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How Winning Fellowships Forced This Grad Student to Take Out Student Loans

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In this episode, Emily interviews Dessie Clark, a doctoral candidate in Community Sustainability at Michigan State University. In 2018, Dessie received a few small fellowships for conference travel and a couple months of stipend income. In 2019, the financial aid office told her she had been “over-awarded” and had to pay the travel fellowship money back. Dessie took out student loans to pay that bill and then set up a payment plan with the IRS when she couldn’t pay the additional tax due on the fellowships. Dessie shares the steps she takes now when receiving fellowships so that she does not become over-awarded and how to prepare for tax time as a fellowship recipient.

Links Mentioned in This Episode

over-awarded fellowship grad student

Teaser

00:00 Dessie: Outside of academia, people wouldn’t hesitate to ask questions about their paycheck, right? And so we need to kind of be thinking about it the same way. If something was different on your paycheck, you would ask why or what’s going on and how you need to deal with it. So just not being afraid to try and talk to people about what’s going on with you so you don’t get in a bind.

Introduction

00:22 Emily: Welcome to the Personal Finance for PhDs podcast, higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season five episode one and today my guest is Dessie Clark, a doctoral candidate and community sustainability at Michigan State University. In 2018, Dessie received several thousand dollars in fellowship income for travel awards and a couple months of stipend income. In 2019, she received a bill from the university for the amount of the travel awards. Apparently, she had become overawarded, a term that was totally new to me., Dessie he took out student loans to pay back the university, and to add insult to injury, faced a higher tax bill that season as well. Dessie relays what she had learned on how to avoid becoming over awarded and her advice for all graduate students receiving stipends. Without further ado, here’s my interview with Dessie Clark.

Will You Please Introduce Yourself Further?

01:19 Emily: I have joining me on the podcast today Dessie Clark, who is a graduate student and is going to be telling us about being awarded fellowships as a graduate student and some of the unexpected downsides that can come with being awarded fellowships, which is of course a wonderful thing, but in Dessie’s case they caused a few other complications. Dessie, thank you so much for joining us on the podcast today and will you please tell us a little bit about yourself?

01:45 Dessie: My name is Dessie Clark and I am a doctoral candidate in community sustainability at Michigan State University. I actually got my master’s degree at Vanderbilt University in community development and action. And then I moved to Michigan to finish out my PhD.

02:01 Emily: Great. And how long have you been at Michigan State?

02:04 Dessie: I have been at Michigan State for four years.

02:09 Emily: Okay. So I won’t ask you when you’re finishing, but I’ll just say soon, you’re finishing soon.

02:13 Dessie: Yeah, hopefully this year, maybe next year, maybe, you know, whenever.

Funding During the PhD:

02:16 Emily: Yeah. So can you tell us a bit how your funding has worked since you’ve been doing your PhD?

02:22 Dessie: I’ve mostly been funded as a research assistant, so that provides coverage for tuition and then a stipend to live on. There have been a couple of summers where I’ve taught as an instructor, but for the most part it’s been RAs. And then there have been some brief moments in time where fellowships have also come into play, which is what I wanted to talk about today.

02:43 Emily: Yeah. Please elaborate about that. When did you win fellowships and maybe what amounts were they, those kinds of details?

02:52 Dessie: I think one of the things that’s important is that I didn’t necessarily know that I was getting fellowships. How this came into play for me was I had friends that had gotten fellowships and they had talked about how they were unaware of the tax implications. So I knew when I was going to apply for fellowships or asked for them that there would be tax implications there. But for me, I was actually receiving fellowships in the form of travel awards. So there were multiple times where I applied to go to conferences, and when I was awarded that travel money, I wasn’t aware that they were fellowships. So I’ve won I guess, fellowships of several thousand dollars for travel. Then there was a brief time where, I needed to change labs and so fellowships were used to fund me in my transition.

03:40 Emily: Okay. So definitely for the travel awards, we’re only talking about thousand, few thousand dollars here and there. Seemingly a relatively small amount of money, right? And then when you were switching labs, was it a semester’s worth of funding or how long was that?

03:54 Dessie: It was still relatively small. It was a couple of thousand dollars, but all of these fellowships awards actually happened in the same semester, so by the end it ended up being like $7,000 or $8,000.

04:07 Emily: Oh, okay. When they hit all at once, it really does add up in that case. Okay. So yeah, you didn’t really know that that was what you were receiving. So what happened? You get this money and it’s all good, right?

04:19 Dessie: Right. So I get this money and I’m really excited, I can afford to go to these conferences, I’m able to switch labs. But one of the things that I didn’t know is that they were fellowships, so I was kind of surprised two-fold. The first thing that happened that let me know that something wasn’t going quite right was that — this was in the fall of 2018 — so when I was going to start school in spring 2019, I got a bill from the university that said, “you owe us money, you’ve been over awarded.” I had no idea what that meant, but what I understand now is that every student has a cap on what they’re allowed to receive for education-related expenses. They had decided that this amount of money that I had received for travel had thrown me over that, so I needed to pay back university. That was kind of the first thing I noticed.

Fellowship Cap and Being Over-awarded

05:05 Emily: Let me pause there, because this term over awarded is new to me as well. What are you paying back to the university?

05:16 Dessie: What they were charging me ended up being the sum total of those travel award costs. There’s something that you can do to kind of help with this. Like I said, every student has a cap for how much money they’re allowed to receive, but one of the things that your department can do is they can write a letter saying, “This travel money is necessary for this person’s education. This is advancing their education or contributing in some way and this money is going towards that. It’s nothing extra. It’s not something we can go shopping on. This is money for the students’ education.” I didn’t know that that was something that could be done or needed to be done, so it wasn’t done in my case. I got this bill and it happened to be for the exact amount that I had received for travel awards. I found out through talking to financial aid that basically those things have been passed through as fellowships and because of how they were categorized, I got more money from the university than I was allowed to and so I needed to pay it back.

06:12 Emily: So it sounds like your stipend had been paid by your RA position and this supplemental fellowship, but those were kind of evening out to be what you’re allowed to be paid. And then these travel awards were over and above that and they were like, you’re not allowed to receive this money. This is literally the first time I’ve heard of this. I don’t know if maybe this is unique to your university or your department or maybe in all these cases, other people write these letters, their advisors write these letters that you’re talking about. I’m not sure how that works out, but this is really the first time I’m hearing about this, so it’s definitely raising like some major red flags for me.

06:46 Dessie: Yes. So from my understanding, and this is just what I’ve been told, this kind of cap exists for every student that is at a university, but I don’t know if it’s just how my university chose to handle it, or if this is happening a lot more than people know about, but basically what happened was I was over whatever that cap is. So it became a huge issue because now I’m sitting here before I can start school being told that I was thousands of dollars.

07:15 Emily: Right, exactly. So what did you do?

07:19 Dessie: What I did was what I didn’t want to do, I took out student loans and they subtract it from that.

