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How This Multi-Fellowship Winner Managed Her Applications and Finances

September 9, 2019 by Lourdes Bobbio Leave a Comment

In this episode, Emily interviews Dr. Anne Rocheleau, who holds a PhD in biomedical engineering and currently works in industry. Anne won several fellowships during grad school (and applied for many more), including ones that paid her stipend and tuition and fees and ones that paid for conference travel expenses. Anne shares her process of finding and applying for fellowships and the extracurricular activities she pursued to make her a competitive candidate. Anne’s established budget helped her manage her income as her pay frequency changed while going on and off the fellowships, but she did have an unpleasant surprise one April since her fellowship did not withhold income tax. Overall, Anne’s fellowships greatly contributed to her development as a researcher and science communicator as well as her personal finances.

Links Mentioned in the Episode

Teaser

00:00 Anne: Fellowships can be a really wonderful way to broaden your experience in grad school and I know a number of students that studied in a different country, for instance, which is a great experience that they wouldn’t have gotten necessarily if they had stayed on a research assistantship or a teaching assistantship.

Introduction

00:23 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season four, episode four and today my guest is Dr. Anne Rocheleau, a PhD in biomedical engineering who won several fellowships and travel awards during grad school and her postdoc. Anne gives advice for other fellowship seekers based on her experience of finding and applying for several fellowships each year and shares the enriching experiences she sought out that made her a competitive candidate. The fellowships had a positive effect on Anne’s personal finances and scholarly development and we discuss how to avoid the financial pitfalls that come with some types of fellowship income. Without further ado, here’s my interview with Dr. Anne Rocheleau.

Will You Please Introduce Yourself Further?

01:13 Emily: I’m joined today by Dr. Anne Rocheleau. Thank you so much for coming on the podcast and we are going to be discussing fellowships, how to win them and what happens to your finances once you do win one. Anne has plenty of experience with this, so thank you so much for joining us today and will you tell us a little bit more about yourself, please?

01:33 Anne: Sure. Thank you so much for inviting me to be part of this podcast. I’m really excited to be here. I got my undergraduate degree in chemical engineering from Worcester Polytechnic Institute in Massachusetts. I did my Masters of Science degree at Cornell University in chemical engineering, as well, and I did my PhD in biomedical engineering, also at Cornell. Then I worked for a year as a quality engineer in Massachusetts, before moving out to the west coast to Portland. I was a postdoc for a year and a half at Oregon Health and Science University and now I work as a research scientist at a startup medical device company here in Portland.

02:17 Emily: Well, we’re going to get on a little diversion here already because I’m curious about you having a real job for a year and then going back to having a postdoc. I didn’t know that was a thing. Was there any difficulty in landing that postdoc, having been out of academia for a little bit of time? And also, what was the reasoning behind that? Was it just, “I want to live in Portland and this is the kind of job I can get”, or what?

02:41 Anne: Yes, it was largely a geographic. I wanted to move out to Portland to be with my now fiance, but also, it was really fun to work in industry for a year. It was very different and it got my mind working in a totally different way, being a quality engineer, and then when I wanted to move to Portland, I had a connection from my PhD advisor, who knew my advisor that became my postdoc advisor here in Portland, so that was a really natural fit and I really liked OHSU, Oregon Health and Science University. To work in the med school environment was really great, so that was a really cool transition. It was interesting going back into academia. I felt like I had a little bit of a different take on things and it really solidified my desire to stay in research. I love research.

03:37 Emily: Glad to hear that it added to your career. It sounds like you networked your way into it, so that’s very natural.

Finding and Applying to Fellowships

03:45 Emily: Let’s hearken back to your grad student and postdoc days when you were applying for and winning fellowships. Which fellowships did you end up winning?

03:56 Anne: I did my master’s degree on the National Science Foundation Science Master’s program fellowship. That one I actually got lucky, I didn’t have to directly apply for it. I was offered that program by my department, so that was the first one. Then, during my PhD, I received the National Science Foundation GK-12 fellowship. That was a full tuition and PhD stipend fellowship and also included a teaching element. I was part of the Society of Women Engineers as a grad student and so I received a scholarship through them, that was $3,000. I applied for and received two travel grants for the Biomedical Engineering Society’s annual meeting, so those travel grants covered the meeting registration as well as $400 for travel. When I was a postdoc, I received a travel grant for a conference and I wasn’t presenting there, but I did attend some workshops and I think that was about $2,000.

05:03 Emily: I’m glad to hear that list because I just want students and postdocs to get an idea of the diversity of fellowships that are out there, it’s not only from the NSF, it’s not only the GRF, there’s a lot of other ones as well. There’s all these travel grants from the conferences and everything. Conference travel is a big pain point for grad students and postdocs and so it’s just good to hear that there is money available. You have to ask, get a little bit lucky, or put together the right kind of application and the money’s there for some people, so that can help a lot.

05:39 Emily: Can you tell me a little bit about your process of applying to fellowships and finding out about these fellowships. You said there was one you were automatically nominated or awarded, but other ones you had to seek out. What was that process like? How did you find these fellowships?

