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How to Financially Navigate an Unfunded Summer

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One of the most frustrating aspects of graduate school is that your income may fluctuate with each term. In some fields and at some universities, you might change roles not just each academic year but perhaps as frequently as each semester or trimester. When each role (fellow, teaching assistant, research assistant, graduate assistant) comes with a different pay rate, the result is a variable or irregular income. It’s even common to go without an income for a term, most typically the summer. This does not mean that you are at loose ends over the summer or free to work any type of other job. Research must go on in order for you to graduate in a timely manner!

An unfunded summer – or even just an income decrease – is not at all financially trivial for a grad student, and the solutions to an irregular income that other people use are not necessarily available or optimal for a grad student because of his low overall income. Of course, the ideal situation is to secure funding over the summer from an RA position or outside grant. If that option is not available, you must consider other avenues. If you see the funding lapse coming or it occurs regularly, you can prepare for it throughout the entire year.

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1) Get Another Job

You can take a job to replace the income you received during the academic year.

It may not be possible (or ethical) to find a regular full-time job since you plan to return to your fellowship or assistantship in the fall. A temporary or seasonable job is a good alternative, whether full-time or part-time.

First, look for a job that would advance your career in some way; it might help you demonstrate an existing skill, learn a new skill, expand your network, or simply look good on a CV. A paid internship is an example of a temporary job that is likely to advance your career.

Second, look for a job that you would enjoy doing, even if it’s not career-advancing. Your university is a great place to start when searching out opportunities, such as a work-study position. Inside or outside your university, there may be opportunities to work with younger students who are also on summer break, such as through camps or tutoring services.

Third, look for a job that pays you the highest available rate while still allowing you some time for your research and/or professional development on the side. If it isn’t advancing your career and you don’t enjoy it, just earn as much as you can per hour so you can minimize your work time.

2) Become Self-Employed

A way to earn an income that is an alternative to a temporary job is to work for yourself. It takes a certain personality and a lot of work to be successfully self-employed, but the advantages are:

  • You choose the type of work and clients,
  • It has the potential to pay a better hourly rate than a job, and
  • Your schedule and workload are under your control.

Try to think of a unique or marketable skill that you have and how you can leverage it to serve clients.

A few generic avenues for self-employment available to many grad students are:

  • Consulting (in your field),
  • Tutoring,
  • Freelance research, writing, and/or editing, and
  • Childcare.

If self-employment appeals to you, you should start pursuing it ASAP, because it often takes time to start generating an income/get paid. You might have to sustain your business year-round, though you could ramp it up or down depending on your academic workload.

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3) Save in Advance

The typical financial advice for dealing with an irregular income or lapse in income is to save up in advance so that you can cover your expenses from your savings instead of your income. This is good advice for someone with an income that far exceeds her expenses. For example, if you will go three months without an income, you should save approximately one-quarter of your income from each month that you are paid to sustain yourself during your unfunded summer. Setting this savings goal ensures that you keep your expenses in check year-round while building up the account you plan to draw from.

But how many graduate students are able to save one-quarter of their net income? And more so, how many of those well-paid graduate students might actually face an unfunded summer?

To the degree possible, you should save from your academic year income (your grad student income as well as side hustle if you have one) to pay expenses during your unfunded period if you don’t know you will earn as much from a different job/side hustle. In the face of short-term uncertainty, especially with respect to income, cash is king. But be honest with yourself from the first regular paycheck you receive about whether this plan is feasible.

4) Reduce/Shift Expenses

In the spirit of living within your means, if you are going to earn less or live off savings during your unfunded summer, you should try to reduce your expenses as well.

As your largest expense is likely housing, that’s where you should look first. If there is nothing physically keeping you at your university over the summer, you can move for the term. Sub-let your academic-year home and rent a less expensive place somewhere else, move in with your parents/relatives, or house-sit.

If any other of your typical expenses become unnecessary over the summer, try to jettison those as well. For example, many cities offer a slate of free activities over the summer, so you may be able to dramatically reduce the amount of money you typically spend on entertainment, eating/drinking out, etc.

