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Unveiling the Hidden Curriculum of Grad School Funding for First-Gen BIPOC Students

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In this episode, Emily interviews Dra. Yvette Martínez-Vu and Dr. Miroslava Chavez-Garcia, the co-authors of the recent book Is Grad School for Me? Demystifying the Application Process for First-Gen BIPOC Students. Yvette, Miroslava, and Emily dive into the financial aspects of the grad school application and admissions process, from applying for external fellowships to negotiating funding offers to preparing financially to start graduate school. Yvette and Miroslava share their personal experiences as well as their insights from prospective students involved with Yvette’s Grad School Femtoring coaching and podcast and Miroslava’s McNair program at UCSB. This episode is a must-listen for prospective PhD students, especially those who come from underrepresented backgrounds.

Links mentioned in the Episode

Uncovering the Hidden Curriculum of Grad School Funding for First-Gen BIPOC Students

Teaser

Yvette (00:00): One year, there was one student who was really, really struggling financially, had gotten into his top choice, had to move from California to the Midwest, and he couldn’t even afford his airfare. So he contacted his soon to be advisor, told that person his situation like, look, I, you know, I’m really trying to make it things work. I’m trying to work, I, but I, I just can’t afford my flight. And that advisor, without even thinking twice, bought him the flight.

Introduction

Emily (00:37): Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. 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. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

Emily (01:06): This is Season 18, Episode 4, and today my guests are Dra. Yvette Martínez-Vu and Dr. Miroslava Chavez-Garcia, the co-authors of the recent book Is Grad School for Me? Demystifying the Application Process for First-Gen BIPOC Students. Yvette, Miroslava, and I dive into the financial aspects of the grad school application and admissions process, from applying for external fellowships to negotiating funding offers to preparing financially to start graduate school. Yvette and Miroslava share their personal experiences as well as their insights from prospective students involved with Yvette’s Grad School Femtoring coaching and podcast and Miroslava’s McNair program at UCSB. This episode is a must-listen for prospective PhD students, especially those who come from underrepresented backgrounds. In fact, I think Is Grad School for Me? is a must-read as well, so I’m giving away three copies of this book to listeners of this podcast. If you are applying to PhD programs in fall 2024 and are in the target audience for this book, i.e., a person of color who is a first-generation, low-income, and or non-traditional student, you can enter the giveaway at PFforPhDs.com/isgradschoolforme/. I would also appreciate you sharing this episode with any prospective graduate students in your life. You can find the show notes for this episode at PFforPhDs.com/s18e4/. Without further ado, here’s my interview with Dra. Yvette Martínez-Vu and Dr. Miroslava Chavez-Garcia, the co-authors of Is Grad School for Me?

Will You Please Introduce Yourself Further?

Emily (02:56): I am delighted to have joining me on the podcast today, Dr. Yvette Martínez-Vu and Dr. Miroslava Chavez-Garcia, who are the authors of the recent book Is Grad School for Me? Demystifying the Application Process for First-Gen BIPOC Students. And as you might imagine, well this guide is incredible for this population and frankly, any prospective graduate student, I highly recommend the book. I just finished it a couple of weeks ago and there’s a lot of financial content within this, as you might imagine. So I was really excited to reach out to these authors and get them on the podcast so we can dive even further into the financial aspects of the application and the admissions process for graduate school. So, Yvette, Miroslava, again, welcome to the podcast. Would you please introduce yourselves a little bit further for the listeners? Yvette, why don’t you go first?

Yvette (03:41): Yes, of course. Hi everyone, my name is Dra. Yvette Martínez-Vu. I’m a first gen Chicana, chronically ill neurodivergent productivity and grad school coach, consultant, author, speaker. Um, I do a lot of things. I have a PhD in theater and performance studies. I worked in higher ed for over 10 years supporting predominantly low income first gen students of color. That’s actually how I met Miros a few years back. Actually, at the start of the pandemic, she became my supervisor. And since then we’ve developed and nurtured a great relationship, which has manifested in US publishing and co-authoring this book together. So that’s a little bit more about me and what I do.

Miroslava (04:25): Great. Yeah. Hi. So I’m Miroslava Chavez-Garcia and I’m a professor of history and I’m also the faculty director of the UCSB McNair Scholars Program. So I’ve been at UCSB probably for the last 10 years, and before that I was at UC Davis, and then I had another job before that. So I’ve been in the game for a little while. Um, also a product from UCLA PhD Yvette and I have that in common as well. And what else about myself? So I’m also a mom juggling with children and a little needy dog. So life just keeps happening no matter what phase you are.

Grad School for Me? Demystifying the Application Process for First-Gen BIPOC Students

Emily (04:59): Fantastic. So let’s hear more about the book. Um, who is the intended audience for the book and why did you write it

Yvette (05:05): As referenced in the title of the book, uh, Is Grad School for Me? Demystifying the Application Process for First-Gen BIPOC students. The book is predominantly, um, catered to first gen bipoc students. But then, um, more broadly, we also address concerns for anyone who fits the quote unquote low income category or also non-traditional categories. So we’re thinking here of, you know, folks from working class backgrounds, we’re thinking of folks who, uh, maybe ages 25 and older. We know that more and more college campuses are no longer having what we may consider traditional students. A lot more of the, uh, student population is going back, they’re older, they have dependents, they have other commitments, and we wanted to meet, be able to address those other factors that individuals consider when they’re thinking about whether or not they want to pursue graduate school.

Miroslava (06:02): Yeah, definitely. I think that we were really interested in this, these folks who had not seen themselves reflected in all the literature that’s out there. So in looking at what’s been written, um, it’s all kind of cookie cutter in some ways. And they imagine maybe they don’t even imagine who, but we imagine it’s not us, right? When we’re looking at these books. And so we were very much with that intention to be able to provide a guide to all those folks who perhaps didn’t see themselves, um, you know, reflected and, and, um, and that was really important to us. And initially, I would have to say for myself, and I’m not sure if that had this thought, I was thought like, what, is there enough? Are there enough of an, is there enough of an audience for this? And, and yes, there is, you know, it’s, it’s that sort of, um, audience that we don’t hear from, but they’re definitely there. And the press was very, um, supportive of, of this, um, of, of, of the approach of the book. So we’re really happy that we were able to, um, target this population that’s been overlooked for so long.

Yvette (06:56): I have had the idea for this book since I was an undergrad. I was part of the inaugural cohort of Mellon May Fellows at UCLA. And despite the fact that I was in a very privileged position of getting into this prestigious graduate school preparation program, despite receiving ample support, I still was stumbling so much along the way. There was still so much information that I was missing out on. I still struggled to find mentors femtors, and I felt really frustrated and I found myself constantly pulling, you know, trying to find from the weeds as many resources as I could and then sharing them. And every year I was always surprised like, why is there not a book like this? Why is there not a book like this? I don’t see myself represented, not just, um, among the faculty, among my department. I was an English, uh, literature major at the time, but even within the literature, the research, the books I was running into, I didn’t, again, I didn’t see anyone like me a First Gen Chicana represented. And I wish that I had had that how to book. So that was, you know, an idea that I had many, many years ago. Of course, it didn’t come into fruition until Miros literally asked me when I’m gonna be writing a book. I never took it seriously until she approached me. And I thank her for her Femtorship and for her support and guidance, even through this publication process. This work wouldn’t have happened if it hadn’t been for the two of us coming together.