05:57 Anne: I have a couple of recommendations for that. First of all, I found internal university resources to be excellent for finding fellowships and talking to other folks that were in my department that had received these fellowships in the years before me, that was really useful. There were some databases at my university, where they aggregated fellowship opportunities. Professional societies are a great way to find fellowships, both for conferences and I also received one that was a scholarship. My other recommendation for this is ProFellow.com. This is an awesome website. I’m still on the email list. It’s post-bac, post-graduate fellowships, graduate fellowships, both long term, short term, all fields, all over the world. It’s a fantastic resource for fellowships.

06:52 Emily: It’s so funny that you mentioned that because we’re recording this on a Tuesday and I’m interviewing Vicki, who’s the person behind ProFellow, on Thursday for the podcast. I don’t know which order they’ll come out in, if yours will come before hers or vice versa. I’m not sure, but listeners, these two podcasts episodes are coming together, they’re a pair. Thank you so much for mentioning those resources. I have a post, I’ll link to it in the show notes, on how to find fellowships, which includes a couple of the databases you mentioned that I saw. Some universities have really extensive ones, but I’m going to add some of the things that you just mentioned to it. So listeners if you want to see some links to this, go to the show notes and find that post. Thank you so much for adding that. I really liked the tip about the professional societies. I hadn’t thought about that at all, but it totally makes sense.

07:42 Emily: So you found some fellowships you applied for. You told us which ones you were successfully awarded, but did you have some others that you applied to that you didn’t win? Were you applying for a lot or maybe only one or two a year or what was it?

07:55 Anne: Oh, yes, I definitely applied to a number that I wasn’t successful in. This is definitely a numbers game and sometimes you get lucky and sometimes you don’t. So yes, there were certainly several from all levels — from scholarships, fellowships, travel grants — that I did not get.

08:14 Emily: Well, it’s good to hear that you were just trying a lot. Since you were submitting a number of these applications per year, how did you think about that in terms of the usage of your time? Did you feel like it was, not a waste of time, but not really within your core mission of what you were doing in graduate school? Like something you had to do that was kind of extra, or did you really see it as just grant writing and building a skill set? How did you view it?

08:43 Anne: I do enjoy writing, so that’s part of it, and I was happy to develop those skills. In the case of the NSF GK-12 fellowship, it was a great way to enhance what I was doing with another skill set. In that case it was teaching and mentoring. I was paired with a teacher that I mentored for a project in the summer. I think fellowships can be a really wonderful way to broaden your experience in grad school and I know a number of students that studied in a different country, for instance, which is a great experience that they wouldn’t have gotten necessarily if they had stayed on a research assistantship or a teaching assistantship.

09:40 Emily: Yeah, that’s a really good point because, what I tend to forget about is fellowships pay you or pay your expenses, but really their purpose is to further your development as a researcher. That could be through doing whatever you’d be doing as an RA at your university, or it could be having these much more independent experiences, as you just mentioned, that are really enriching in a variety of ways. That’s what a fellowship is for, right? It’s good to be reminded of the core mission of a fellowship, which is to develop an individual, not necessarily to further some larger grant or whatever that you’re working on.

10:24 Anne: I have one more thing that I can add there too. I felt like it really deepened my connection to the professional societies that I was part of as well. I’m actually now involved in my local chapter of the Society of Women Engineers as a scholarship chair, so it really inspired me to turn around and give back after graduate school. It really meant a lot to me and it was inspiring to me that those organizations believed in me and I felt like that also came out as well in these.

Fellowship Application Tips and Tricks

11:00 Emily: Wonderful. What about the process of actually writing these applications? Did you have any tips for another grad student or postdoc going through that? What was that process for you?

11:12 Anne: I generally kept these materials together and it was my folder of preparation for what I needed to write some of these applications. First of all, you almost always need a copy of your transcripts, so I just had that handy so I didn’t have to go searching for it when I needed it. You almost always need a CV, so again, I just had that handy, a two page CV. I also had my set of go-to recommenders because many of these a fellowships also require recommendations. Then I had some talking points that I used as a basis for the essays for these different fellowships. They all require something a little bit different, but they almost always have a research component — what you’ve previously done, what you would like to do, some quantifiable results if you have those. Many of them have an outreach component, so I had this running list of what I was involved in with volunteer efforts and professional society involvement. Many of them have leadership component too, so again, I just kept that list of bullet points of some of the things that I’ve done and this just really helped me make the process smoother and faster, and when I went to go actually write one of these, I had something already there to go off of.

12:39 Emily: It kind of seems to me that the more of them you write, the easier it gets, right? Because you can reuse the themes and reuse some of the wording and so forth from your previous submissions.

Building Up Your CV

12:51 Emily: We talked a little about the process of writing applications, but what about the other things that you just mentioned, which was building up your CV, building up your leadership experiences, building up your outreach experiences. What did you find were relevant experiences that you had that you think helped you win these when these awards?