Another possibility for making ends meet on a temporarily lower income is to shift any expenses possible to when you have a higher income. This doesn’t necessarily reduce the amount you would spend, but rather makes budgeting easier. Expenses that might be shifted include:

  • Shopping, i.e., for clothes, electronics, household furnishings,
  • Routine medical/dental/vision care,
  • Non-monthly insurance premiums or subscriptions, and
  • Vacation.

5) Take Out Student Loans

Finally, if you are enrolled as a student and taking a sufficient number of credits over the summer, you may be eligible to take out a student loan. (Credits don’t necessarily equal classes, depending on how your university registers graduate students.)

This is in my opinion a method of last resort and should only be used to speed progress toward graduation if a large salary bump is expected. A summer free from teaching or other service obligations can be an incredibly fruitful time for research progress – for some projects, it might be the only time when meaningful work is accomplished – so student debt can be reasonably justified for that purpose.

Do some math on the ROI of taking on the debt (principal and interest) vs. your other income options for an unfunded summer to make sure it’s worth it. You don’t want to end graduate school with an amount of debt that will be onerous to pay back with your post-PhD salary, but you also don’t want to tread water in graduate school and put off earning that post-PhD salary for too long.

Using student loans over the summer isn’t incompatible with any of the other options; use the other approaches to minimize the amount of student loans you need to take out/repay them immediately to the degree that they do not interfere with your research progress. Also, it is preferable to take out student loans than to accrue higher-interest rate debt (e.g., credit card debt) due to poor planning.

If you know your upcoming summer will be un/under-funded or you aren’t sure whether you’ll be able to secure an academic position or grant, start preparing now by:

  1. Reducing your expenses and saving as much as you can.
  2. Searching for temporary/part-time jobs.
  3. Pursuing a self-employment side hustle that ideally both pays well and complements your graduate work.

Even if you find funding for your summer and don’t need the side hustle or saved money, you will have put yourself in a better financial position and set your mind more at ease about the potential for subsequent unfunded summers.

Why It Matters How You Are Paid

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If you look across a sample of graduate students receiving stipends within any given field, you will find that they have quite similar day-to-day activities: taking or teaching classes, researching, writing articles or chapters, applying for funding, etc. However, behind the stipends that allow these students to engage in their studies are two very different types of sources, which the student’s tax forms reveal. (This distinction and the tax-related details herein are for graduate students in the US.) Whether a student has one type of funding or another has implications for his taxes, access to retirement accounts, and possibly university benefits.

A version of this article first appeared on GradHacker.

The two types of pay that provide stipends to graduate students are ‘compensatory’ and ‘non-compensatory.’ Compensatory pay is given in exchange for work. Typically, this work is in the form of an assistantship – research, teaching, or graduate. Non-compensatory pay is given as an award, and there is (according to the IRS) no work requirement for receiving it. Typically, this award is in the form of a fellowship or participating in a training grant. (Scholarships that go toward paying tuition, fees, and/or health insurance premiums are another form of non-compensatory pay.)

why it matter how you are paid

The type of pay that is behind a graduate student’s stipend potentially affects several aspects of her finances, depending on the university’s policies.

1) The tax forms generated by each type of pay differ. Students with compensatory pay will receive a W-2 in January. Students with non-compensatory pay will see their pay listed on, depending on the university’s policies, a 1099-MISC in box 3, a 1098-T in box 5 (probably summed with the scholarships received), or an unofficial courtesy letter. It is also possible that students with non-compensatory pay will receive no additional notification at tax time. Despite these different reporting mechanisms, a graduate student will report both types of pay in line 7 of his 1040 (with “SCH” denoted next to the line to indicate non-compensatory pay).

2) Graduate students receiving compensatory pay will have the opportunity to have income tax withheld from their stipends, while graduate students receiving non-compensatory pay may or may not, depending on the university’s policy. If students receiving non-compensatory pay do not have the option to have income tax withheld, they may have the responsibility of paying quarterly estimated tax.