Miroslava (08:26): Like Yvette, most of my career has been focused on doing this kind of work, right? The hidden cur- un- unraveling or uncovering the hidden curriculum, addressing all of those isms, all these things that we feel, but we can’t quite put our finger on it. And so, um, when I was in grad school, there were some guides, but nothing like in the last that has been produced in the last 10, 15 years. And I didn’t even think we could encapsulate. And, and granted, this is not all about grad school. This is about just applying, right? So, but we’ve, it’s a pretty hefty book and we’ve top- tackled one topic. I think there’s many more that can be tackled, um, in the future. There’s other books out there as well. But definitely, um, it’s nice that we’re able to bring so many things together. I, with my more years in academia, but Yvette, with all of our up to date since, you know, things get really quickly, get out of date in academia and there’s new things, new trends, new um, approaches, um, especially we see right now a lot of changes happening. But yeah, it would just worked really well actually.

Emily (09:21): And if someone is convinced already that they need to get their hands on this book, where can they find it?

Yvette (09:26): Yeah, you can get it at IsGradSchoolForMe.com, and you can also find it at most major bookstores and even, um, a good number of independent bookstores have it too.

Miroslava (09:36): And definitely the press. And there is, um, if, if, if, uh, listeners are interested, they can contact us. We have, there’s a, there’s a discount code for now as well. It should probably be there for a while. That makes it more accessible to our, our population

Yvette (09:48): Yeah, you, you can go to the UC press website and this code should work it’s ucpsave30. So again, ucpsave30, it should work as far as we know. We don’t, it doesn’t have an expiration. So if you wanna get it and get it 30% off, um, go ahead and, um, get your copy directly from uc press.

Financial Support During Grad School and Its Impact on Student Success

Emily (10:10): Perfect. And I definitely learned from reading the book that you all, uh, have an aligned position with mine that having, um, sufficient financial support during graduate school is very important to the students’ overall academic and personal success throughout that time period. Um, can you elaborate on that idea a little bit more? Um, how important is this? I mean, I know you said in the book like, you know, we discourage taking out student loans for our graduate degree and so forth. So just tell me a little bit more about how you came to that position.

Yvette (10:40): I mean, I think a, a big part of it is our experience, uh, both personal experience, experience working with student- with this population in particular for a lot of low income first gen students of color. The question of can I afford it and will I have adequate fund- funding is a very, very important question. And without it, some of them are even willing to go the extra mile of pursuing graduate school. So yeah, getting an advanced degree, especially pursuing a PhD is a significant investment in time, effort, resources. And for some, it’s not even an option without having at least some funding. So that’s why for us, it’s important for them to know, you know, what are the differences in funding options is between PhD programs, between master’s programs, what are these funding options packages even look like? That’s why we provided samples in the book because, um, the more financial burdens you have, if you don’t come in with generational wealth or trust funds or a savings account, just some sort of support, that means that a lot of people end up taking on insurmountable amounts of debt, debt that holds them back from reaching other major life milestones, or they end up staying one too many years in graduate school, they’re having to juggle multiple jobs to make ends meet. Or for a lot of people, they end up getting pushed out. We know that 50% of folks who go into PhD programs don’t actually make it and get to finish. And that’s a problem. And I wouldn’t be surprised if sometimes funding plays a factor in that. So we do think it’s important to, to consider the funding aspects of it, um, when you’re thinking about grad school as your next step in your career.

Miroslava (12:24): Yeah, definitely. One thing that we tackle a lot throughout the book is this idea of fit. Like is this program or this, you know, university institution for me, and one of the, I would say one of the main, you know, sort of categories of that would be around funding. I know my department does not take any PhD students. We can talk about master’s program that’s a little bit different or could be quite different. But PhD programs, we will not take anybody without funding. I mean, we have to bring in people who have support them. So that’s been going on for a while now. And I think lots of programs run that way. Uh, the PhD programs, at least in the humanities where, you know, there’s so much upfront and then no guarantee on the other end that you’re gonna be able to make up pay off that loan and, and, you know, thrive if you’re able to do that, the STEM fields might be a little bit different, but I know that in humanities, um, institutions are a little more cognizant of that, um, disconnect. Sometimes it happens.

Emily (13:13): This is something that I point out when I speak with, um, prospective graduate students. Current undergraduate students is like the funding mechanism for your undergraduate degree and professional graduate degrees is just completely different from, you know, the PhD or the, the research based graduate degrees. And while it may be perfectly okay, um, to take out debt for, um, an MD or a JD or a similar type of degree like that, it’s because the salaries on the other side of that justify taking out that debt. And depending on the PhD field that you’re in, as you just said, Mirsolava, you don’t really know what kind of career you’re going to have or what that salary is going to be on the other side. So it’s that much more important to make sure that your, um, PhD is, um, uh, you’re not, um, leveraging your future <laugh>, uh, when you’re doing that PhD, you’re only building into the future. And so in your book, one of the, one of the sections is about, um, applying for external fellowships in particular. And so why did you take the time in the book to encourage prospective graduate students to apply for that type of fellowship?

Yvette (14:14): You know, I’ll, I’ll share a personal anecdote in relation to this question. When I went into my PhD program, I was awarded a prestigious fellowship. It was a departmental fellowship, and everybody told me, oh, you got full funding, you’re good to go. You don’t have to worry about applying for anything else. And I remember my advisor at the time discouraging me from applying to external fellowships and only later on finding out about fellowships that covered multiple years that could have provided me with additional years of being on a fellowship could have minimized my teaching burden and could have even increased my chances of getting more competitive dissertation year fellowships later on. So for me, I do think it’s important, it’s not just the financial advantage of having another offer that you can then use to leverage your funding package and to shift things around as best as you can, depending on your department and their flexibility, but also access to a network. So for instance, when I became a four dissertation year fellow, I was, you know, I, I entered this space of networking, I joined the national conferences, I started meeting up with people for networking meetings, and I realized, wow, there’s like this whole world of Ford fellows out there that I didn’t know that I could have been exposed to earlier if I had known to apply to the Ford Predoctoral Fellowship if I had been encouraged. So I do think that it, it only increases your chances of, um, having access to more opportunities, having access to bigger networks. So why not do that? Why, like, don’t put all your eggs in one basket and expect to only get funding from your department or even from your program.

Miroslava (16:02): Yeah, and I would definitely agree. I’m also a Ford postdoctoral fellow. I tried the pre-doc and the dissertation, um, but the postdoc was fortunate to get that. And so Yvette’s talking about the networks, like you can’t put a dollar price on those because they’ll stay with you throughout your career. Particularly with the Ford, they always talk about us being a family and people, um, you know, in a good way, <laugh>, I don’t, so families, uh, you know, uh, but those relationships are there. They reach out to you for networking. So it’s, that’s really valuable. I think another thing to think about as well is that they bring prestige. I hate to, you know, I’m not a big, you know, showy kind of person, but nevertheless institution, it brings prestige to the, you know, value to you. Um, it shows that other institutions also value what you’re doing and it also brings more hum umph to your, the significance of your work. And I think that anytime that happens, you know, it’s, it’s for the, for the work, it’s for your subject, it’s for your project, your research, and that’s a win-win. So

Emily (16:56): I think all those reasons are so fantastic to apply for fellowships, apply for fellowships throughout your PhD, not just early on. As you said before, you aren’t when you aren’t sure what your funding is going to be. Um, but I particularly like them for prospective graduate students because, um, during admission season, it can be quite an advantage to have already been awarded an external fellowship. You can come to your program and say, Hey, I’m actually, you thought you were gonna fund me, but I’m actually bringing in X amount of dollars from this other fellowship that, that I just won. Um, can you speak more about the, um, advantages to, to that situation for that perspective graduate student?