07:24 Emily: So you took out student loans to pay the university for money that you had won that you used go to conferences. This Is bananas. This situation makes no sense. I’m really glad that you volunteered to come on the podcast to talk about this because the situation I’ve heard in the past for other students is that maybe they have a fellowship coming from the university or maybe they have an RA position or TA, something like that. Then they win a fellowship that’ll pay like their stipend. And a lot of students think, “I am in the money now.” They think getting that fellowship on top of the existing funding for their RA position or whatever it was. That is almost universally not the case. It is possible that you may end up being paid more than you were going to in the first place, but it’s not going to be double what your stipend was to begin with. And so there’s plenty of people who are caught by surprise by “what I just won funding, what do you mean you just take away my other funding?” No, that’s definitely how that works everywhere. There may be some room for negotiation and so forth, but that’s how the standard situation works. But I’m really glad to hear about your situation as well. So you know, now that you have been through the whole thing, what could have been done on your behalf and wasn’t. I don’t know. This is something that I’ve never heard of, of a student having a proactively ask for, so of course you wouldn’t have known, but I guess in the future, anyone listening who receives extra fellowships in some manner, make sure that you’re not going to run into any kind of cap, or whatever exceptions need to be made are going to be made on your behalf. Is that your advice?

Proactive Steps to Avoid Getting Over-awarded

08:54 Dessie: Yes, that is definitely my advice. I think something else too that really ties into this, that I experienced, is I got another fellowship for travel in spring and of course this time I was like, “hi, can you please write this letter and send it to financial aid? “And they were able to do that. But I came upon a situation this summer where there was something the university was going to pay for and they weren’t able to pay for it the way that they want it to. I had gone to my college and I said, I need help figuring out how this thing is going to get paid for, but it can’t be a fellowship because I’m scared I’m going to get over awarded again and I’m going to owe it. My college was really great at hearing that concern and trying to work with me on it, but what ended up happening in the meantime is that the graduate school at my university granted it as a fellowship anyway. One of the things that I think is a kind of a broader issue is that when we’re getting loans or we’re getting grants, we have to accept them and there’s usually some paperwork that we have to go through promising whatever and making sure we fully understand the impacts, but I was awarded a fellowship without my permission basically. I think that the school has figured it out, so that way I won’t be over awarded and this won’t impact me, but I also think that’s why I said at the beginning, it’s really important to know how things are being classified and categorized on your behalf because maybe something is a fix, but then all of a sudden six months down the road you’re being asked to pay it back. I think keeping an eye on that is really important.

10:15 Emily: Yeah. I mean, it sounds like you were taking the proactive steps the second time around that you knew to take, and yet, as you just said, they can just push these things through into your student account and there’s no process around it. It’s totally on their end and they have control over it. But I guess, did it just end up being that they just took it back like, “Oh, we gave it to you, now we’re going to take it back and award you the money in some other way?”

10:40 Dessie: They ended up just doing what I was talking about before and doing the right amount of paperwork to explain why this is an educational expense and all of that. I think it was handled because they knew that there were some extra steps that needed to be taken. But I think another thing too is you asked me how I found out about all this. Like so many other students at tax time, it really became a “you owe this money.” I think too, it’s easy for us to just think like, well this was only, you know, $1,000 here or $1,000 there. But it really adds up. And for most graduate students, we’re not in a super comfortable financial place. So even a surprise tax of a couple of hundred dollars can really set you back.

11:20 Emily: Yeah, and sometimes I think it’s easy to forget the academic year and the calendar year don’t line up, right? So you could be receiving fellowships maybe in two different academic years, but if they fall in the same calendar year, then it’s all going to add up at that year-end tax return.

Commercial

11:40 Emily: Emily here for a brief interlude. Tax season is upon us and while no one loves this time of year, it’s particularly difficult for post-bac fellows, funded grad students, and postdoc fellows. Even professional tax preparers are often thrown for a loop by our unique tax situation. And don’t get me started on tax software. I provide tons of support at this time of year for PhD trainees preparing their tax returns. From free articles and videos, to paid at-your-own-pace workshops, to live seminars and webinars for universities and research institutes. The best place to go to check out all of this material is pfforphds.com/tax that’s P F F O R P H D dot com slash T A X. Don’t struggle through tax season on your own. Visit my website for the exact information you need in the most efficient form available. Now back to the interview.

Tax Consequences of Being Over-awarded

12:44 Emily: Okay, not only did you, you know — Hey, you received award funding. Awesome. Got that. Oh no, you have to pay it back to the school. Ridiculous. You have to take out student loans, do that. So essentially, with some middlemen, you were just taking out student loans to go to conferences, which is probably not a decision, it sounds like, you would have made, had you known that was going to be outcome. On top of that, travel and research is not a qualified education expense for making fellowships tax free. So you end up with this tax bill on top of all the other stuff that’s happening. How did that play out?

13:19 Dessie: I think one of the things that I knew when I was changing labs is that I knew that a portion of that fellowship money, I knew it was untaxed* and I was gonna need it. So I was able to put that aside. What surprised me is when I sat down with my accountant and she put two and two together, that all these other things had been categorized as fellowships, the amount I had set aside to pay taxes on was not nearly the amount of money that I needed. That was obviously a huge strain. I’m lucky enough that I have a partner who works, but we did end up having to go on a payment plan to the IRS because I just couldn’t afford to come out of pocket the amount that I owed.

[* By ‘untaxed,’ Dessie is referring to the fact that income tax was not withheld for her on this portion of her income, not necessarily that it is tax-free.]

13:57 Emily: At the point when you were working with your tax preparer, at what point in tax season was that? Were you getting ready to file and you found out that, “Oh wait, I’m going to owe more than I had set aside?”

14:08 Dessie: It was right at the end. There was no fixing it. I getting ready to file taxes and she’s like, this is not looking good, and it was what it was at that point.

14:18 Emily: Not all the listeners may know, but some people might hear, maybe from their parents or something, about filing extensions. So they get another, I don’t know, six months or something to file your tax return. You do not get an extension on actually the tax that you owe. You only get the extension on the return. So if you’re finding out in March or April that you owe a tax bill and you’re not prepared to pay it, as you said, graduate students typically live without much margin in their lives. If you find that you owe a tax but you’re not prepared to pay it, really probably the best thing to do is what you did, which is to go on a payment plan with the IRS. A lot of people would say, “Oh my gosh, the IRS, I’m so afraid I don’t want to talk to them. I don’t want to deal with them,” but actually that’s the worst step you can take, is not to talk to them. Did the payment plan work out okay? Did it end up being all right that you could pay a little bit over time?

15:06 Dessie: I’m still on it to this day. I owed a chunk and there’s only so much I could put towards it per month. So yeah, it has worked out. I’m making my payments so I haven’t gotten in trouble with the IRS, but it isn’t a new bill now every month that I have to pay. I think too, just thinking about this calendar year and the implications for next tax season, I think now I’m just very closely watching anything financially that comes through the school just to make sure I don’t get into this situation again. I know now there are ways that your department or your college can help you, and making sure that these expenses are processed the way they should be as true education expenses and not as extra in your life. And just keeping an eye on that. I think especially as I get into the fall, I will definitely be following up with my administrators and saying, “Hey, just want to make sure I see this here. Was there something that went with this to make sure that I’m not getting a bill for being over-awarded again, or I’m not having any more tax implications than I already know I will have.”

Saving Money for Taxes When Your Fellowships Do Not Have Tax Withheld

16:08 Emily: Right. At this point, now that you’re so aware and you’re so proactive about everything, are you filing quarterly estimated tax or does your additional tax due not rise to that level of necessity?