3) With rare exceptions, graduate students cannot elect to contribute to retirement accounts at their universities. Therefore, graduate students who wish to save for retirement inside a tax-advantaged account typically opt to contribute to an Individual Retirement Arrangement (IRA). However, only compensatory pay (aka ‘taxable compensation’ or ‘earned income’) is eligible to be contributed to an IRA. Graduate students who receive only non-compensatory pay in the course of a calendar year (and are not married to a person with compensatory pay) are not eligible to contribute to an IRA in that year (though they can still save for retirement).

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4) Full-time graduate students typically do not pay FICA tax on their stipends, but the reason for this is different between the two types of pay. Graduate students with compensatory pay enjoy a student exemption to FICA tax, whereas non-compensatory pay is not subject to FICA tax in the first place. This distinction is important if graduate students ever become predominantly viewed as employees rather than students, which sometimes occurs in the summer when they are not enrolled in classes. In that situation, they might lose their FICA exemptions temporarily and have to pay additional tax.

5) The benefits that universities extend to students may differ based on their status. Graduate students receiving non-compensatory pay are unambiguously students in the eyes of the university. Graduate students receiving compensatory pay are both students and employees, and universities have varying views on which half of that balance is dominant. In some cases, when graduate students are considered employees, different or additional benefits may be extended to them that graduate students who are only students do not receive, such as union membership, childcare subsidies, and pensions.

While graduate students receiving compensatory and non-compensatory pay likely have very similar roles within the university, you can see that the IRS and the universities draw a number of distinctions between the groups that become important at some points in a graduate student’s career. If you are unsure which type of pay you are currently receiving or received earlier in the calendar year, you can either wait to see which kind of tax form you receive (W-2 for compensatory, anything else or none for non-compensatory) or inquire within your university’s payroll or financial aid office.

Have you received compensatory, non-compensatory, or both types of pay during graduate school? Was there a time that you realized that your type of pay affected your life materially? Do compensatory and non-compensatory students receive any different benefits at your university?

Why You Should Apply for Fellowships Even If You’re Fully Funded

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PhD students are funded by a variety of sources: research assistantships, teaching assistantships, graduate assistantships, training grants, and fellowships. It’s typical to be funded by two or more of these difference sources over the course of your PhD, and the funding source can change year-to-year or even semester-to-semester. While the differences among these funding sources are sometimes subtle, one stands apart from the others: Being funded by a fellowship, particularly a nationally recognized one, is in many ways superior to other forms of funding.

Last week, there was a very interesting conversation on The Grad Cafe about the various ways PhD students are funded. Ultimately, the original poster asked: “Why are fellowships so highly sought after? I am assured full funding (around $30,000) at every school I’m looking at. As someone who isn’t even in grad school yet, is this something I should be concerning myself with?”

I believe every prospective and graduate student should apply for at least one fellowship per year (assuming you are eligible for any). I recently compiled a list of nine portable, broad, lucrative fellowships that prospective PhD students can apply to. Many on that list plus more fund 1st- or 2nd-year PhD students, and there are fresh funding opportunities for PhD candidates with a clear research focus or who are nearing the ends of their dissertations.

apply for fellowships

Why Fellowships Are a Superior Funding Source

At the graduate level, fellowship funding is usually preferable to assistantship or training grant funding.

1) You Don’t Have to Work

This point may seem unclear until you understand the definition of “work” being used. Assistantships are a part-time job and typically require the assistant to work 20 hours/week. Fellowships are a type of award, which means that they are not tied to a specific work requirement. Fellows are still required to make progress toward completing their degrees, which will of course involve classwork in the early years and research throughout the PhD. But students who receive their full stipends from fellowships are excused from doing an assistantship.

The advantage of being paid by a fellowship rather than an assistantship is more pronounced in some department than others.

The ideal situation for a PhD student, and what a fellowship provides, is the ability to put 100% of your effort toward achieving your professional goals (mostly working on your dissertation).

Teaching assistantships confer extra duties that take away from your available time for dissertation work. (Gaining teaching experience may be an additional professional goal, in which case some types of teaching assistantships may be beneficial to you.)

Research assistantships are a mixed bag. In some fields, such as STEM fields, research assistants spend all their time conducting research that will become part of their dissertations (the topic of which is guided by the projects/funding available in the advisor’s lab). In other fields, the research that a research assistant conducts will not become part of his dissertation, so again that is time taken away from dissertation work.