Commercial

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Negotiating as a Prospective Grad Student

Miroslava (19:03): I, I will, if it’s okay, I’m gonna jump in. I’ll give a specific example of one of our, our McNair scholars who, um, had applied to many institutions and, um, a prestigious one UCLA. She would I think she applied in the STEM fields and she got an NSF and that decision happened like overnight. I mean that they, the door was open quickly at UCLA for her to come in. They’re like, oh, come step right in. And, and so she took that position, but she had been, wait, not waitlisted, but I think she hadn’t heard. Um, and so that really granted her that, um, you know, provided I say the ticket to make her own decisions and choices. And so, um, that’s the example I like to share.

Yvette (19:40): I’ve seen the same scenario, so I was gonna say almost an identical scenario, but with a different student <laugh>. Yeah.

Emily (19:48): Yeah, because sometimes the reason for a rejection is not anything lacking in the candidate, it’s just the funding is not gonna go far enough to accept as many people as we would like, or, you know, this particular advisor didn’t have funding, but if you come with it, then you can work with that person. Um, and so it can reverse those decisions or get you off a wait list or whatever that, um, you know, situation might be. And it also provides you leverage for negotiation <laugh>.

Emily (20:12): So let’s talk about that next. I loved that you included information about negotiation in this book. I think a few years ago I didn’t really hear that many people talking about it, but it’s been, I’ve just heard more and more people familiar, like prospective graduate students when I bring up negotiation, they’re like, oh yeah, I, someone already told me I was able to do that, or at least able to attempt it. Right. So let’s talk about that, um, a little bit further. Like, how have you seen prospective graduate students successfully negotiated their funding packages? Do you have any tips about how they should do so?

Yvette (20:40): I think that it’s always important to tread the waters carefully, right? When it comes to negotiating. And it’s also good to have all of your information available. So you wanna know, don’t start to negotiate before you know, you know, what is even feasible. So, um, I’ve, I’ve seen a lot of different scenarios. Uh, one of the most successful scenario that I’ve seen work time and time again is where when someone gets multiple offers and then they send their best offer to their top choice school who maybe may is offering less, and they ask if they can match or increase their offer. And in many cases, they either increase or match it, or sometimes they say, you know what? This is the best that we can offer you. We still really want you, but there’s no way we can compete with that. And it’s up to the student to decide maybe sometimes it is worth it for them to accept the lower offer because cost of living might be different and cost of living makes it so that that’s actually a better offer financially at the end of the day when you crunch the numbers and, and create your budget. So that’s one scenario where that’s been fairly successful. What I’ve also noticed is that a lot of times folks don’t feel like they can negotiate because they say, oh, well I don’t have another offer, or, oh, they’re not offering me any funding. How can I ask? And in these scenarios, I mean, it doesn’t hurt to ask, it is rare. In fact, I’ve only seen this happen for summer programs, but it, it’s rare for folks to have their offer rescinded because they asked for more. Of course, you want to be conscientious, of course you want to be grateful, of course you want to express your enthusiasm. Um, but you can ask, and I’ve seen this happen more than once, where someone didn’t get any, they got into a master’s program, didn’t get awarded any funding, asked if there was any funding that they could apply for or that they were eligible for and could be considered for. And the next thing you know, a few days later, they’ve got a $12,000 scholarship that wasn’t there before. I’m like, so overnight you got $12,000 for asking, you wouldn’t have had that. Aside from that, a lot of applicants don’t know what else they can ask for. It’s not always just tuition remission, it’s not always just a stipend. Some graduate students get, uh, a laptop covered, some graduate students get their travel, um, or re- relocation expenses covered. Sometimes it’s partial, but it’s still something some, uh, I’m trying to think about other things that, that folks will ask for. I remember one year there was one student who was really, really struggling financially, had gotten into his top choice, had to move from California to the Midwest, and he couldn’t even afford his airfare. So he contacted his soon to be advisor, told that person his situation like, look, I, you know, I’m really trying to make it things work. I’m trying to work, I, but I, I just can’t afford my flight there. What can I do? Can I work for you? Like, is there any way that I can figure this out? And that advisor, without even thinking twice, bought him the flight. So it’s all about advocating for yourself. It’s about asking for what you need. It’s about building genuine reciprocal relationships, helping one another out. But it also, it’s about knowing again, what even can you ask for? And sometimes you get some stuff, sometimes you don’t. Uh, but I always kind of lean, lean on the side of asking because I wish that I had been taught this skill a lot earlier on. Now I have that skill of negotiating took many years trial and error. Um, but I, I just, I, I want folks to learn this skill as early as possible because it’s gonna continue to be an ongoing skill that they practice for the rest of their career.

Miroslava (24:26): Yeah, I would definitely agree that it’s like the biggest hurdle is even knowing what to ask. And I would, I was, I don’t wanna say I grew up in the generation, but I came of age in terms of academia that of my generation where we just didn’t ask. We were just grateful, right? As a, as a Chicano Latina, I was accepted first gen immigrant, you know, that I was being, I didn’t even know that this happened at all. So even for me to get comfortable after all these years, it’s really, really hard. So when you, if you’re newer, new-ish or newer ish coming into academia, practice it and you’ll get more comfortable. And, um, also there’s a question of like sharing information with your peers. That’s another topic as well. In terms of funding packages. Do you talk about them or not? Um, other, I’ll just add two more things that I’ve seen in, in the, the last, um, few years I’ve been academia a lot of times I, what I’ve seen in, um, in terms of packages is that it’s kind of set the amount, but the one thing you could do is you could ask for money to be moved around. Like instead of having that fellowship off the first semester, I’d like it to be off the second semester so you can negotiate those things. So moving money around. Also, another thing to not, not forget or, um, is summer funding. Um, ’cause a lot of these packages do not include summer funding and then summer rolls around, it’s like, oh, oh, you know, we’ve had horror stories here on my campus where students live in their cars and things like that because there’s no, they can’t afford, you know, rent in the summer In Santa Barbara here it’s very, very expensive. So some programs are getting much better at providing funding or helping them find some form of a TA ship over the summer. There’s a lot of course, a lot more online, um, online courses. There’s a huge push in our University of California system for more of those courses. And so that’s a, a space where graduate students can work and make some money over the summer. But, um, I would have summer funding like on the table when thinking about a program.

