did was I worked for the NCAA, the Department of Athletics at UW Madison. Of course, this is a big school for athletics, so you might think that we’re the only place with money, but I actually did this in undergrad, too. And the money tends to be excellent, particularly if you already have your undergraduate degree, they can pay you more. And so this is to the tune of about $20 an hour for group tutoring, closer to $18 for single tutoring sessions. And you make your own schedule. It’s very flexible. You only tutor what you want to. It was really fun. I loved my students. Student-athletes are highly exploited by universities like Wisconsin. And so it was awesome to build relationships with them. And I mean, I absolutely loved that job. When I gave it up to finish my Masters, I was very sad. But that was probably my favorite side gig, and I recommend it to literally everyone. If you want to pick up extra tutoring hours, the Department of Athletics wherever you are has money. And they have a need for sure.

15:48 Emily: That is a great tip. I’m always really curious when people talk about having side gigs on campus. How does that play with your stipend? Were you actually a W2 employee or was it like an independent contractor position?

Self-Employment: Frankie’s Cupcakes

16:01 Frankie: Great question. So, it’s still a W2. So, you can only work 75%. That means that I had a cap on how many hours I could work at the same time as being a TA. So, then comes in my other side hustle. In the last 18 months or so, I’ve started a cupcake company. So, I now sell cupcakes and cakes to everyone in the Madison or surrounding area here in Wisconsin. It started as a self-care hobby and then I got good enough that people would start paying me. So, now that’s my side hustle and also my hobby and self-care at the same time.

16:35 Emily: That is so much fun. What is your business name? Do you have an Instagram?

16:39 Frankie: I do have an Instagram. You can find us @frankies.cupcakes, which is the name, as well. We just went to the state fair yesterday to find out that I won a bunch of first place ribbons. So, that’s feeling good. Wisconsin state fair representing. But so yeah, you can find me. It’s Frankie’s Cupcakes. We have a Facebook and an Instagram.

16:57 Emily: That’s awesome. And so that, of course, is your own business. That’s total independent, not even a contractor. It’s just self-employment kind of stuff. So, I have this framework for side hustles that I like to talk about, which is one type advances your career. That could be like the teaching or tutoring for you, for example. Another type is just something you really enjoy doing that you can monetize. That is exactly this cupcake thing. And then there’s stuff you don’t like to do so much, but it gives you money. So, you do it. That’s a third category. And then the fourth one is passive income, which is a whole other can of worms. So, I love to hear that the cupcake thing sort of hits different satisfaction areas in your life for you. So, that’s awesome to hear. Have you pursued any other side hustles besides those two?

Arbitrage via Poshmark

17:42 Frankie: Well, so as far as passive income, actually, there’s an application called Poshmark, which lots of young people are using and they’re installing themselves on college campuses. And I’ve made a couple of thousand dollars selling stuff on Poshmark. Homewares, jewelry, designer bags, whatever. I’ll go to Goodwill, buy something designer that someone donated and then sell it on Poshmark and keep the profit. Or if I grow out of something or gain or lose weight, which you do in graduate school, it’s a great way to replace/cycle out your clothing. But also make some good money, especially if you come across anything valuable.

18:16 Emily: So, that’s a cool side hustle. Anything else you’ve done?

GRE Tutoring and College Application Assistance

18:20 Frankie: I know that I’ve done like tutoring on the side. Or like, unofficial tutoring for entrance exams, GREs, college application essays, things like that. For sure.

18:29 Emily: Yeah, that’s another really accessible one for graduate students because presumably, you got into graduate school, so you’re probably good at taking tests. You may be able to help other people with that.

Commercial

18:43 Emily: Emily here for a brief interlude. Tax season is upon us, and while no one loves this time of year, it’s particularly difficult for post-bac fellows, funded grad students, and postdoc fellows. Even professional tax preparers are often thrown for a loop by our unique tax situation. And don’t get me started on tax software. I provide tons of support at this time of year for PhD trainees preparing their tax returns, from free articles and videos, to paid at-your-own-pace workshops, to live seminars and webinars for universities and research institutes. The best place to go to check out all of this material is pfforphds.com/tax. That’s P F F O R P H D S.com/T A X. Don’t struggle through tax season on your own. Visit my website for the exact information you need in the most efficient form available. Now, back to the interview.