Basically, for teaching and non-dissertation research assistantships, you have to work on your dissertation above your 20 hr/week job, while fellowships and dissertation research assistantships allow you to devote your full working time to your dissertation.

2) They Often Pay More

Most external fellowships provide a specified amount of money for your stipend plus money to go toward your tuition and fees (either to pay them fully or up to a certain amount). For example, the stipend specified by the National Science Foundation Graduate Research Fellowship Program is $34,000/year, by the National Defense Science and Engineering Graduate Fellowship is $102,000/3 years, and by the Department of Energy Computational Science Graduate Fellowship is $36,000/year.

The stipend provided by an external fellowship is usually higher than the stipend you would have received from an assistantship or training grant. Even if the fellowship stipend is lower, some departments will supplement the fellowship stipend up to or above the departmental base stipend. It’s unusual, though not unheard of, for a fellow to receive a lower stipend than his classmates funded by assistantships or training grants.

Further browsing: PhD Stipends

An external fellowship also confers rare negotiating power to you. Negotiation is likely to be most effective when you are a prospective graduate student with multiple offers to (tactfully) play off one another. The fellowship stipend might be supplemented by a department every year, or the department might pay a one-time bonus to the fellow. If you receive a fellowship while already enrolled in a PhD program, you can also ask for a supplement or bonus. (Be sure to ask other fellows in your department if any extra money was conferred to them.) Something else you can negotiate for is additional years of guaranteed funding after the fellowship ends.

3) Fellowships Give You More Autonomy

Because fellowship money is separate from your advisor’s grants, it can in many cases increase the control you have over your own research pursuits. It may allow you to shift the focus of your dissertation away from the main thrust of your advisor’s research, facilitate a collaboration with another group, or add a side project to your dissertation that isn’t aligned with your advisor’s grants.

4) Fellowship Sometimes Pay Above Your Stipend

In addition to paying your stipend and (part of your) tuition and fees, some external fellowships award you additional money for conference travel or professional development.

Downside

There is one clear financial disadvantage to being funded by a fellowship (or other source of non-compensatory pay) for at least one full calendar year, which is that fellowship income is not eligible to be contributed to an Individual Retirement Arrangement (IRA). Unless you have a side income or are married to someone receiving compensatory pay, you won’t have access to any type of tax-advantaged retirement savings vehicle.

Further reading:

Why You Should Apply for at Least One Fellowship (Even If You Don’t Win)

While the best result of applying for a fellowship is that you’ll actually win it, there are positive side effects even if you don’t.

1) Shows Initiative/Effort

Applying for fellowships when you’re not required to (like you have a guarantee or reasonable expectation of funding) shows you are willing to take initiative to further your training and career. You are trying to provide for yourself instead of depending on your department or your advisor. Even if you are not successful, this is an admirable quality; your advisor or potential advisors will probably be impressed at your effort.

2) Good Practice

Applying for fellowships somewhat resembles applying for grants, although usually abbreviated. If you are going to be a career researcher, you will have to develop the skill of successfully pitching yourself and your ideas to funding agencies. Applying for fellowships and predoctoral grants is good practice for the larger grants you’ll apply for later.

The Most Compelling Reason to Apply for Fellowships

The most compelling advantage to winning a nationally recognized fellowship is not its superiority as a funding source or how the process benefits you or your advisor, but rather its role as a CV-booster. Winning a prestigious fellowship early on in your career sets you up well to win larger and more lucrative awards later on. While it is of course possible to win fellowships and grants later in your career without winning one in graduate school, it is advantageous to have been favorably evaluated in the past by another agency. Winning a fellowship in graduate school is an early step in creating a track record of obtaining funding for your research, which is something hiring and tenure committees look for.

Prospective graduate students should apply for at least one large, multi-year fellowship (assuming eligibility) so you, if nothing else, can tell the PIs you’re interviewing with that you did it. If you’re in a STEM field, the NSF GRFP is likely to be your first stop. Once you’re enrolled in graduate school, you should consult with your advisor about which fellowships to apply for, at apply to at least one more in your first and second years and any later years in which you are eligible.