Emily (26:10): I love what kind of both of you pointed out in that, is that the, the, the start of the negotiation process or the pre-negotiations aspect is figuring out, just really having clarity on what the offer is on what the funding path is, both in the first year and in subsequent years. Um, and even just asking some clarifying questions like Yvette, your example of someone saying, well, you know, is there an internal fellowship that I could apply for anything that we can do here, um, that can sometimes result in, uh, the, the outcome you want from a negotiation without even feeling like a negotiation. You were just asking some clarifying questions. Oh, I didn’t see that there was, um, a moving stipend included in this offer, but I, I’ve seen other universities do that. Is that something that you all offer? That’s pretty like low stakes and easy to ask and it could potentially result in an offer being made. I think something that perspective graduate students should know about the negotiation process, and you all both kind of pointed this out in different ways, is that the, the director of graduate studies or whoever the person is that you’re approaching about this, um, potential augmentation of your funding offer, they know a lot more about what levers, you know, can be pulled, what can be adjusted than you do. And so I think it’s really helpful to keep your question or request very open-ended. Like is there anything that you could do to augment this package? I’m not sure how that could come about. Um, instead of saying something like, I must have my stipend increased by X many thousands of dollars because it’s an, that’s an easy no, a lot of times a base stipend can’t be increased because the rates are set, you know, above that person’s pay grade by far. But maybe there’s, you know, a top up fellowship that they could offer you. Maybe they can put your name forward for an internal fellowship. Maybe they could, uh, get you into subsidized housing. So they know all the kind of background things that could happen much better than you do. And so I think, yeah, just keeping it open-ended is a good idea. Do you have any other tips about the negotiation process that you’d like to add?

Yvette (27:57): Well, there’s one thing that you just reminded me of is about asking clarifying questions. Because not every offer looks the same. Some are very clear and they lay out every year what you’re getting. And others are more vague. They’re like, you’re gonna be receiving a stipend of X amount every year in the program. Okay, how many years is guaranteed? And you wanna have that in writing. So first I would say get very clear about what your offer is because sometimes it’s not very clear and you’re made to feel like maybe you just aren’t reading it right. So I’ve had so many cases where folks ask me to read an offer alongside with them to make sure that they’re understanding it correctly. And then I go over, I’m like, yep, they’re not telling you how many years <laugh> you need to ask this and this and this. You need to ask about healthcare. ’cause healthcare is also not the same. You need to ask about professional development support because again, that’s not the same. I’ve had clients who have had their departments pay for my coaching services and I’ve had folks ask, and if they hadn’t asked, they wouldn’t have had that support. So you, again, just make sure before you negotiate, ask as many clarifying questions as you need to know exactly what you’re getting offered. And once you know what you’re getting offered, sometimes it can help to see if you get in somewhere else to compare and contrast the offers or compare and contrast to some of the offers we mentioned in the book. Which, you know, unfortunately, I would say they might become outdated at some sort, but, or at some point. But, um, sadly these stipends are not going up that much more. So you can kind of compare and contrast between your offer and a friend’s offer if they’re comfortable, your offer and another offer or your offering, even the samples that we have in the book. So you can get a sense of what information you do have, what information you’re missing and what’s, what are the things that are your priorities that you want to ask for. Even childcare is another one that comes up too, that people ask about. Yeah, yeah.

Miroslava (29:52): I, I will add to, um, to last things and something just piggyback on what Yvette was saying in terms of, uh, you might ask as well, like, will there be other opportunities for, um, fellowships or small grants in our program at the end of the year, we have the award ceremony and people apply for these smaller, you know, pots of money, a thousand, 2000 or even $500. Um, and sometimes those pot, those awards are for people working in specific areas, but sometimes the larger, beyond your department, the graduate division might have, um, fellowships for, um, maybe first generation students or maybe Asian American students working in a particular field. So again, like as Yvette saying doesn’t hurt to ask, um, are these opportunities available for me down the road?

Emily (30:33): I wanted to follow up on one of the thing you said Miroslava, which was that, you know, um, some time ago or, or back when you were admitted to graduate school, there was this attitude of, oh, they admitted me. I’m so grateful. This is amazing. I’m not maybe gonna look too closely at what this offer is. I’m just gonna say yes. Um, because you’re so flattered, right? To be admitted right to academia, this, um, this particular institution. And I, I definitely don’t think that attitude serves the student well. In fact, during the, um, admission season, after they’ve extended an offer of admission and before you accept it, that’s the time period when that student has really the most leverage and the most power in terms of negotiating and getting what they want and, and so forth, um, compared to any other time later on in graduate school. ’cause once you say yes to them, you’re committed. And the longer you spend in that program, kind of the more sunk costs, um, there are. And so you really don’t have as much as much leverage later on as you do during the application process. So I just wanna point that out as like, um, it’s, it’s a, it’s a golden opportunity <laugh>. So when you get are in that season, um, take the best advantage of it that you can because it’s not, it’s probably not gonna come around again, frankly.

Yvette (31:38): And I would encourage folks to get support in this process because for some of us, it’s also a major cultural difference and it feels wrong to do it. Like there’s guilt <laugh> and there’s shame involved in asking for more. And so it can help to lean on a mentor femtor, someone who’s been there, who has experienced that, who can push you or coach you or guide you so that way you can test it out and have that support. Maybe they come back, reply back, we can’t do this, but can we do that? And just that, just a lot of people do this even just professionally in their careers. They’ll hire someone to help them with the negotiation process. You know, a lot of folks, recruiters, you know, they work outside of academia, like this is the norm. But for a lot of first gen students, they don’t know this is the norm. And if they’re coming from different cultural backgrounds, then they’re made to feel like this is not okay. But it is. And, um, yeah, just if, if it’s really hard for you because it was for me at one point, get the help and support that you need from a trusted mentor Femtor,

Emily (32:44): I think something that might help with that, um, sort of realignment of mindset there is understanding that, again, as I said earlier, being sufficiently financially supported during your graduate degree is more likely to help you get to that desired end point, um, of graduating and moving on to a wonderful career, which is actually where your interests and the interests of the program are completely aligned. We, everybody wants that for the student. And if finances are going to, um, help that and help the person not be stressed and not be distracted and not have to side hustle and do all the other things that people have to do, um, to make ends meet, then that’s good for the program too. So I don’t think it’s, um, illegitimate at all to <laugh> to bring it up, but as you said it, it can take a little bit of an adjustment of, of the mindset and, um, dealing with the, the cultural backgrounds of everybody. So thank you so much for, um, for elaborating on those points.

Opportunity Costs of Pursuing a PhD

Emily (33:31): And then last question, or second to last question here, um, is let’s talk a little bit about what the opportunity costs are of pursuing a PhD because they are quite steep. And how should a prospective graduate student evaluate whether graduate school is going to be, um, a good investment for their career?

Yvette (33:50): I mean there, there are a lot of opportunity costs. Um, the first thing that comes to mind off the top of my head is the amount of time that a lot of people spend in graduate school. You might be spending anywhere from four to 10 years of your life in a PhD program. And while you, your income stays relatively the same, you’ve got colleagues whose income might be going up, who are advancing in their careers, who are getting promoted, and it can feel like that’s a big, um, that’s a big sacrifice that you’re making to pursue this PhD. So that’s one thing is the the income. The other thing I think about is, um, saving and oh, not saving, investing for retirement. A lot of times when folks are in graduate school, because your income is relatively low for a lot of people, unless you’re working on the side or working full time while you’re doing your PhD, you know, a lot of folks put their, uh, retirement investing and retirement accounts on hold. And what does that mean? That means, again, four to 10 years of your life that you could be investing, that you could be preparing for your future retirement that’s gone. Um, and even some folks put their life on hold, big major life decisions on hold. They’re like, oh, I don’t wanna have a baby or I don’t wanna get married or I don’t wanna, whatever the big milestone is in their life. So those are some things to keep in mind. That’s why we ask in the book, if graduate school is right for you and also when is the right time? Because people ask all the time like, when is the right time to go? Should I go after undergrad? Should I take a gap year or two? Should I get some work experience? And really it’s you and your circumstances and you get to decide when is the right time for you. There is no right or wrong time, even if you go back 10 years later. So it is important to calculate these costs to think about like how much is it gonna cost you? Not just if you think about taking on student debt or not just if you think about your income loss, but just thinking about the timing and other life factors and whether or not you’re willing to make that sacrifice for the end goal in sight, which might be a PhD and then whatever other career opportunities can come with a PhD.