Prioritizing Valuable Side Hustles

19:46 Emily: When you are looking for a side hustle, what’s something that has really brought value to your life? In terms of like, what’s a really good pro of one of your side hustles? Where you’re like, “Yeah, this was a really great reason to be pursuing this particular one.” Or maybe, another one, “Hey, I stopped pursuing this side hustle because it turns out it wasn’t serving me that well for this reason.”

20:05 Frankie: Yeah. When I started with Poshmark, it was working really well for a while, but then it ended up being really time-consuming, and it’s not going to add anything to my resume. But tutoring for athletics–and then I ended up becoming a sociology and psychology tutor trainer, so I would help train other people–that’s going to look great on my resume. I ended up getting tutor-certified, and they pay for your training. So, they’re paying you to put lines on your resume. So, that ended up being wonderful. I wrote a couple of pieces about athletes and education. I ended up meeting some amazing people. It was great to meet people outside of my department. Not that I don’t love the people in my department, but it is nice to meet people who are not in the same building all the time with you who are also in graduate school. So, it was both personal and professional.

20:49 Frankie: Like what is it that you’re spending your time on that is good for you, your resume or your CV? But also, whether it’s because it’s something that you enjoy personally and the people you really like, or because you’re like, “Well this is a good way to make money that doesn’t like break my heart or soul somehow,” or like isn’t drawing you emotionally. The emotional drainage or some of the side hustles can be extreme. So, I knew that and needed to keep my emotional energy spent kind of low because I was spending so much of it teaching. I spend so much of it teaching. So, the cake thing is pretty much something I do by myself. And so it’s really nice because it’s something I pretty much do alone. You know, listen to a podcast or something on the radio and make cakes and it’s really good for my introverted side.

Managing Work-Life Balance

21:32 Emily: Yeah, I think that’s one really important thing. Just recognize about the whole, you know, work-life balance thing–like, the graduate school-“other things you do”-balance–is that it’s sometimes really, really wonderful to have an escape from research. I know for example, for me, if research was not going well, which it didn’t for like three years, it was great to have some things going on outside of that that I could find some success in or some satisfaction. So, how do you manage your actual dissertation work, your main job, your grad student job and all these side hustles and you know, taking time for yourself. Like, how do you make all that work?

22:11 Frankie: It’s a really good question. And I answer this question so many different ways and have answered it so many different ways. So, I think today my best response to you is that my work-life balance is less of a work-life balance. Just because my work is my life, and my life is much of my work and I have to be in love with everything I’m doing for it to be possible that way. So, I’m running these different organizations. I’m also committed to teaching. I’m deeply invested. I interview people about menstruation. And so, I have to love all of those things because I do them all the time or they’re always on my mind. So, I think for me, my work-life balance ends up being calming my mind or like finding good headspace. And for me, actually, it ends up being that my partner is not an academic.

22:57 Frankie: He is not part of academia at all. And that ends up being a blessing. And I put a lot of time into–we have wonderful cats and I do cat-sitting–finding peace in both cakes and cats. And also taking the time and being okay with not doing work for a minute or two. Not always having to do something–I have such productivity anxiety–convincing myself that it is okay to go see a movie, to just sit on Instagram for an hour and be okay with it and not judge myself. And so the first couple of years of graduate school, I had to learn to do that and know that that was actually self-care and healthy. I cannot recommend enough that anyone in graduate school go to therapy. Even if you don’t think you need it or if you’re like, “Well, I don’t need that yet.”

Benefits of Therapy in Graduate School

23:49 Frankie: It’s great to establish the tools you do need for when you need them. And I wouldn’t have made it, I don’t think this far, without having great support both at the university health system and in our own–I have this wonderful woman who I see in Madison–and sometimes it’s when I need it, and sometimes it’s when I don’t. And it’s a great tool that, like I said, I recommend to everyone in academia or any stressful life situation. It really is wonderful to have someone outside your department who won’t affect your resume, your hiring decisions, your teaching appointments, someone who you can really talk to. And you know, it’s hard to build friendships in graduate school. It’s hard to build really like noncompetitive community sometimes. And I recommend that people find spaces that they feel like they’re part of a community or they feel like they have friendship. And not that my therapist is my friend, but it’s someone who I can talk to candidly and not worry about anything. So, I definitely recommend that as a resource to anyone.