16:22 Dessie: It doesn’t rise to that level, but I am always putting stuff aside. Even when there are things that should be categorized in a way that I won’t have to worry about that, I’m still always just taking a certain percentage and putting it aside, because I think in my situation, the worst case scenario is to have what happened this year and be totally surprised and unprepared, because that’s exactly what happened.

16:42 Emily: Can you tell the listeners a little bit about your system for setting money aside? Because maybe they want to know, mechanically, how you do that.

16:48 Dessie: Yeah. I am not an accountant so I don’t have this down to any kind of science. It’s just kind of what I’ve found has worked for me. So anytime that I get any kind of award through the school, whether it be for travel or whatever else, it could be research money, I always take about 30% of that and I put it in a savings account. And that seems to be kind of a pretty safe estimate of you definitely won’t need to pay more than that, and so I think that’s been my system now. Even when I make requests for money, I always keep that in mind, because I think something that I’ve watched other students go through is they ask for exactly what they need, forgetting about that tax buffer. And so you might end up short or paying back necessary money later.

17:33 Emily: Yeah, good idea. I do think 30% is a very good margin, probably more than you’ll need, but better to be on the safe side than on the sorry side, as you definitely found out. Do you have like a separate savings account that you use for that or something?

17:46 Dessie: Yes, I have a savings account that I just don’t touch. I kind of joke with my partner, that it’s like the savings account that you don’t use as a savings account. There is no level of emergency that could make me touch that money. I pretend it’s not there because for all intents and purposes, it’s not mine. It’s the government’s, and I don’t want to end up in a situation. I mean it’s August, right? And I’m still on a payment plan for this past year’s taxes. I don’t want to have to do that again.

18:12 Emily: Yeah, I do the exact same thing. When I was in graduate school, some years…Well, I guess it wasn’t in graduate school, but it was when I did my postbac, taxes weren’t being withheld. I had to pay quarterly estimated tax at that time. I started doing the exact same thing. I set up a separate savings account, I have it nicknamed tax, put money in there as I get money to come in, withdraw from it as I was paying quarterly estimated tax. But I wanted to say that I do the exact same thing as you, which is that I don’t think about that tax savings account as being my money. Right now, when I’m self employed, I also have the responsibility of paying quarterly estimated tax. And so I actually calculate my, or our family’s net worth every month, on the first of the month, and so I calculate two numbers, which is one my technical net worth, which includes the tax money in it, and then what I label as my true net worth, which subtracts that tax savings account balance out. And I say, “Nope, I don’t even think of it as being mine right now because, as you said, I know I just have to hand it over to the IRS in a few months.” I don’t want to think of it as accessible at all, in the meantime. So yeah, thanks for sharing about that.

Final Words of Advice

19:16 Emily: Is there any other final advice around the situation that you would want to tell someone else so they don’t get into the same kind of problems that you did?

19:24 Dessie: Yeah, just kind of recapping what I said. So I think, of course, the conversation that fellowships are untaxed* is just a broader conversation we need to be having in general because I don’t think a lot of people know that. But again, just monitoring how things are being processed for you and if they’re technically being categorized as a fellowship. Then, I think that for the most part students are pretty safe. I don’t want to create mass panic as far as this cap goes. If you’re just talking about you just have an RA or you know, just the little student loans or you just have a TA. I think where you start to get near this cap is when you’re doing a lot of research awards and travel awards and teaching where it’s on top of what you’re already getting. I think for students that might have multiple things going on, like I clearly had, making sure you’re having a conversation and knowing where that line is so that way you don’t cross it because the way that they balance their books is you’re not going to know until you’re far down the road and the money is already spent. It’s going to be the next semester. So just keeping an eye on that and honestly just reaching out and asking your financial aid office and saying “I know that there’s a certain amount of aid that we’re allowed to get. What is my number?” So you can kind of monitor it yourself because I really think that for most people, you’re better off saying, “No, I’m not going to take that award this semester. No, I’m not going to get this or do this now” and waiting, so you don’t cross that line and end up having the money need to be paid back.

[* By ‘untaxed,’ Dessie is referring to the fact that income tax was not withheld for her on this portion of her income, not necessarily that it is tax-free.]

20:44 Emily: Yeah. Or just be aware, as you were saying earlier, that these letters or whatever can be written so that the money goes on top. So it sounds like, at least your university, your department, it wouldn’t be like, oh, your advisor just wants to pay you more or someone wants to just like give you a fellowship. You’re going to run into problems with that. It has to be something that’s justifiable under their system for raising their cap on an exception basis to allow that award to go through.

21:10 Dessie: Right, and I think too, just noting that the people that work in financial aid may not be as familiar with why research money or why conference money is an educational expense. So things that you might see and go through and you think, “Oh yeah, that’s totally an expense for my education. Anyone would see that?” No, you might have to justify it and they might need, you know, justification from your department on why this is important for your education.

21:32 Emily: Yeah. And I will just add that financial aid professionals and so forth, they’re not going to touch this tax issue with you. They’re going tell you to go away if you try to ask them tax questions. But in the area of how much you’re supposed to be awarded and what the education expenses are, they are the experts in that area. So you can definitely go to them with those kinds of questions. Just don’t ask them, “what’s my tax bill going to be?” They’re not going to answer that. But, yeah, among that subject matter, they are the best people to go to, I think. It sounds like you’ve developed a little bit of a working relationship with those people.

22:04 Emily: Dessie, thank you so much for giving this interview and sharing the story. I think it’s really unfortunate how it worked out and also just that you were saying that you didn’t catch all of this until the following calendar year or the following semester, naturally. That’s how these things work. Of course you wouldn’t, but because it happened so late, it sounds like the proper paperwork couldn’t have been pushed through in the past. I just want to ask the concluding question that I ask of all my guests, which is what is your best financial advice for another graduate student or early career PhD?

22:34 Dessie: I think asking questions. I think that early and often you should ask questions about the money that you’re getting, where it’s coming from, how it’s classified, and just always not being afraid to shoot financial aid and message and say “Hey, this has come through. Is there anything I need to do with this?” Because I think everyone, us included, but also the financial aid folks would rather be proactive about dealing with a problem rather than getting the early spring email, which was “what is happening, I can’t pay you a couple of thousand dollars.” I think just always asking questions and not being scared to ask about how these things impact you. Outside of academia, people wouldn’t hesitate to ask questions about their paycheck, right? And so we need to kind of be thinking about the same way. If something was different on your paycheck, you would ask why or what’s going on and how you need to deal with it. So just not being afraid to try and talk to people about what’s going on with you so you don’t get in a bind.

23:28 Emily: Yeah, absolutely. And like you said earlier, you don’t have to accept a fellowship. It can just be pushed through. And likewise for some other people, they might not even really be aware of how they’re being paid. They’re just kind of receiving a paycheck and they don’t really know is it from an assistantship. I mean they would know if they were teaching your class, right? They know if it says teaching assistantship, but is it a fellowship, is it an RA, I don’t know. The roles, like what you actually do for each of those things, are pretty much the same. So you might not even be aware until you get a W2 at tax time or don’t get a W2 at tax time, what happened in the previous year. Then, if any adjustments need to have made, then it’s too late, right? Then the tax year has already ended. So totally want to underline that advice — know why you’re being paid, know what kind of tax forms you’re going to receive.