Emily (36:03): I wanna underline everything you just said, especially about the investing time lost. Amazing. But let’s not forget about student loans either. If you have student loans from your undergraduate degree and they’re unsubsidized, they’re gonna continue accumulating interest. And as you said, if you put off, uh, if you are able to defer them, which is wonderful for six or 10 years or however long it is, it’s gonna be, you know, the interest will capitalize and the balance will be that much higher on the other side.

Miroslava (36:26): Those years I was thinking, I was thinking about that my twenties, right? ’cause I went straight through, uh, and I was thinking about how much it your life is sort of on hold. I guess for me personally, I kind of felt like I couldn’t make those decisions that Yvette was referring to in terms of a family this or that. ’cause I was so focused on my work and it was really hard for me coming from a family. Um, the questions came up, when are you gonna get a real job? When are you gonna get married? You know, or somebody to take care of you, quote unquote. And I thought like, oh my goodness. And you just have to tell them I’m one, at one point I just said, I’m gonna be in school for the rest of my life and get used to it, you know? And so that, I don’t know if that settled things or not, but um, yeah, I mean you don’t realize these things later I realized, oh, I didn’t invest. I could have been investing. I mean this is for myself, you know, coming from immigrant family and, and um, not having any of this information, uh, later on. But I will say like being on the other side now for all these years, it’s the best decision I could have made.

Best Financial Advice for Another Early-Career PhD

Emily (37:15): This has been just, um, the most wonderful conversation. I thank you so much for agreeing to come on the podcast and telling us about the book and diving deeper into some of these financial aspects. It’s been so wonderful to talk with you. So I want to pose to each of you the question that I ask all of my guests at the end of interviews, which is, what is your best financial advice for another early career PhD that could be a prospective graduate student or a current graduate student, or however you wanna interpret that. And it could be something that we’ve already touched on in the interview or it could be something completely new.

Miroslava (37:43): This is based on some of the the, my own experiences, but I think it’s important when you start thinking about graduate schools, I think it’s important to come with your finances in order to the most, to the best of your ability that it’s important not to come with tons of debt or financial obligations. I think I just think about the, this is sort of like, I don’t wanna say the the, so it is the femtor in me, right? To say not to um, to come and risk putting excessive stress on yourself, on your career in grad school. Just thinking about like you have all these mounting bills, these grad, these undergrad, right? Uh, not only loans, but maybe perhaps car loans or your, you are supporting your family that you decide to, you know, come to graduate school because you, you did get a package and then that will, you know, offset you for a while. Um, I think that it’s really hard to be able to focus on your work if you have all those financial burdens. You know, we can’t, many of us can’t sleep at night when we are just thinking about where’s our, our next paycheck or am I gonna be able to do these things? Um, so you need to think about, you know, because there’ll be so many other hidden costs in graduate school. And so I’ve seen some of my students come with lots of stress, you know, financial stress and I’m always with my mouth jaws my jaw open. Like, oh my goodness, how are you doing it? So that’s one thing I would say, if possible, try to get your finances in some kind of working order or get a system to help you, um, get to your goals.

Yvette (39:01): Yeah, I mean, I’ll echo what Miros just said. I do think it’s important that this starts before you even accept an offer. So create a budget before you accept an offer and make sure you can actually make ends meet with that offer. Um, if it’s possible. Again, I know everybody’s circumstances are different, but if it’s possible, minimize debt of any kind. Um, especially, I mean all all debt I’m not a fan of, but especially when it’s more than federal debt, when it’s personal loans, when it’s credit card debt, like to try to avoid that as much as possible. And more importantly like learn about financial literacy, learn about personal finance. I put that on hold throughout my graduate school journey. I didn’t start learning until after I got my PhD and it’s a shame. I wish I would’ve just done that homework on the side because it would’ve saved me, like literally saved me a lot of money. <laugh>, Um, explore other funding or income opportunities. Some of us already learned those skills because we have to. Um, but if you haven’t quite learned that skill, you know, explore what, whether that might be tutoring, mentoring, teaching, editing, you name it, you have a lot of skills that you can use to help you make ends meet. Um, and also maximize your institutional access and resources because at one point you’re not gonna have access to that really great healthcare or to that free or low cost therapy or to those LinkedIn learning courses. At one point you’re gonna have to be the one to pay for it. So ask around, find out what those benefits are and and maximize them. And then of course, I cannot say this because I wish that older me would’ve taught younger me how to do this, which is like getting, getting into the habit of investing earlier on. Um, even if it’s something as small as, I don’t know, $25 a month, if that’s all that you can do, just getting into the habit of investing will help you in the long run. Even if it doesn’t feel like it’s gonna make a big dent, that habit will make it a lot less burdensome, a lot less scary for you to then increase that amount in the future so that you can set yourself up for success. I wish I would’ve had that. Now I have to work even harder because I started out a little later.

Miroslava (41:15): I think most of us didn’t even know that was something in my family I grew up with, um, hoarders in terms of money, immigrant, you know, put it underneath the, the mattress and save every penny. And I’m sort of grateful I didn’t go the opposite way. We sometimes we go opposite what we learn and so I’m very much a penny pincher. Um, but you know, it doesn’t grow if you leave it underneath your mattress. So, um, anyways, so we just wanna play catch up, but we try to then share that information with others to help them sort of correct some mistakes that we made.

Emily (41:46): Well, we don’t have enough time for me to praise every single piece of advice that you two just gave because that was absolutely fantastic. So I’ll just say to the listener, if you need to, you know, rerun the rerun the last couple of minutes, listen to it over and over again because there was so much gold in just those quick responses. Um, and I certainly hope the listeners will take it to heart. So once again, thank you so much for coming on the podcast. Um, it’s been absolutely great to have you. And the book again is, Is Grad School For Me? Demystifying the Application Process for First-Gen BIPOC students. Will you say the website again where they can get it?

Yvette (42:14): Yes, that’s isgradschoolforme.com.

Emily (42:17): Perfect. Thank you so much. Thank you.

Yvette (42:19): Thank you

Miroslava (42:20): This was really fun.

Outtro

Emily (42:30): 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! Nothing you hear on this podcast should be taken as financial, tax, or legal advice for any individual. The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by Dr. Lourdes Bobbio and show notes creation by Dr. Jill Hoffman.

University-Level Policy Ideas to Improve the Financial Lives of Graduate Students and Postdocs

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In this episode, Emily shares the microinterviews she recorded at two higher education conferences this past summer. The conference attendees, virtually all of whom work at universities and most of whom have PhDs themselves, responded to this prompt: “What policy at your current university or one you worked at or attended in the past would you change to improve the financial lives of the PhD students and/or postdocs?” Listen through the episode for numerous ideas for policy change to advocate for at your university.

Links mentioned in the Episode

University-Level Policy Ideas to Improve the Financial Lives of Graduate Students and Postdocs

Teaser

00:00 Michael D: And the reproduction of knowledge requires financial security. And when you’re in a situation where you’re not getting paid a living wage, it’s very, very difficult to achieve that financial security. So for me, that’s definitely the major policy change that I would love graduate programs across the country to adopt.