Best Financial Advice for Early-Career PhDs

24:46 Emily: You know, you put that so well. I really don’t have anything to add to that. I hope that everyone listening just kind of rewinds a couple of minutes and listens through all that again because I think what you said is so, so valuable. What really resonated with me was when you said that you have to love everything that you do. And I think that it’s something that we sometimes forget about in academia and in graduate school that, ultimately, you’re there by choice and presumably at some point there was some reason why you chose the field you did and the advisor that you did. And there’s something that you love about it, and you might be going through a really hard period. It might be a long period, but it should be something that you’re passionate about, right? Or else why are you doing it? And hey, go ahead and leave your program if it’s not your passion anymore. But it’s so refreshing to hear you say that you do love all these different aspects of what you do, even though it’s not paid that well and you have to string all these different things together. It’s something that you find great joy and satisfaction in in all these different areas. I’m really, really happy to hear that. And as we wrap up here, Frankie, what is the best financial advice that you have for another early-career PhD?

Save for Unexpected Expenses (E.g., Medical Emergencies)

25:52 Frankie: That’s also a great question. I have a little experience running into medical emergencies. I had two surgeries my first year of graduate school. That’s something I don’t recommend. If you can avoid it, don’t do that until the summer of any school year. I don’t recommend doing it over Christmas. And then again over spring break. That’s–don’t recommend. So, I was hit with some medical bills in a harsh way. And I wish that I had budgeted a little bit better, like my moving expenses my first year, and not spent money on cat trees and whatever else that I thought was necessary at the time. Because I was like, “Oh, I still have more money,” or, “Oh, I still have more money. I could spend a little bit more.” Or, “Oh, you know, I can make this $50, $100, $200 go a little bit further.”

26:37 Frankie: I wish that I had saved it and thought to myself, “If something does happen, I’m at a low enough income that I need to be collecting what I do have, even the pennies, so that if something bad does happen to me or if I do end up needing to take, I don’t know, a semester off, a summer off, something like that–which is totally normal–that I would be able to.” And I wish that I had prepared a little bit better for that because I spent the better half of my second year paying off medical debt from surgeries that, I mean my insurance plan “covered” so to speak, but I needed to more carefully plan that out my first year. I think I spent more money out of stress or thinking, “Oh, if I spend more money, I’ll feel better.” And then when I did need to have surgery and pay that off later, you know how medical bills work, they send you the bill after the whole thing’s over.

Own Your Negotiating Power (Yes, Even in Grad School)

27:25 Frankie: So it’s not like I could have avoided it. And I did fight the insurance companies. I did fight the doctors to get things lower. And then the other thing I would say is that I did end up going to my department one point and asking for more money for a certain job that I was being pushed to do. You can do that, and if you are a graduate student and you feel like you’re between a rock and a hard place, you can negotiate or ask for help or ask your university for help and put yourself in a place where you can say, “I need a little bit more for this semester or in advance or something.” And do try to work with the people around you just in case it does help you.

28:01 Emily: Two really amazing pieces of advice there. And thank you so much for those. On the first one, I totally agree. I mean, I think especially for someone who’s like a young adult, maybe you haven’t been navigating insurance on your own before. Maybe you’re new to budgeting, maybe you’re newly independent from your parents. These irregular events, these unusual events are not something that you necessarily budget in from the beginning. The thing is that, you know, maybe you didn’t know in particular you were going to have these surgeries or what the bills are going to be. Right? There is no way, really, as you said, that you can know that in advance. But the thing is that something’s going to come up in some category in some way at some time. You’re guaranteed that something’s going to happen like that.