24:10 Emily: I just want to add in a final note for the listeners, if there’s anyone listening who is receiving a fellowship, even a small award, like what Dessie’s been talking about during this interview, you should look into whether or not you need to file quarterly estimated tax. I’m going to link in the show notes my massive article on quarterly estimated tax. And I also have a workshop on that that’s linked from that article. So I’ll link to both those things in the show notes. Please note that the deadlines for quarterly estimate tax are in mid April, mid June, mid September and mid January of every year, usually the 15th of the month or the business day following. So keep those deadlines in mind. If you are receiving a fellowship, you might not have to pay quarterly, but at least you need to investigate and figure out whether or not it’s your responsibility, or whether like what Dessie’s doing, you can just set the money aside and leave it until the end of the year and pay it all at once with your annual tax return.

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25:01 Emily: Thank you again Dessie for coming on and giving this interview and giving this word of warning to all the other graduate students listening.

25:08 Dessie: Thank you for having me.

Outtro

25:10 Emily: Listeners, thank you for joining me for this episode. PFforPphDs.com/podcast is the hub for the Personal Finance for PhDs podcast. There, you can find links to all the episode show notes and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, here are four ways you can help it grow. One, subscribe to the podcast and rate and review it on Apple podcast, Stitcher, or whatever platform you use. Two, share an episode you found particularly valuable on social media or with your PhD peers. Three, recommend me as a speaker to your university or association. My seminars covered the personal finance topics PhDs are most interested in, like investing, debt repayment, and taxes. Four, subscribe to my mailing list at PFforPhDs.com/subscribe. Through that list, you’ll keep up with all the new content and special opportunities for Personal Finance for PhDs. See you in the next episode, and remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing and show notes creation by Lourdes Bobbio.

How to Read Your PhD Program Offer Letter

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Congratulations on receiving an official offer of admission to a PhD program! This is truly an exhilarating period in your academic career. After celebrating your admission and letting the giddiness wear off, whip out your magnifying glass: It’s time to take a close look at your offer letter to figure out what it actually means. Offer letters can be a bit difficult to decipher (sometimes intentionally!), but this is a vital step so that you go into your PhD program with your eyes wide open regarding your financial situation. This article covers how to discern what your program is offering you regarding your stipend/salary, out-of-pocket tuition and fees, the type of pay you receive and whether it comes with a work requirement, health insurance, “guarantees,” and how your funding package evolves as you move through your PhD program.

PhD offer letter

If your offer letter doesn’t answer all the following questions (and you’re seriously considering taking it), turn to the offering department’s administrative assistant (for official answers) and/or current graduate students (for this-is-how-things-actually-work answers).

Gross Stipend/Salary

Right away your eye might be drawn to a phrase like “Your total financial aid package is worth…” and some huge number like $50,000 or $90,000. Don’t be distracted by it! You need to know what your actual pay will be – what is usually referred to as your stipend. The letter should delineate between your stipend and the cost of the tuition and fees paid on your behalf. The important take-away is what’s going into your pocket (before taxes) as this is the money that will pay your living expenses and fund your financial goals.

Tuition and Fees (Your Responsibility)

If your offer letter includes funding, it should say that some aspect of your tuition and/or fees will be paid on your behalf. However, when determining how much money you actually get to keep at the end of the day, you have to know: Are you responsible for paying any (partial) tuition and fees out of your own pocket? For example, perhaps your tuition is being paid on your behalf, but out of your stipend you are expected to pay a relatively small fee. Don’t be impressed by huge numbers in tuition and fees being paid for you! What matters is how much you have to pay out of your own pocket; ideally $0 or close to it!

Source of Stipend

Your offer letter will likely tell you the source(s) of your stipend: an assistantship or fellowship. One of the key differences between these two types of funding is whether there is a work requirement.

Fellowships do not have “work requirements,” and to maintain them you are generally just expected to make satisfactory progress toward your degree with respect to your coursework and dissertation progress.

Assistantships do have a work requirement; you are technically an employee of your university. Research assistantships with your dissertation advisor usually allow you to combine your work requirement with your dissertation research (with some exceptions). Teaching and graduate assistantships require you to teach or perform some other kind of service for your university (most often officially capped at 20 hours/week), after which you are free to work on your coursework and/or dissertation.

It’s vital to know whether you have a work requirement in your first year or really any requirements to maintain your funding (e.g., attending a seminar series, submitting progress reports). If you don’t meet those requirements, your funding could be revoked.
Your stipend offer letter should clearly state what your work requirement is or whether you need to secure one prior to the start of the school year. For example, you might be offered funding from a teaching assistantship, but it could be still up to you to actually arrange with a professor to TA a certain course.

Knowing about a work requirement will help you properly envision how you’ll spend your time during your first year in your PhD program.

Duration of Stipend

Your offer letter should tell you over what period you will be paid your stipend. Ideally, the answer is 12 months, although carefully note if the source of the stipend changes during that time. (For example, I was paid in my first 9 months of graduate school by a training grant and in the next 3 months by a research assistantship, and this was all spelled out in my offer letter.) If the offer letter says the stipend lasts any period shorter than 12 months, you need to follow up: Does that mean you actually won’t be paid (you’ll have to plan financially for that, obviously) or that you are going to have to secure other funding after the initial period?

Who Pays What for Health Insurance?

Health insurance is a huge issue for graduate students, and universities handle it differently. The key answers you need from your offer letter are:

  • Will you have an opportunity to buy student health insurance through the university? (Almost certainly the answer is yes.)
  • What is the yearly premium for the student health insurance?
  • If you sign up for student health insurance, is the premium paid on your behalf (similar to tuition and fees) or do you pay (part of) it out of pocket?
  • Are dental and vision insurance bundled along with health insurance, or would you have to buy them separately?

Even if you plan to stay on your parents’ insurance for some years at the start of your PhD, it’s important to understand what you may be paying for premiums once you switch to insurance through your university.

Is There a Guarantee?

Does the word ‘guarantee’ appear anywhere in your offer letter, e.g., is your funding guaranteed for 2 years, 5 years? A guarantee is nice to have, but it shouldn’t necessarily be a deal-breaker. If you don’t have guaranteed funding throughout your PhD (which might very well go beyond 5 years!), find out from current students whether students all pretty much stay funded or whether funding becomes tight/competitive in later years.

What Happens after the First Year?

Probably of the most important things to know about funding during your PhD is what happens in later years. A PhD is long, after all, and your offer letters might only discuss funding in the first year. Your offer letter might include hints of funding changes in the future, such as by saying you received a first-year fellowship or one-time bonus, or saying that your funding source will change starting in your second year.

You should be particularly wary of your stipend decreasing after your first year due to a one-time/first year-only bolus of money (a promotional offer, so to speak). It would be quite painful to find out at the last minute that your stipend is going down and have to scramble to adjust your living expenses. Better to build your life and budget around your ongoing stipend amount and use the first-year increase for one-time expenses or savings.

If you are seriously considering accepting an offer, you should definitely inquire about what funding looks like in the second and following years. The departmental administrative assistant may not be able to say for sure what will happen in your case, but he/she and current students can tell you the precedent.