Introduction

00:19 Emily: 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.

00:50 Emily: This is Season 15, Episode 5, and today I’m sharing the microinterviews I recorded at two higher education conferences this past summer. The conference attendees, virtually all of whom work at universities and most of whom have PhDs themselves, responded to this prompt: “What policy at your current university or one you worked at or attended in the past would you change to improve the financial lives of the PhD students and/or postdocs?” Listen through the episode for numerous ideas for policy change to advocate for at your university. The two conferences I attended were the Graduate Career Consortium Annual Meeting or GCC and the Higher Education Financial Wellness Alliance Summit or HEFWA Summit. GCC is primarily attended by university staff members working with PhD students and postdocs in career and professional development. The HEFWA Summit is attended by university staff members working in financial wellness and financial aid across undergraduate and graduate populations. These two conferences were excellent networking opportunities for me on top of the built-in professional development. However, there are plenty of universities who were not represented at these conferences.

02:10 Emily: Would you please consider recommending my financial education seminars and workshops at your university? My most popularly requested events for the upcoming academic year are How to Survive and Thrive Financially in Graduate School or Your Postdoc, How to Not Hate Your Fellowship During Tax Season, and Up-Level Your Cash Flow as a Graduate Student or Postdoc. Please direct an appropriate potential host within your graduate school, postdoc office, grad student association, etc. to PFforPhDs.com/financial-education/ where they can learn more. Thank you in advance!

02:53 Emily: You can find the show notes for this episode at PFforPhDs.com/s15e5/. Without further ado, here are the microinterviews recorded at GCC and the HEFWA Summit.

What policy at your current university or one you worked at or attended in the past would you change to improve the financial lives of the PhD students and/or postdocs?

Understanding Financial Priorities of International Students: Karin Lawton-Dunn, Iowa State University

03:11 Karin L-D: Okay. So I’m Karin Lawton-Dunn and I’m at Iowa State University. And what policy would you change when you’re current or former university campus to improve financial life for graduate students or postdocs? Since I work primarily with international students, I think I would try to change the understanding of faculty and staff of all of the different priorities that international students have with their money, and so that, you know, they really will go without food, without meals, so that they’re able to send some money home to their families that are also in need and struggling with food and housing. And I think that we need to be understanding of that and not punishing them for doing that.

Fee Exemption: Laura Farrell-Wortman, University of Arizona Cancer Center

03:53 Laura F-W: I’m Laura Farrell-Wortman. I’m the assistant director for academic programs with the University of Arizona Cancer Center. So I think that the policy that I would change would be to exempt PhD students from required fees, because I think that it really is, you know, important revenue generation for the university. But it does feel a little bit like kind of like the company store right where you are getting the money for working there, but that you’re turning right around and giving the money back to the university so it doesn’t feel like it’s a really sustainable system. And I would I would be interested to see what kind of revenue generation they’re actually getting from the PhD students and whether or not that could be found in an alternative means.

Postdoc Stipends and Benefits: Kaylee Steen, University of Michigan Medical School

04:41 Kaylee S: My name is Kaylee Steen. I work at the University of Michigan Medical School, and my advice for changing a policy at our institution that we’re actually implementing is ensuring that all postdocs at least make the minimum NIH stipend for their years of experience at the university. I think is really key. And another policy that we have not implemented would be that postdocs receive the same retirement benefits as are the rest of our staff, with the 2 to 1 matching.

Postdoc Benefits: Chris Smith, Virginia Tech

05:19 Chris S: My name’s Chris Smith. I manage the Office of Post-Doc Affairs at Virginia Tech. And one policy I’d like to see change really across the landscape is treating postdocs more like employees with employee benefits, especially retirement matching. Some institutions do that. We are one of them, but a lot of them don’t. And I think it’s important for them to kind of set them up for success.

Postdoc Training and Benefits: Weiwei Xu, Tulane School of Medicine

05:40 WeiWei X: My name is Weiwei Xu. I’m the academic and career advisor for a biomedical sciences graduate program within the Tulane School of Medicine. I think we can actually provide postdocs with more training programs as well as social benefits and retirement benefits so that they feel more supported by the school and by their training programs.

Cost of Living Adjustments: Beth Hunsaker, University of Utah

06:05 Beth H: My name is Beth Hunsaker with the University of Utah’s Financial Wellness Center. I’m the associate director, and the policy that I would want to see changed is to have cost of living adjustments, how much it costs to have rent. When that’s over half of what their stipend is and they’re not able to go and work somewhere else does doesn’t work for their families.

Consistent Funding and Transparency: Chris Hamm, University at Buffalo

06:28 Chris H: My name is Chris Hamm from the University at Buffalo. And the first prompt it was asking about what policy would you change in your current or previous campus approved financial life for grad students? And for me, just working with graduate students, noticing the opportunities for GA TA and RA positions, we do have, you know, minimum amount of financing for those positions that are agreed upon. But I think it’s not consistent across the board for each of different departments. And also true, since it’s a larger university, it’s very siloed as far as what information’s available to graduate students. So I think being able to have that be a little bit more transparent, giving them the opportunity to be more competitive, get themselves these positions and also make them aware of it, because a lot of times it’s only specifically in departments and I think it’s a really great opportunity because that’s something that I did when I was in grad school as well to help fund my education and get my experiences.

Postdoc Benefits: Alexandra Schnoes, Science Communication Lab

07:22 Alexandra S: Hi, I’m Alexandra Schnoes. I am the director for professional development at the Science Communication Lab. One of the things that I think about a lot is, is how postdocs at different institutions are often under these weird sort of employment categories. They’re often in different employment categories at the same institution. They often don’t have access to things, even though they’re considered employees are also considered trainees. So they also often don’t have access to things like sometimes even health care. But potentially child care support or retirement accounts. And and all of these things are ridiculous. These are these are people with Ph.Ds who are acting as professionals and and they should be able to be treated like you know, the employees that they actually are, as opposed to some weird, crazy, you know, none of the above, which means they get none of the benefits and all of the work of being a postdoc sometimes for years on end, doing amazing work, making the university home. But then they’ve sacrificed finances, potentially health care, retirement accounts, the ability to have children, all of this, all of these are things that policies could actually help address.

Child Care: Kathryn Sawyer Vidrine, University of Notre Dame

08:57 Kathryn SV: So this is Kathryn Sawyer Vidrine from Notre Dame and if I were to change one policy to make life easier on graduate students and post-docs, it would be to provide childcare for children under two years old because there is almost none in our area. 

Postdoc Benefits: Peter Myers, Washington University in Saint Louis

09:16 Peter M: My name is Peter Myers. I’m at Washington University in Saint Louis. The one policy that I would change for postdocs would be to make them all employees of the university.

Wages/Stipends: Elizabeth Eikmann, Washington University in Saint Louis

09:30 Elizabeth E: My name is Elizabeth Eikmann. I am the program coordinator for Postdoctoral Community Engagement at Washington University in Saint Louis, and I was a graduate student at Saint Louis University. And if I could change one policy for my former university’s campus to improve the financial life of the grad students there, it would be immediate graduate assistantship raises. The wages currently are not even living wage wages. Graduate assistants there are paid only nine months out of the year instead of 12. So not only implementing a raise but also instituting a year round salary, which also includes year round access to health insurance, which is not currently a policy there on campus.