The Full Cost of Applying to PhD Programs

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The full cost of applying to PhD programs is significant; it can easily surpass $1,000 and even reach a few thousand dollars if you take a GRE prep course, apply to a large number of programs, and/or pay out of pocket to visit the universities you applied to. Given the enormous impact where and with whom you do your PhD has on your career, it’s vital to present yourself as well as possible in your applications and interactions with faculty. Mostly that’s going to translate to a large investment of time and energy, but sometimes it does translate to spending sufficient money on the application process.

This post outlines the three main direct costs of applying to PhD programs so that you won’t be caught by surprise during the process and can adequately prepare for this expenditure.

cost of applying to PhD programs

Know Your Programs

PhD programs are amazingly diverse. There are field-to-field differences as well as university-to-university differences. It’s imperative that you grasp how the admissions process works in your field and at each university you apply to. There are different expectations regarding the personal and/or research statement that you write, whether you should contact individual faculty members in advance of submitting your application, the purpose of a campus visit, etc.

Another massively important difference is the level of financial support offered to PhD students and what form it comes in. You might be funded by a fellowship, training grant, teaching assistantship, research assistantship inside or outside of your dissertation advisor’s group, or graduate assistantship (or some/all of the above). The support might be year-round or only during certain semesters, and it might be guaranteed for a certain number of years or at the discretion of your advisor or department. You might or might not have to pay fees or insurance premiums out of pocket. You must to know what is typical in your field to evaluate the offers that are ultimately extended to you.

The best way to figure out these largely unspoken cultural and policy differences is to ask current students or recent graduates of the programs you’re interested in. Tap your alumni networks and any relevant personal connections (LinkedIn can help you find these). Faculty members in your field at your current institution or a faculty advisor charged with supporting prospective PhD students are also wonderful resources.

The GRE(s)

While the predictive capabilities of the general GRE have come under fire, most universities in the US still ask for general GRE scores and sometimes subject GRE scores on their applications.

Further listening: Seriously, Can We Ditch the GRE Already?, Does the GRE Predict Which Students Will Succeed?

The registration fee to take the general GRE is $205 and to take the subject GRE (biology, chemistry, literature in English, math, physics, and psychology) is $150 as of July 1, 2017. Test-takers with qualifying financial needs can receive a 50% discount on the fee.

If the programs you’re applying to weight the GRE in their admissions decisions, such as by setting a minimum score, you could decide to study for the exam so you can perform your best. You can avail yourself of free resources available through the ETS website or purchase a review book (tens of dollars), course (hundreds of dollars), or tutoring (thousands of dollars). Whether or not you spend money preparing for the test, you may choose to devote significant time to it. However, extensive preparation for the exam is totally optional, and your time may be better spent on other aspects of your application.

Download the PhD Applications Budget

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Application Fees

Most application fees for US PhD programs fall between $50 and $100. Here are a few examples of fees for the 2017-2018 application cycle:

  • Clemson University: $80 for domestic applicants and $90 for international applicants
  • Indiana University at Bloomington: $55 for domestic applicants and $65 for international applicants
  • Johns Hopkins University: $75
  • North Carolina State University: $75 for domestic applicants and $85 for international applicants
  • Rice University: $85
  • University of California at Davis: $105 for domestic applicants and $125 for international applicants
  • University of Kansas: $65 for domestic applicants and $85 for international applicants
  • University of Notre Dame: $75
  • University of Utah: $55 for domestic applicants and $65 for international applicants
  • Washington State University: $75

Many universities also offer fee waivers for qualifying applicants, the details of which can be found on their websites.

In addition to the application fee that the university charges, you will also usually pay a fee to send your GRE scores and transcripts to each university. You can choose to send your GRE scores to four universities for free on test day for the general GRE and upon registration for the subject GRE. To take full advantage, make sure your application list has four schools finalized on it before you are prompted to send the free scores. ETS charges $27 to send your score from each test to each additional recipient.