  • What will my after-tuition/fees stipend (and its term) be in my second and subsequent years (lower, higher, pretty much the same)?
  • What will the source of my funding be in later years, and am I responsible for securing it? (For example, in your first year you might be funded from a training grant so you can rotate among potential advisors, but starting in your second year you must secure a research assistantship with your dissertation advisor.)
  • Are yearly cost-of-living raises typical?

Don’t be dazzled by a pumped-up first-year offer if the reality behind it is a department where students compete with one another for limited funding and you’re paid the same stipend in your fifth year that you were in your first!

You can see that to properly understand your funding during your PhD you need a lot more information from your stipend offer letter than just the number that will hit your bank account each month! Again, you only need to investigate beyond the offer letter to the degree that you are considering accepting the offer (most likely based on other factors). But even if you don’t care about money at all, I strongly encourage you to find answers to these questions for the program that you ultimately accept before you commit to a lease or move.

Do I Owe Income Tax on My Fellowship?

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Postbac, graduate student, and postdoc fellows frequently ask whether their fellowships are considered taxable income. PhD-type fellowships that are not reported on a W-2 are non-compensatory income. They might be reported on a 1098-T in Box 5, on a 1099-MISC in Box 3, or on a courtesy letter or not reported at all, which accounts for the widespread confusion. Publication 970 answers the question of when a fellowship can be considered tax-free. Fellowships are considered part of the recipient’s taxable income unless they go toward paying qualified education expenses (students only).

Links Mentioned in the Episode

income tax fellowship

Transcript

Welcome to the Personal Finance for PhDs Podcast – a higher education in personal finance. I’m your host, Emily Roberts.

I’m doing something a little bit different in this special bonus episode for Season 2.

I’m using it to answer a frequently asked question that I receive about taxes. The question is: Do I owe income tax on my fellowship?

In this episode, I’m speaking to citizens and residents in the United States. And I’m also talking about PhD-type fellowships whether at the postbac level, the graduate student level, or the postdoc level.

What’s going on with these fellowships that makes the recipient question whether or not they are taxable is that they are not reported on a W-2. They might not be reported at all, or they may be reported on a 1098-T in Box 5, on a 1099-MISC in Box 3, or on a courtesy letter, which is not an official tax form but rather just a letter that states what the amount of the fellowship was in that calendar year.

Fellowship income is considered part of your taxable income. Now, you may not actually end up paying tax on your fellowship income depending on the rest of your return, like the deductions and credits you’re going to be able to take, but it is considered part of that taxable income.

Now, I know you’re not inclined to just believe me right off the bat. I mean, there’s a strong incentive for you to believe that your fellowship income is not taxable, so I’m going to give you a bit of evidence here.

IRS Publication 970 is the definitive publication on the taxability of fellowship and scholarship income. I’ll read you a few excerpts from Chapter 1 of Publication 970.

First, some definitions:

A scholarship is generally an amount paid or allowed to, or for the benefit of, a student (whether an undergraduate or a graduate) at an educational institution to aid in the pursuit of his or her studies.

A fellowship grant is generally an amount paid for the benefit of an individual to aid in the pursuit of study or research.

So you can see that fellowship grants are much more broad; they can be issued to non-students, whereas scholarships only go to students.

Chapter 1 of Publication 970 approaches fellowships and scholarships from the perspective of trying to make them tax-free.

So let’s see how that can happen:

A scholarship or fellowship grant is tax free (excludable from gross income) only if you are a candidate for a degree at an eligible educational institution.

So right off the bat we know that anybody who is receiving a fellowship who is not a student cannot make their fellowship tax-free, i.e., it is part of their taxable income.

Additionally:

A scholarship or fellowship grant is tax free only to the extent: It doesn’t exceed your qualified education expenses…

So now we’re just dealing with the graduate student population that has the potential to make a scholarship or fellowship grant tax-free.

The way that we use the terms ‘scholarship’ and ‘fellowship’ in academia, a ‘fellowship’ generally refers to the money that you take home for your living expenses, whereas ‘scholarship’ is the money that goes towards paying your tuition and fees, the qualified education expenses.

Very roughly speaking, your qualified education expenses can make your scholarships tax-free if you’re a fully funded graduate student, but there’s no more qualified education expenses to start making your fellowship income tax-free. Therefore, again, roughly, your fellowship income is included in your taxable income.

So to summarize, fellowship and scholarship income that goes towards paying our qualified education expenses like tuition and fees can be made tax-free, but fellowship and scholarship income that goes towards paying other kinds of expenses like your living expenses can’t be made tax-free.

Now, I’m glossing over some very important details on how you actually calculate your taxable income, so if you want more information about that, please see the tax center on my website, pfforphds.com/tax.

But, there you go, roughly speaking, fellowship income does need to be included in your taxable income, whether you are a postbac, a graduate student, or a postdoc.

Thanks for joining me in this short bonus episode!

Please share this episode on social media and with your peers because this is a message that they need to hear. It’s not a message that they want to hear, but it’s a message that they need to hear to stay on the right side of the IRS.

Show notes for this episode can be found at pfforphds.com/s2be1.

Thanks for joining me today, and I’ll see you in the next episode!

Further reading/viewing:

Negotiating PhD Funding Offers: This Grad Student Did It Successfully

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In this episode, Emily interviews John Vsetecka, a second-year PhD student in History at Michigan State University. When John was a prospective PhD student, he attempted to negotiate the stipend and benefits of the three admissions offers he was seriously considering. John shares exactly how he initiated the negotiation process and the outcomes at each of the universities. His negotiation method is well-researched and well-considered and is applicable to many if not most other prospective graduate students. John and Emily also discuss how prospective PhD students should combat imposter syndrome during the admissions process.

Links mentioned in episode

negotiating PhD offer

0:00 Introduction

1:05 Please Introduce Yourself

John Vsetecka is a second-year PhD student in the Department of History at Michigan State University. He studies modern Ukrainian history, with a focus on the 1932-1933 famine. Before beginning his PhD program, he worked as a GEAR UP advisor. This is a federal grant agency that works with low income students, called Gaining Early Awareness and Readiness for Undergraduate Programs. He worked in Colorado to help middle school and high school, low income students prepare for college. Before this job, he got a Master of Arts in History in 2014 at the University of Northern Colorado.

2:55 What PhD offers and interview requests did you receive from universities?

When John applied to PhD programs, he applied to eight schools and faced some rejections. He considered four offers, then narrowed his list to three. The first offer he eliminated would have required that he start with MA and work into PhD. Since he already had an MA, he felt he was ready to move on. He seriously considered three offers. He accepted the offer from Michigan State University, where he is now. He visited “University 2” in person for an interview. He had a virtual interview with “University 3.”

4:21 What did you think about the offers from these three universities?

John wasn’t sure what a fair offer was for a PhD position in History. Generally, PhD students are shy about sharing their financial experiences. So he did research and his mentor from the University of Northern Colorado guided him in this process. He talked to other PhD students, who would say they had enough to live on or that they were struggling. He used the websites GradCafe and PhD Stipends. He got a sense of what people were being paid, including their health insurance and fees. From all of this information, he decided two offers were fair and worth considering.