28:40 Emily: So, as you said, just saving up in advance a bit as best you can. Obviously, it’s going to be challenging, but saving up in advance can really save you a lot. Both financially and stress-wise, like on the backend of whatever that emergency happens to be. So, thank you so much for sharing your story about that. And I am curious to hear a tiny bit more about your negotiation because it’s not something that I usually hear about, let’s say after the admissions process is done. So, can you say like what was the job that you’re being pushed to do?

Know Your Worth, and Advocate for Yourself

29:08 Frankie: Yeah, that’s a really good question. So, I was actually sort of between departments where one department had offered me a better-paying a job and one department really needed me to teach a job. Like, they were lower on teaching faculty and they needed someone to step in. And if they don’t admit enough people to teach each cohort year, then eventually they run into these issues where they don’t have enough people to lecture or people who have experience in the field. So, it was just this past year, and I had accepted this job in another department which would’ve been a lot more work, but they were going to pay me more. And I was excited about the opportunity. But then I had also said, “If I could work both jobs.” Well, UW intervened, the Dean’s office said, “You can’t work two lectureship jobs before you officially have dissertation status.”

30:00 Frankie: And I said, “Okay, so I have to choose one.” And so I was like, I’m going to choose the one that pays me more. And then basically I positioned to the other department and said, “This is less work for me. If you can match that salary and raise mine to meet the salary that this other department is going to pay me, I’ll take your job. And I’ll tell them that I’ll defer their job until next year.” And that’s exactly what happened. And people were like, “Well, I don’t think we can do that.” And I said, “Well, I don’t think I can take your job then.” So, I felt really lucky that I could sort of position that way. And it sounds very corporate, but the truth is that you feel so subjected to whatever the institution tells you you’re worth–what you can do, what you can’t do–and the honest truth is that if you have a little bit of bartering after a year or two that you’ve been part of a lab, part of a TA-ship, part of a union of some kind, to say, “I’m willing to do this for you. I’m willing to help out this department in whatever way.” You have a little bit of bartering that you can negotiate. If the department asks you to lecture and you can say, “Hey, I need about a thousand more dollars to really make that work or I can’t.” If you are in a position that you can make that kind of offer, you should because it’s possible that they find that money somewhere. Or they do this thing where they give you a top out scholarship where the department will just add on another thousand dollars in a scholarship fund to your tuition account and then you can refund, check it back to yourself. And that stuff happens and is possible. They can offer you greater hours. Like, they find little ways around the bureaucracy to help you. And I really recommend that students understand all of those different positions and also have those conversations.

Ask for Help: Get to Know Your Administrative Staff

31:33 Frankie: And if, if anything else, the administrative staff of your department are the people you need to know almost better than your advisor. Those are the people who have changed my life at the University of Wisconsin in every way. They know the system, they know the money, they know how I can get through the bureaucracy or challenges I’m facing. So, hats off to the administration at my university and my department and particularly in legal studies and sociology. They’re amazing people and they’ve made my life much, much easier on the financial end.

32:02 Emily: Yeah. Thank you so much for making that point. And I totally agree that they are the people to know. And it’s really good to hear that, you know, sometimes bureaucracy seems like this total juggernaut. It is what it is. It can’t be changed. It can’t be gotten around, whatever. But no, there are creative solutions. You just have to talk to the people who are familiar with their bureaucracy, who know all the tricks, who are going to be really advocating for you and working on your behalf to make whatever you need to have happen, happen. So, I’m really glad to hear that example of what was basically two competing job offers. Hey, you would have taken both of them if the bureaucracy had told you that it was possible. That wasn’t possible, but you were able to negotiate. That’s a perfect story, and I’m really glad that you shared that.

32:41 Emily: I’m glad to have another negotiation story that’s not right from during admissions season because that’s a really unusual one. So, Frankie, thank you so much for joining me on the podcast day. This is a wonderful interview.

32:52 Frankie: Yeah, Emily, thank you so much for having me. I feel really honored that I was able to talk to you and get to meet you. I recommend that everybody follow the advice given by other people who’ve spoken here. It really is valuable and it makes it so that everyone else’s life can be easier and everyone doesn’t have to experience it for the first time.

Outtro

33:08 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.