With the full cost of each PhD application hovering around $100, the cost of applying to a handful of PhD programs adds up quickly. Determining the number of schools to apply to is a challenge: too few, and you risk the randomness of the application process leaving you with no acceptances; too many, and you spend a lot of money and spread your time thin, possibly harming your chances of getting into the university that would fit you best.

Visits and Interviews

Another field-by-field difference is whether the application process involves an interview or campus visit.

Some programs admit or reject applicants outright, and if a prospective student wants to visit the university, she’ll do it on her own dime and schedule. Some programs request interviews, but the interview is conducted over video or the prospective student pays to visit campus. Most STEM programs arrange for a visit weekend, where a group of prospective students is flown to campus to meet with faculty and be courted by the program. That visit weekend might include interviews upon which the admission decision will depend or simply serve to sell the program to admitted students.

The out-of-pocket costs for the visits could be $0 if everything from the flight to your meals are paid for by the department or reimbursed (be prepared to front money, though!) or the applicant could be responsible for the full cost (up to hundreds of dollars for flights, lodging, ground transportation, and food). Even if you think the program will pay for everything, it’s a good idea to budget some walking-around money for each visit in case a meal ends up going unreimbursed or you want to do some sight-seeing or buy a souvenir.

While deciding what programs to apply to and preparing your applications is very time-consuming, it can be done on your schedule. One of the hidden costs of campus visits is the time it takes to leave school or work for 1-3 days. If you have a (part-time) job, save some vacation time or try to shift your hours around so that you don’t have to forgo any wages to go on the visits. However, for schools you are seriously considering, it’s worthwhile to miss work to properly evaluate the programs, and that will need to be factored into your applications budget.

The temporal and monetary cost of applying to PhD programs generally – and the application fee in particular – serves as a disincentive to apply to too many programs. It takes so much time and money to fully investigate and apply to each program (not to mention actually choosing which you will attend!) that you should be judicious about which institutions make your list. This requires carefully evaluating your own research and career goals as well as the programs, but you will without question benefit professionally and personally from this careful introspection in the application stage.

How much did you pay to apply to graduate schools? Did you incur any costs not listed here?

How Graduate Students Are Financially Distinct from Young Professionals

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Two young adults graduate with the same major from the same college in the same year. One of them gets a job and the other enters a funded graduate program. Their financial lives have just diverged, despite their similar professional starting points, and it’s not because the graduate student lacks an income.

graduate students are financially distinct

 

Here are the top ways graduate students are financially distinct from their young professional former peers.

Limited Income, Unlimited Training

Graduate students are among the best and the brightest college graduates, but that isn’t reflected in their stipends/salaries.

The value proposition of graduate school is that the student will be provided with training, and therefore the stipend is only intended to cover living expenses (more or less) to keep the student from undertaking outside work. (Of course, some students undertake unfunded PhDs or lose their funding at some point.) So the grad student’s income is suppressed, and there is little opportunity to increase it without engaging in a side hustle. This is very different from a regular job, where there is a chance for promotion or at least opportunity to take a different job with a better salary without derailing your career trajectory.

by Jorge Cham

A compounding factor in this situation is the uncertainty of the length of the training period. It’s unusual for a PhD in the U.S. to take less than five years, and apparently the average is 8.2 years. This is such an issue that asking a PhD student when she’s going to graduate is viewed as a faux pas. It takes an unusually driven graduate student and motivated advisor to accurately set the end date for the graduate degree more than a year in advance, let alone at the start of grad school. And even the end of graduate school doesn’t mean the student will get a big income boost, as 65% of PhDs will continue their training as postdocs.

These factors together mean that a grad student has a low salary for an uncertainly long amount of time: at minimum half a decade, and for many a decade or more.

Not a Full Employee

The exact nature of the relationship between the university and the graduate student is being reinterpreted at many universities around the US due to the recent National Labor Relations Board ruling that allows the unionization of graduate student assistants at private universities.

Graduate students are certainly “students” in the eyes of the university, and graduate assistants are also considered “employees” secondarily. The benefits offered to graduate students therefore often straddle these two statuses; they receive some or all of the benefits that undergraduate students do, but virtually always less than other classes of employees like faculty and staff.