Emily shares an important piece of advice for prospective PhD students is to do your research. Anonymous databases, like PhD Stipends, provide more transparency around these offers. But you should talk to current graduate students, because it’s one thing to look at the numbers, and another thing to get a feel for how it is to live on that amount.

Further Reading: How to Read Your PhD Program Offer Letter

7:54 How did you initiate the negotiation process for your PhD stipend offers?

John negotiated his stipend offers during his interviews. He went to visit two universities in person for interviews, and had a virtual interview a University 3. His first interview was at University 2. During the visit, they have an itinerary and fully scheduled day. The experience is like a whirlwind. He prepared a set of questions for faculty members and set of questions for Graduate Director. With the Graduate Director, he talked about the PhD program as a whole to get their insight. Then he directly asked the Graduate Director if there is any other money available, such as other fellowships, and explained that he has other offers with higher financial value. The Graduate Director is the one that can control the money. The faculty can only put in good word on a student’s behalf. So as a prospective PhD student, you should know who you can talk to and know who you can negotiate with. You don’t need to be afraid to ask tough questions about financial aid.

The PhD program interview was a good time to negotiate PhD stipend offers. John waited until he received all offers to see where he stood across the field, and this gave him some leverage. Negotiating like this is is what people do with any other job. John told the Graduate Director that he had other offers, but he didn’t show them the letters themselves. Negotiating before receiving all other offers and before the interview can seem desperate. But if he negotiated after the visit, it might seem like that offer wasn’t his first choice and he was only negotiating after losing another offer. John also believes that talking in person is the best type of communication. Negotiating in person puts them on the spot.

During his interview visit for University 2, John asked the Graduate Director about the potential for a better financial package. The Graduate Director told John that they would get back to him a couple hours. Later that day, John received an email with a offer for a fellowship package. This showed John that they were willing to work on his behalf. He was surprised by this because he had expected them to negotiate and push back. During the interview visit, the department is most focused on recruitment, so they quickly considered his request and acted on it.

John went into the meeting with a set plan for negotiation. He had a notebook and visibly took notes during the conversation, which indicates that he took the negotiation seriously. Treating graduate school interviews like a professional scenario sets you up for success.

14:35 What new offer did you receive after negotiating?

Because he negotiated with the Graduate Director, John received an offer of a university fellowship instead of a teaching assistantship. The new offer was university-based funding, not department-based funding like his original offer. The university fellowship had different teaching requirements than the department teaching assistantship. It was more money in total, as well as better health care coverage. This showed what kind of control the department and university has over financial awards for PhD students. Even if the university can’t raise stipends, they can cover more fees or provide better benefits.

16:22 What outcomes did you get from negotiating with the other two universities?

John learned that not everyone would negotiate. At Michigan State, he had a generous offer that he was already happy with. Even so, he asked the Director of Graduate Studies at Michigan State about his financial award. The director kindly told him that his original financial award was what the department was willing to offer. John later learned that his department offers different financial packages based on a tiered system, and he was happy with the offer he received.

At University 3, John had a virtual meeting with the department. John brought up that he had offers with much more value than what they had offered him. John says that honestly, he was displeased with University 3’s financial offer. He learned that due to financial constraints at University 3, the department couldn’t offer more money. The department suggested term-to-term options. John didn’t want to be on his toes every semester wondering if he’d get paid. Though University 3 offered paid tuition, the money offered for teaching/research was not enough to even consider.

It’s important for prospective PhD students to recognize that some offers only tell you about the first year, while others present a five-year plan for funding.

19:35 Based on what you experienced, what would you do to negotiate differently?

John says he wouldn’t change much. While he knew negotiation was possible, he personally didn’t know anyone in his cohort group that negotiated their stipend offer. John heard from his advisors and mentors that it’s ok to ask, but you have to know to ask. John says this is one of those hidden things in academia. If prospective graduate students receive multiple offers, this is a chance to use offers against each other.
even if you get one offer, be happy, but if you get more offers you can use them

Emily brings up that often, applicants don’t feel a lot of confidence. They often think, “Who am I to be receiving these offers?” This imposter syndrome deters prospective PhD students from negotiating their stipends and ensuring that they receive the best offer.

22:27 How did you know negotiating your PhD offer would be possible and welcome?

John’s MA program advisor told him how to negotiate PhD stipend offers. First, you have to apply to multiple universities and know their programs well. Second, you need to know who you want to work with. Third, you need to talk with current graduate students. This is the most important advice. If you find their email on department websites, you can email them directly. Fourth, online communities like GradCafe help you connect with people who can help you.

John says that graduate school applicants should treat a PhD position like any other job. John says this profession should not be excluded from the process of negotiation. John’s experience at GEAR UP, where he helped low income students fight for undergraduate school money, showed him that there is a lot of money out there. He says it’s unfortunate so many undergraduates go into a lot of debt, when there are all types of money out there for different skills and talents. John wonders why graduate students can’t have that money too? There are different organizations, based in different fields, but money is out there. He suggests prospective students apply to everything they’re qualified for, but they also ask universities and departments what they can give.

Emily adds that prospective PhD students need to consider cost of living. If you have school A versus school B with higher stipend and in lower cost of living, you can ask the school A’s department what they can do to make the offer comparable.

26:44 Has your negotiation had any lasting impact on your graduate career?

John says the negotiation process doesn’t stop when you receive your final offer. Negotiation is a longer standing issue to think about in the future. At Michigan State, John and his peers negotiate for conference money, travel money, research money for the summer. Some graduate students can’t find money beyond teaching assistantships. Because he considered these benefits in his financial offer, he accepted a position that allows him the time and money to not worry. He has summer funding and he can teach online. For instance, he taught a seven week class online while being in Ukraine for research. He chose a school with an institutional investment. The department is doing well and it is investing in its students. He saw that the department was willing to invest continually in their students. He thinks the investment will continue after he graduates.

29:33 Final Comments

John says prospective graduate students should feel free to reach out to him. He likes to help in any way he can. When you get your offers, the first thing you should do is celebrate, and get a round of applause. After celebrating, look over your financial offer, and look beyond stipend to health insurance and benefits. If you get multiple offers, compare them. Be confident about your acceptance into a program and don’t be afraid to negotiate. Know that you have power in these situations. Even though graduate students often don’t have much power, this is the situation where you do. You have all the power and you should use it while you can.John treated PhD offers like job offers because it’s also a job, in literal and figurative sense.

31:27 Conclusion

The First Step to Complete Your Grad Student Tax Return (2018)

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There is one vital step grad students need to take when starting to prepare their tax returns. It’s a super simple step, but most often overlooked, and skipping it can lead to an inaccurate return or even overpaying tax. This is the step that you take before you start feeding any numbers to your 1040, your tax software, or your tax preparer, and it is to find and categorize all of your income sources (funded grad students have at least two!).

If you found this video insightful and you want to take the next step to completing your tax return – including one trick to reduce your tax due that your tax software or tax preparer can easily miss – register for my workshop, “How to Complete Your 2019 PhD Trainee Tax Return (and Understand It, Too!).”

grad student tax return step

The Complete Guide to a Side Hustle for a PhD Student or Postdoc

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It’s no secret that PhD students and postdocs are paid a meager salary, sometimes not even as much as the local living wage. While a fraction of graduate students have probably always pursued side income to supplement their stipends/salaries, e.g., through part-time jobs, moonlighting, or odd jobs, only in recent years has it become easy to make money online or make money from home. Enter the ‘side hustle.’ The term exploded in popularity during the Great Recession along with the ‘gig economy.’ The flexibility of modern side hustles has made it possible for students and postdocs to fit their income-generating activities around their busy research schedules.