Retirement Benefits: Maggie Nettesheim Hoffmann, Humanities Without Walls Consortium

10:24 Maggie NH: My name is Maggie Nettesheim Hoffmann. I’m the associate director of Career diversity for the Humanities Without Walls Consortium. Which is a grant for a Mellon funded, grant funded project at space at the University of Illinois at Urbana-Champaign. But I am located at Marquette University in Milwaukee, Wisconsin. So I think the policy advice that I would give and more systemically across, you know, higher education across the nation would be to recommend to universities that you consider one of the benefits for graduate students enrolled in your schools to give them access to starting their own 403b plans while they’re working on their master’s degrees or their PhDs, and making that a real benefit of, you know, if you’re at a public university that has you know, that regard, students are organized, making that a part of your union contract negotiations, aiming at private institutions, right? I mean, it’s not a heavy cost to the institution at all just to give them a framework or structure to start investing into those for all three plants. So that would be one of the policies that I would advocate as a shift in our higher ed, higher education ecosphere. Yeah.

Financial Education: Brady Krien, University of Iowa

11:32 Brady K: So my name is Brady Krien and I work at the University of Iowa, and the policy that I would change on our campus is to actually give us greater latitude to provide resources and information about finances for graduate students, and particularly related to the tax implications of fellowships that they win and how they need to prepare in advance to deal with those.

Financial Education: Yazzmynn Martinez, University of Colorado, Boulder

11:58 Yazzmynn M: Hi, everyone. My name is Yazzmynn Martinez. I am a events education and emergency response coordinator at the University of Colorado Boulder. I work at the Basic Needs center and one policy that I would change about the university campus to improve the financial life of our graduate and postdoc students is to provide a more formal education on basic needs in general so that can include how to get housing before they start college and also how to like budget with groceries and other expenses. And I would also advocate to increase the stipend just because oftentimes that’s not even enough for students to cover their living expenses.

Transparency: Katy Peplin, Thrive PhD

12:45 Katy P: Hi, I’m Katy Peplin from Thrive PHD. You can find me at thrive dash PhD dot com. I work with graduate students all around the world on being a scholar and a human. What policy would be useful. I think that the biggest policy that universities can put in place is transparency. I know so many students who have been caught in between different policies where they weren’t aware that certain things applied to them when they actually did or they lost out on money because things were well communicated. And I know that it’s extra work for universities to make some of those things transparent. But the more information that’s readily and easily accessible, the less grad students have to depend on their departments or their advisors who might not be well informed to let them. Know about opportunities. So transparency.

Commercial

13:31 Emily: Emily here for a brief interlude. Would you like to learn directly from me on a personal finance topic, such as taxes, goal-setting, investing, frugality, increasing income, or student loans, each tailored specifically for graduate students and postdocs? I offer seminars and workshops on these topics and more in a variety of formats, and I’m now booking for the 2023-2024 academic year. If you would like to bring my content to your institution, would you please recommend me as a speaker or facilitator to your university, graduate school, graduate student association, or postdoc office? My seminars are usually slated as professional development or personal wellness. Ask the potential host to go to PFforPhDs.com/speaking/ or simply email me at [email protected] to start the process. I really appreciate these recommendations, which are the best way for me to start a conversation with a potential host. The paid work I do with universities and institutions enables me to keep producing this podcast and all my other free resources. Thank you in advance if you decide to issue a recommendation! Now back to our interview.

Wages/Stipends: Sasha Goldman, Boston University

15:38 Sasha G: I am Sasha Goldman. I am the director of PCE resources at Boston University. And if I could change a policy on my current university campus to improve the financial life of the graduate students and postdocs, I would give everyone 12 months of funding and everyone more money.

Fellowship Payment: Joseph Gonzales, University of Miami

15:56 Joseph G: My name is Joseph Gonzales and I’m the senior director in the Office of Science and Assistance at the University of Miami. And the policy that I would change and this isn’t specifically related to my current campus. It’s based on my experience at different campuses. It’s how people pay like to pay fellowships, and especially when there’s a research component to it, they tend not to use the employment side of it where it would be there would be tax withholdings, because I believe sometimes faculty think that it’s a way to sidestep tax. The tax requirement when they don’t realize that it’s actually basically pushing it down the line for the student to deal with later and sometimes that often students don’t realize that there is a tax liability too, that comes with their financial aid. And by the time they’ve found out they haven’t saved money for that liability. So puts them in this financial crunch, sort of once their taxes are had been filed or they don’t claim it, and then it just gets pushed further down the line. So I would like faculty and universities in general to have said you’re trying to help other people. I don’t know if it’s more of a process that is that are aligned because it changes from one university to the other and how these are handled.

Wages/Stipends: Alex Embree, University of Missouri

17:39 Alex E: My name is Alex Embree. I’m the program manager at the Office for Financial Success for the University of Missouri. And the policy that I would want to have changed is that graduate student payment is in accordance with the value that they bring to the university when they are operating in a teaching capacity or grant. They need to be paid accordingly.

Time to Degree Transparency: Robbie Pearson, Southern Methodist University

18:03 Robbie P: My name is Robbie Pearson, and I’m the director of graduate and postdoctoral graduate career development and post-doc affairs at SMU in Dallas, Texas. And in terms of policies that I would be interested in revising around graduate education to improve the financial life of grad students and postdocs, I’m really interested in time to degree. I would like to see more transparency around how long it takes to earn a doctoral degree, and I’d like to see policies and initiatives around making sure that that’s a reasonable amount of time. Right. So in some fields it could take eight, nine, ten years to earn a doctoral degree or longer. And, you know, there’s some case that that’s important for the intellectual development of the scholar and for the research that they’re contributing to. But I also want to balance that against the reality that graduate students should be thinking of their time in grad student in grad school as an investment, not only into the intellectual development and into their field, but also into their financial futures. So getting them into the workforce in a reasonable amount of time is a really good thing. From my perspective.

Financial Education and Wages/Stipends: Stevie Eberle, Stanford University School of Medicine

19:03 Steve E: Stevie Eberle, executive director and assistant dean of biosecurity at Stanford University School of Medicine. So what policy would you change in your current or former university campus to improve the financial life of graduate students and postdocs? I would. We have an entry level class that all incoming graduate students have to take. And then there is a kind of an intro group that postdocs attend. And I really do wish we had financial training and planning built into the trainings, especially in the Bay Area because it’s so expensive and you you can’t quite understand it until you’re there. So I really would like somebody who can very directly explain the market and directly explain how to navigate it and have the resources to develop that. That being said, I think it is the administration’s responsibility to also help build better structures for that which we are working on, I will say. So we have subsidized housing in that type of thing, but subsidized housing is still very expensive. So I would like to have better pay, better caps, better minimum salaries and better coaching for faculty on how to treat something else. And often treat students and postdocs as more respectfully and more like adults and give them better tools for negotiation. Because I do think sometimes faculty just don’t know that. Sometimes they do, and that’s the problem, but sometimes they don’t. So I’d like to do better education on equitable offers and help better develop those kind of baseline expectations for parents and for this.

Cost Transparency: Derek Attig, University of Illinois, Urbana-Champaign

20:57 Derek A: I’m Derek Attig. I work in the Graduate college at the University of Illinois, Urbana-Champaign. And I’d like to see it be consistent that tuition and fees and the total cost of graduate education is completely transparent to people before they apply and when they’re making the decision to attend so they can understand the costs and weigh that against outcomes they hope to achieve.