Commonly, graduate students take part in the student health insurance plan, and the premium might be partially or completely paid as one of their benefits. Beyond that, benefits vary widely by university, school, and program. Some graduate students may have defined vacation policies while others’ are left to the discretion of advisors; some get dental and vision insurance alongside health insurance; some receive subsidies for housing or childcare; some receive a free or subsidized gym membership; very few even have access to a 403(b).

Common financial advice to young professionals to take full advantage of employer benefits by contributing to a 401(k) at least to the full match amount and maximizing the value of life, disability, health, dental, and vision insurance benefits therefore does not apply to graduate students. Conversely, graduate students may access to student benefits that are very unusual outside of universities, and it’s very important in those cases that the students are aware of all their benefits.

Fellowships Do Not Provide Taxable Compensation

While grad students receiving stipends have an income, they don’t all have “taxable compensation” or “earned income.” Graduate students (and postdocs) whose salaries are paid by fellowships are not being compensated/earning their income. (Their income is still taxable, however.) They are not employees, but neither are they self-employed. Therefore, they are not eligible for tax benefits that are tied to having compensation or earned income, such as IRA contributions and the earned income tax credit. Having an income that is not reported on a W-2 also may throw a wrench into the process of taking out a mortgage. This situation is very hard to wrap your mind around when you first hear about it because it is so different from what (self-)employed people experience.

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Low Taxes

The silver lining to having a low income is that you don’t have to pay much in the way of income taxes. Nearly all graduate students whose only income is their stipend will fall into the 15% marginal tax bracket or lower. Therefore, tax reduction strategies that might be recommended to young professionals are not as beneficial for graduate students. For example, contributing to a Roth IRA is a great idea for a graduate student with taxable compensation, while a young professional with a higher income might benefit more from using a traditional IRA or 401(k).

The unexpected bonus to being in the 15% tax bracket or lower is that the current federal tax rate on long-term capital gains and qualified dividends is 0%. Therefore, even graduate students who are saving for retirement outside of tax-advantaged retirement accounts can minimize the tax bite on their investments.

Finally, graduate students do not have to pay FICA tax, either because they have a student exemption or because they aren’t receiving compensation. Young professionals can’t easily avoid that 7.65% tax bite.

Access to Student Loans

Lastly, graduate students have the option to take out student loans. If the student experiences an income drop or a personal emergency, they could take out a student loan to cover it, whereas a non-student would more likely turn to credit cards or personal loans. While using a student loan in these circumstances might be advantageous in some ways (for example, the interest rate is almost certainly lower than the interest rate on a credit card), student loans are more uniquely dangerous than other kinds of debt because they cannot be discharged in bankruptcy. A graduate student, because of this access, therefore needs enhanced information and counseling when looking to take out a new loan.

In what ways are graduate students financially different from their age-mates who have real jobs?

Simultaneously Earn Extra Money and Advance Your Career

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In my final year of graduate school, I participated in a leadership program at my university. In the course of this program, all the participants worked on group projects, the subject of which was how to improve graduate student and postdoc career development. My group decided early on that we would focus on how trainees could participate in internships to gain work experience.

A version of this post was originally published on GradHacker.

Instantly, our group uncovered a culture clash: I was coming from an engineering program in which internships were fairly encouraged and some students even consulted or started their own companies. Two other group members were in the biological sciences, where the farthest you were allowed from the bench was Woods Hole, MA. The fourth group member was in a humanities program and insisted that 100% of his classmates got tenure-track teaching positions and therefore would be totally uninterested in any career development aside from teaching (a claim the rest of us found dubious).

Ultimately, we were able to agree on a project that helps students gain relevant experience outside of academia by thinking beyond internships to volunteering, part-time jobs, freelancing, launching new programs, taking courses, etc. The process of collecting testimonials on these career-developing experiences opened my eyes to the many ways grad students can advance their careers, even if their advisors or programs frown upon it.

Since I’m a money-minded person, I was particularly interested in the examples of grad students who earned money from their career-developing experiences. That really seems to be the best of all options—gaining relevant work experience and some extra cash, of course in balance with dissertation work. Internships are the most obvious way to accomplish this, since they often pay more than assistantships, but I found that many grad students had strategically chosen a variety of non-internship experiences that also fit the bill.