This article details why a graduate student or postdoc would want to side hustle, whether it’s allowed by their university/institution, examples of real side hustles held by PhDs, how to best manage the side income, and advice from PhDs with successful side hustles.

side hustle PhD postdoc

Motivations for Side Hustling

The motivations for having a side hustle during your PhD training are to make up for the deficiencies in what the university provides: money (primarily) and career-advancing experiences.

Increase Income

Pursuing your PhD during graduate school or gaining additional training as a postdoc is supposed to be your full-time (or more) pursuit. Research is life, right? Unfortunately, the positions don’t pay anywhere near as well as a regular full-time job.

The best case scenario for a PhD student or postdoc is that you will be paid enough to support yourself without making extreme lifestyle sacrifices, i.e., living in a van. However, there are plenty of programs and universities that do not even meet that low bar for a single person with no dependents. For a graduate student or postdoc with a dependent spouse (e.g., of an international trainee) or children, the low stipend or salary is almost certainly inadequate.

Graduate students almost always turn first to cutting their living expenses to be able to live within their means. They know that they are supposed to devote the lion’s share of their weekly energy to their coursework, research, and teaching. But when their backs are against the wall, some make money on the side to avoid going (further) into debt.

Career-Advancing Experiences

Some graduate students and postdocs are motivated to side hustle not by lack of income but rather lack of practical career preparation.

What careers does a PhD or postdoc prepare you for? These days, the vast majority of PhDs are not hired into tenure-track faculty positions. (Time to stop calling the jobs most PhDs get “alternative”, right?) Some universities have acknowledged this and put in place programming to help PhDs transition out of academia (my alma mater, Duke University, and in particular the Pratt School of Engineering, is innovating in this area), while others are still catching up.

Of course, PhDs have plenty of transferable skills that can be put to use in a wide variety of careers, but landing a job is still challenging.

Further reading: How My PhD Prepared Me for Entrepreneurship

A judiciously chosen side hustle (or even volunteer work) can help a PhD build out her resumé/CV and network to stand out from the other PhD applicants. A side hustle can teach you new skills, give you an opportunity to demonstrate the skills you already possess, and introduce you to professionals who can further your career journey.

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Are Side Hustles Allowed by Your PhD Program or Postdoc Position?

While some academics may take the view that side hustling distracts from classes, teaching, research, etc., for some people a side hustle is the main factor that enables them to stay in their graduate programs or postdoc positions. They side hustle because they want to keep doing PhD-level research; otherwise, they can just leave and earn more money elsewhere! If conceived and managed properly, a side hustle is not a distraction from the student or postdoc’s training but rather an enhancement of it.

If you think about graduate school or your postdoc as similar to any other type of job, usually the only stipulations regarding your side hustle are that: 1) it does not interfere with your primary job and 2) it does not present a conflict of interest. That logic is helpful for thinking through whether a side hustle is allowed, but the universities sometimes add layers of complexity.

Further reading: Can a Graduate Student Have a Side Hustle?

Side Hustle Permissibility by Position Type: International, Fellow, Employee, Etc.

There may be explicit bans on making money on the side or it may be frowned upon. The income and experience gained from a side hustle is not worth getting kicked out of your graduate program or postdoc position.

International trainees

The F-1 and J-1 visas generally only permit employment directly in your capacity as a graduate student or postdoc. Sometimes, you can seek permission for other employment ventures, such as Optional Practical Training (OPT) for F-1 visa holders. A side hustle that you work on simultaneously with your research will likely not comply with these rules, so it’s a no-go.

Fellowship Recipients (Graduate or Postdoc)

Check the terms of your fellowship funding supplied by your university, employer, or funding agency. There may be a stipulation that no outside income is allowed as the fellowship is designed to support you completely and require your complete dedication. If you choose to pursue a side income against the terms of your fellowship, proceed with extreme caution and recognize the downside is potentially losing your primary funding. In other cases, outside income is not mentioned by the fellowship terms or is even explicitly allowed.

Research and Teaching Assistants

This is the category of graduate students most likely to be able to get away with a side hustle or be explicitly allowed because your responsibilities are generally time-limited to 20 hours per week (officially). Of course, beyond that, you are responsible for your dissertation work, so side hustling might conflict with that important pursuit. If you are in a contract with your university, check its terms. If outside income is not allowed, proceed with caution as you might lose your assistantship. You might, however, find a provision that allows outside income, perhaps up to a certain number of hours per week.

Postdoc Employees

A postdoc employee has a regular job, albeit a demanding one. Your desire to side hustle at that point in your training is more likely motivated by career advancement rather than income. Again, check your contract, but a side hustle may very well be permissible as long as it doesn’t interfere with your work. If you are working in your field, though, it could be a good idea to seek your advisor’s permission in advance.

What Does Your Advisor Think?

The person with the most important opinion on your side hustle–after you–is your advisor. Allowed, disallowed, frowned upon… The status of side hustling in the eyes of your university, department, or funding agency is less important than its status to your advisor. If your advisor is an unforgiving taskmaster who expects his myopic view of the supremacy of research to be adopted by his trainees, a side hustle is a very risky endeavor. However, if your advisor is a reasonable and kind person who respects work-life balance, it may be better to ask for forgiveness rather than permission if your side hustle is discovered and viewed negatively.

The Bottom Line: The Spirit of the Law

The spirit of the law when it comes to side hustling during graduate school or your postdoc is that it should not distract from your training. (This sentiment does not apply to visa holders; the letter of the law is most important in that case.) Financial and career stress itself can easily distract from training, so it may be a matter of choosing the lesser of two ‘evils.’

Prohibitions against outside income make sense when the income comes from a part-time job with fixed hours (meaning that you wouldn’t be able to stay late in lab if necessary) or if it takes so much time overall that you can’t complete your work healthily. But I don’t find prohibitions against outside work that doesn’t interfere with the student or postdoc’s primary ‘job’ any more logical than prohibitions against having a family or a hobby (assuming no conflict of interest).

Ultimately, rules or no rules and advisor’s opinion aside, you are the only person who gets to decide whether to pursue a side hustle. You are the one who will manage it and make sure that it enhances your PhD training instead of detracting from it.

Types of PhD Side Hustles and Examples of PhD Side Hustles

I break side hustles for PhDs into four categories: ones that advance your career, ones that you enjoy, ones that pay well (enough), and passive income. A side hustle that pays well and advances your career is ideal. If you can’t achieve that, doing something you enjoy is obviously preferable to doing something that you dislike or feel neutral toward that simply pays some bills. Passive income is outside of this ranked order as it doesn’t involve trading time directly for money.

By the way, if you are looking for a way to increase your income that your advisor would be totally on board with, try applying for a fellowship. I’ve created a guide to applying for and winning fellowships that includes a list of broad, portable fellowships that pay full stipends/salaries.