Wages/Stipends: Michael Dedmon, National Endowment for Financial Education

21:25 Michael D: My name is Michael Dedmon. I’m the research director at the National Endowment for Financial Education and a Ph.D. candidate in political science at Syracuse University. I can definitely say for me that the single policy change that I would love for my graduate program, which is still sort of considering to adopt, is to raise wages and raise stipends for for graduate students. My department recently unionized, even though I’m an advanced graduate student and no longer in the bargaining unit. It’s something that’s very, very close to my heart that I think is very important. It’s beneficial for universities in terms of recruitment and retention. It reduces time to degree. It reduces attrition. We all know the benefits of it, in addition to the fact that the work that the students put in is what makes the universities work. They’re teaching students, they’re producing research, they’re publishing papers. It’s a beneficial situation for everybody. And the reproduction of knowledge requires financial security. And when you’re in a situation where you’re not getting paid a living wage, it’s very, very difficult to achieve that financial security. So for me, that’s definitely the major policy change that I would love graduate programs across the country to adopt.

Wages/Stipends: Byron Kerr, Texas State University

22:30 Byron K: Hi, I’m Dr. Byron Kerr with Financial aid and scholarships at Texas State University, and I received my Ph.D. from Florida State University in Tallahassee and what I would like to see changed on college campuses is back in the day. At any rate, my stipend check for my for my Ph.D. always came in a month after the payment deadline. So I always generated a $100 late fee every single semester. So I was always costing me money to be employed.

Housing: Anna Sheufelt, Duke University

22:58 Anna S: My name is Anna Sheufelt I work at Duke University, overseeing the educational programing and outreach for the Office of Student Loans and Personal Finance. A policy change that I would love to see come to. My campus is guaranteed housing for our international masters and graduate students. These are folks who have some of the largest complexities going on in their lives and also some of the greatest financial constraints with the international student status.

Wages/Stipends and Tuition: Annie Maxfield, University of Texas at Austin

23:28 Annie M: My name is Annie Maxfield. And I am at UT Austin in Texas. Career engagement and I would say the biggest financial policy problem is that tuition has continually become higher and higher over the years. Yet graduates students stipends are not increasing at that rate. And so we know the university is taking in more funds. However, the distribution of those funds is inequitable in terms of how graduate student labor is actually compensated.

Child Care: Phil Schuman, Indiana University

24:03 Phil S: So my name is Phil Schuman. I’m from Indiana University. One thing I do expect to see for a lot of grad students throughout higher ed is more access to child care and whether or not that’s temporary or permanent or whatever. But just the ability for grad students to be able to focus on their studies, their academics when they have child, if you have childcare issues come up, just because we’ve seen a lot of childcare and daycare cost issues and closing on campus. But I think it’s one thing, it’s a huge barrier that could potentially prevent grad students from getting over that hurdle. 

Fellowship Transparency and Experiential Learning for International Students: Sonali Majumdar, Princeton University

24:34 Sonali M:  Yeah. Hi, everyone. I am Sonali Majumdar and Assistant Dean for Professional Development in the Grad Futures program of the Graduate School of Princeton University. And I just wanted to talk a little bit about what kind of inclusive policies university campuses could have to support their international graduate students. And most of population on their financial wellness. And there are two things that come to mind. One is transparency on what kind of research fellowships are open to international graduate students and postdocs. And a lot of the universities do have research, Discovery Fellowship. Discovery databases like David Hopkins has a public dashboard that like lists all sorts of fellowships at the Graduate and closed off level by citizenship accessibility as well. And the other thing is experiential learning. What can we do to make experiential learning more accessible to international population? One pathway that does work is our internships and our fellowships that are funded by the institution that the students are working on, and that relates to work policies of how much academic hours on top of academic hours are. Students are available to work at university offices or other units on internships. And so there is definitely some interesting new programs that are helping out in this arena. And I hope more universities would eventually think about accessibility for their international population. On experiential learning. Thank you.

Financial Education: Matt Hertenstein, DePaul University

26:05 Matt H: Hi, my name is Matt Hertenstein, a college professor at DePaul University, received my Ph.D. at U.C. Berkeley in 2000. It may have changed since I graduated, but the policy I would change was to actually teach some financial literacy advice and financial wellness to Ph.Ds and make that a priority during orientation and make sure that people actually knew that that was available to help them.

Health Insurance: Alex Yen, Boston University

26:33 Alex Y: Hi, my name is Alex Yen I am a postdoc at Boston University in the Professional Development and Postdoctoral Affairs office. The policy that I would change or wish could change is that I hope that more universities will allow graduate students who take time off to keep their student health insurance during that time off. So that way they can take care of their mental health while they are recovering or taking some time away.

Outtro

27:14 Emily: 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 Dr. Lourdes Bobbio and show notes creation by Dr. Jill Hoffman.

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 [email protected] 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.

Finding Fellowships

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There are many opportunities for graduate students to win fellowship funding for their own stipends, tuition, and/or research expenses. The fellowships often provide a stipend that is higher than what the graduate programs normally pay, confer a degree of independence to the recipient, and boost the recipient’s CV with their prestige.

Fellowships Databases

ProFellow is a large, comprehensive, user-friendly database of fellowships that individuals can apply for that provide funding both for graduate student and for work opportunities. You can find fellowships to fund your graduate work by choosing either ‘Graduate study’ or ‘Doctoral study’ under the ‘Fellowship Type’ search field. After you create an account, you can keep track of fellowships of interest to you by bookmarking them.

These comprehensive databases of funding opportunities will also help you find fellowships and grants that you are eligible for:

Broad National Fellowships

The fellowships included below are popular among early-stage graduate students because they provide a large number of fellowships each year to students in a range of disciplines.

National Science Foundation

Graduate Research Fellowship Program

Award: $12,000 toward tuition and fees and a $32,000 stipend for three years

Fields: a variety of fields within chemistry, computer and information science and engineering, engineering, geosciences, life sciences, materials research, mathematical sciences, physics and astronomy, psychology, social sciences, STEM education and learning research

Eligible years: college seniors and first and second year graduate students

Deadline: October to November 2015 (field-dependent)

Further Reading: Preparing an Award-Winning NSF GRFP Application

Department of Defense

National Defense Science and Engineering Graduate Fellowship

Award: tuition, fees, and 12-month stipend of $30,500 in the first year, $31,000 in the second year, and $31,500 in the third year

Fields: Aeronautical and Astronautical Engineering; Biosciences; Chemical Engineering; Chemistry; Civil Engineering; Cognitive, Neural, and Behavioral Sciences; Computer and Computational Sciences; Electrical Engineering; Geosciences; Materials Science and Engineering; Mathematics; Mechanical Engineering; Naval Architecture and Ocean Engineering; Oceanography; Physics

Eligible years: college seniors and first and second year graduate students

Deadline: December 11, 2015

Fannie & John Hertz Foundation

Hertz Fellowship

Award: tuition and $32,000/year for five years

Fields: applied physical, biological and engineering sciences

Eligible years: college seniors and grad students

Deadline: October 31, 2015

Notes: Must agree to a moral commitment.

 

Do you know of another national fellowship for a variety of disciplines or a great funding database? Leave the name in the comments and we will add it to the list.