Below are a few examples of students who landed or created career-developing work experiences that also paid them. These examples are drawn from our Think Beyond Internships project from last spring (not specifically paid experiences, but many are) and my series on side jobs (not specifically career-developing experiences, but many are).

1) Summer intern

Alice completed a paid summer internship at a medical device company doing work related to her dissertation research, which confirmed for her that she wanted to pursue an industry career after her PhD. In addition, she gained “great contacts and references,” and “it was also really helpful to see the way PhDs were viewed at a big company … and understand the corporate mindset.”

2) Weekend consultant

Kathayoon created her own consulting practice evaluating zoos and aquariums, which was in line with her dissertation work. She found her first client through a mentor, and then more clients approached her; she traveled on weekends to complete the evaluations. Consulting helped her “build a lot of important skills … make connections to people in [her] field who acted as study subjects for [her] dissertation, and … get a job after graduation.”

3) Part-time analyst

Adam worked on a part-time, hourly basis as a research analyst for an investor relations firm, writing reports and updates. Not only was this a paid position that “made [him] realize how underpaid [he] was as a graduate student,” but he took a full-time job at the company after he finished his PhD. He said, “The best part was that I had an opportunity to try out my job before starting full-time. How else do you know if you want to launch a career in a certain field?”

4) Freelance editor

Julie and Amy freelanced for a scientific journal article editing company as contract editors. They edited articles related to their fields of study on a pay-per-assignment basis. Because of this this experience, Julie “read much more widely than [she] ever would have on [her] own and… [thought] more critically about what [she is] reading.” She also noted the networking benefits to working for her company. For Amy, “the contract job was perfect because [she] learned a lot and could do as much or as little as [she] wanted.”

5) Semester-long science policy fellow

I participated in the Christine Mirzayan Science & Technology Policy Fellowship after I finished grad school, but many of the other fellows in my class were current graduate students. We worked at the National Academy of Sciences for 12 weeks, learning about careers in science policy, gaining relevant work experience, and networking like crazy. The fellowship was designed to give graduate degree-holders a taste of science policy; they know that some of the fellows will pursue careers in science policy, but others will take their experience back to academia or into other sectors. My mentor agreed to serve as a reference for me for future positions, and many of the other fellows were able to stay on at the Academies after the fellowship or landed other science policy positions in DC. We received a stipend for participating in the fellowship.

I hope these examples have excited you about the possibility of finding paid work that also advances your desired career path. Before I conclude, I offer three tempering notes:

1) Some graduate programs explicitly disallow outside work in their assistantship or fellowship contracts, so you should check whether being paid will get you in hot water with your funding source or advisor. However, I think the spirit of this exclusion is more important than the letter. The point as far as I can tell is that your program wants you to make progress on your dissertation at a reasonable pace and not get distracted by outside commitments. But are a few hours of paid work a week really any more or less of a distraction than many other activities graduate students engage in (socializing, hobbies, self-care, raising children, etc.)? I think you should use your own judgment in how to balance your main goal of completing grad school with your side job and other pursuits and discern when you might need to refocus more or solely on your graduate work. In my own observation, some programs that state their students are not allowed outside employment will actually encourage work that is related to the student’s thesis topic.

2) All of the examples above and most in Think Beyond Internships involve students in STEM disciplines. I am hoping that is selection bias because the vast majority of my group’s contacts were STEM grad students and that students in other disciplines are also able to find paid, career-advancing work. I would love to hear from some non-STEM graduate students who have engaged in this type of work in the comments below.

3) Even if you aren’t able to find a job that combines both purposes of advancing your career and paying you, you can still achieve the goal that is more important to you (or both, through separate experiences). You can volunteer your time in such a way that advances your career (there are plenty of examples on Think Beyond Internships), or you can earn some extra money from unrelated work.

I wish you all the best in both setting yourself up for your post-grad school career and generating some extra cash flow!

Did you have paid outside work during graduate school, and if so what did you do? How strict is your department in disallowing students from working? How have you advanced your career during graduate school, aside from your dissertation work?