Further reading: How to Find, Apply for, and Win a Fellowship During Your PhD or Postdoc

PhD Side Hustles that Advance Your Career

There’s no better type of side hustle than one that pays you and helps you along in your career. Through this type of side hustle, you put your current skills to use, learn new skills, expand your network, and/or explore a possible career path. Often, this sort of side hustle is related to your current field of research or uses skills you’ve honed during your PhD. You might even be able to start working for a potential future employer while you’re still in training.

Examples of PhD side hustles that advance your career are:

  • Consulting
  • Writing
    • Freelance writing (Derek)
    • Freelance academic writing (Vicki)
    • Journalism
  • Editing
    • Freelance scientific paper editing (Julie and Amy)
    • Freelance scientific paper editing (Jenni)
    • Thesis/dissertation editing
  • Internships
    • Scientific research summer internship (Alice)
    • Engineering summer internship (David)
  • Professional fellowships
    • Science policy fellow (Emily)
  • Analysis
    • Research analyst for investor relations (Adam)
  • Teaching

PhD Side Hustles that You Enjoy

Sometimes an enjoyable hobby can be monetized or you can find meaning and delight in a side hustle. This kind of side hustle is one you would likely spend some time doing even if you weren’t being paid and can be particularly revitalizing during the long slog of your PhD or postdoc.

Examples of PhD side hustles that you might enjoy are:

  • Monetized hobby
  • Non-academic teaching
  • Resident advising
    • Resident advising for graduate students (David)
    • Resident advising for a fraternity (Adrian)

PhD Side Hustles that Pay the Bills

If the only purpose a side hustle fulfills is bringing in some money, it’s done its job. Sometimes these pursuits are necessary for survival, but you shouldn’t spend any more time on them than absolutely necessary.

Examples of PhD side hustles that (likely) simply bring in income are:

  • Tutoring
  • Retail
  • Food service
  • Uber/Lyft
  • Childcare

PhD Passive Income

Passive income has become a bit of a buzzword in recent years. Ostensibly, passive income occurs after you make some kind of investment that then pays a residual.

Making a monetary investment in a rental property or dividend-paying stock is a classic example of passive income. The former is definitely a possible income source for a PhD who owns her own home.

Further reading: Should I Buy a Home During Grad School?

If you don’t have money up front, you can “invest” your time and talent into a product that people will buy over time. The classic example of that type is an author who is paid a royalty with each book sale.

The current fad incarnation of passive investing is a promise that you can “make money while you sleep!” through online business, generally selling previously created digital products. (I do this in my business.) However, almost no online business runs for long without input of time and labor. The upside for a graduate student or postdoc, however, is that the large time investment needed up front to generate passive income and the maintenance over the long term can generally be performed on your own schedule and under the radar.

Examples of PhD side hustles that are passive income:

  • Writing (i.e., published author)
  • Patent holder (licensed)
  • Digital products
    • Flash cards and ebook (Alex)
    • Courses
  • Investing for current income
  • Landlording

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Balancing Your Side Hustle with Your PhD Work

Figuring out how to make money and settling into a groove of earning a side income can be exciting. It can even be more gratifying at times than your research as research is basically a series of failures punctuated by occasional successes. In those weeks and month when nothing is going right in your research, being able to turn to an activity with a known outcome ($$!) can be a welcome relief. However, you should not forget why you are pursuing the side hustle in the first place: to finish your PhD and pursue a certain career. (Of course, your side hustle may spur you to leave your program, but only do so after serious reflection! It shouldn’t be about the side hustle per se but a carefully considered evolution of your career plans.)

To that end, there are a few strategies you can use to make sure your side hustle complements and does not compete with your primary role:

1) Track Your Time

Set weekly limits for yourself on the amount of time you will spend on your role as a graduate student or postdoc vs. on your side hustle. If your time spent side hustling creeps too high or your time spent on research dips too low, you know you need to readjust. Expect your weekly time goals to change throughout the seasons of your PhD training.

2) Set Geographic and/or Temporal Boundaries

It’s best if you conduct your side hustle in a different location than your primary PhD workspace; for example, you could work from home on your side hustle and never in your office or on campus. An alternative to geographic boundaries is temporal boundaries, such as never working on your side hustle during daytime working hours. The exact boundaries you set will depend heavily on the nature of both your PhD work and your side hustle.

3) Choose a Flexible Side Hustle

An ideal side hustle for a PhD is one that can be accomplished from anywhere at any time and ramped up or down depending on how busy you are with your research. This is not realistic for all side hustles, but the more axes of flexibility yours has the better it will complement your primary job.

4) Keep Your Side Hustle Quiet (If Possible)

An internship or professional fellowship that requires time away from your graduate program or postdoc obviously can’t be kept secret, but many other side hustles can fly under the radar of your advisor and department if you want them to. The seriousness of the possible repercussions or how “frowned upon” side hustling is should dictate how open you are about your pursuit. Keep in mind that a side hustle in your current field of research may very well get back to your advisor as communities are quite small, so in that case it may be better to be completely above board.

Best Financial Practices for Your Side Hustle

Most side hustles are independent contractor or self-employment positions, which means that you become an entrepreneur (or solopreneur) of a kind. There are some common best practices in self-employment you should put in place from the start of your side hustle.

Further reading:

1) Use a Separate Business Checking Account

Separating your personal transactions from your business transactions at the account level will help you keep track of exactly how much money you are earning after expenses and what is deductible on your tax return. You can make periodic transfers from your business account to your personal account to pay yourself.

2) Set Aside Money for Tax Payments (Quarterly or Annually)

Your PhD side hustle generates (potentially) taxable income, subject not only to income tax but also in many cases self-employment tax. Add your marginal tax brackets at the federal, state, and local levels together with the FICA tax you must pay, and set aside that fraction of each of your side hustle paychecks to ultimately pay the extra tax. If you earn enough in your side hustle compared to your primary job, you eventually will need to start paying quarterly estimated tax. Fellowship recipients who don’t have automatic tax withholding are already familiar with this process. Even if you aren’t required to pay quarterly, expect a larger year-end tax bill.

Further reading: The Complete Guide to Quarterly Estimated Tax for Fellowship Recipients

3) Give your Earnings a Job

The best way to ensure you don’t blow your side income is to assign it a job to be completed as soon as it hits your personal account. You could pay a specific bill or two with your side income or only allow yourself certain indulgences from your side income. For example, Jenni saved her side hustle earnings for travel.

Closing Advice and Thoughts from PhD Side Hustlers

“Honestly, it kept me sane to have other things going on… [They] helped me to finish my dissertation more quickly because I was more focused on the time I had, instead of having lots of unstructured time to work.” – Kathayoon

“I’d encourage graduate students to pursue a lot of different opportunities while in school, even ones that are at a slant from what they usually do. It’s easy to get tunnel vision as a grad student, but if you open yourself up, you can develop really useful skills while reinvigorating your academic work.” – Derek

“I definitely recommend finding something in grad school that’s unrelated to the work you do, monetized or not, so that if all your experiments fail one week, you still have something meaningful to throw yourself into.” – Shannon

“This experience was critical for my transition out of graduate school. I ended up getting a full-time offer at the same company after maybe 2 months of hourly work and have been there for almost 2 years now. The best part was that I had an opportunity to try out my job before starting full-time. How else do you know if you want to launch a career in a certain field?” – Adam