13:16 Anne: I got involved in some of the organizations through my department and through my university. We had some outreach events through my departments that were really fun. I had a good time participating in those. I also started getting involved in the leadership executive board of the professional society chapter at my university. I did that throughout my years in grad school, so I felt like that was really valuable. And again, I kept a list of the deliverables for my research, so I always had that ready to go. I think that was helpful too.

14:02 Emily: Define deliverables, because I’m thinking papers, but maybe there’s some other things in there too.

14:09 Anne: Yeah, papers, presentations. This wasn’t applicable for me, but if there was any media coverage of your research or anything special like that, if your university highlighted your work or a local news station highlighted your work, something like that. Those would be the main deliverables that I’m thinking of.

14:30 Emily: Did you have publications early on that were easy to point to when you have these further applications, like from your masters, for example?

14:40 Anne: Yup.

14:42 Emily: Yeah. I think that just goes into being the kind of candidate who wins these fellowships, having those deliverables come out early. So push for that, I think, is the advice for a current grad students. Don’t try to publish all your papers right at the end. It’s nice to get maybe one out the door early on.

15:00 Anne: Yeah, absolutely.

Writing the Fellowship Application

15:02 Emily: Anything else around advice for writing and winning fellowships?

15:08 Anne: I would say, first of all, if you have any questions about the content of the materials of the application definitely reach out to the organizational contact. It’s an obvious thing, but make sure you’re completing the full application packet. Sometimes they can be pretty long, a little bit complicated, and also don’t give more than they ask for. That might be held against you, potentially. If there’s an essay limit, stick to the essay length limit, things like that. When you’re organizing your essay, make sure you have an introduction. Make sure you have a section that’s organized around your research, the content of what you’ve done before, what your proposal is. Make sure you group any other outreach and leadership experience together. And then also explain how the fellowship could benefit you and your career path. I think the people that are reading, and having been now on the other side, I think it really is nice to know that it really would make an impact to the person if they received the fellowship. They’re not just applying willy-nilly to these. It really would be meaningful and helpful to them, financially too.

16:30 Emily: Can you give an example of that? What’s beyond the obvious of how a fellowship would further your career? Maybe something that you included in one of your essays?

16:41 Anne: Yeah. For instance, the NSF GK-12 fellowship had the teaching component and I think learning about science communication, that was really something that was really important to me, and being able to translate my work to others, that was what I included in that essay. And even though I’m not actively teaching in a professor capacity right now, that really was valuable to me and that really was something that meant a lot to me to gain out of that fellowship.

Commercial

17:18 Emily: Emily here for a brief interlude. Through my business, I provide seminars and webinars on personal finance for graduate students, postdocs and other early career PhDs, for universities, institutes and conferences, associations, etc. I offer seminars that cover a wide range of personal finance topics and others that take a deep dive into financial topics that matter most to PhDs, like taxes, investing, career transitions and frugality. If you are interested in having me speak to your group or recommending me to a potential host, you can find more information and ways to contact me at pfforphds.com/speaking, that’s p f f o r p h d s.com/speaking. Now back to the interview.

Financial Impact of Winning a Fellowship

18:08 Emily: Let’s shift gears and talk about the financial effect that winning a fellowship has on you, the awardee. So in your case, what happened? You won some fellowships, what happened with your personal finances?

18:25 Anne: One of the really great things about the fellowships I received was they were actually higher than the RA or TA stipend that I would have otherwise received, so that was really great and definitely a motivation for others to apply for fellowships. They’re often higher than what you would receive from your university. One thing to note is that different fellowships pay out slightly differently, so I had different payment arrangements depending on the years. One fellowship paid at the beginning of the semester, so just twice, and the other paid biweekly, every other week. It made a difference in my monthly budgeting. I didn’t change really how I budgeted because of that necessarily, but depending on how you operate with your budget, it might. The other thing is that the year that I received the the $3,000 Society of Women Engineers Fellowship Scholarship, that was actually on top of the GK-12 fellowships, so I stacked those, which was really cool. That’s sometimes possible as well. I’m trying to think of what else.

19:44 Emily: Well, there’s already a lot there. Let me ask a couple follow-on questions. Okay. So the first one — it sounds like, in total for your years in graduate school, were there two years when you received a fellowship that paid above the baseline stipend or was it more than two years?

20:01 Anne: It was two years.

20:02 Emily: Okay, so two years out of how many?

20:04 Anne: Five.

20:06 Emily: Did you do anything different in those years compared to the other three? For instance, did you live in a different place that was maybe more expensive or were you a little bit freer with your discretionary spending? Or did you end up saving more? What happened to the increase in pay since it wasn’t the entire time since it was only a couple of the years.

20:30 Anne: No, I didn’t change my budget really at all. I probably should have saved a little bit more when I was making the slightly higher salary that one year, but no, I didn’t change it really very much.

20:46 Emily: Okay. I just kind of always think about people who win a multi-year fellowship at the beginning of grad school and then they set their spending level in line with that fellowship. Then at some point they go down to the base stipend and I worry about those people. I’m a little concerned for them. Okay, so you didn’t really change anything but you could have saved more during that time. I think it’s really just about being intentional. Whatever you decided to do with it, just decide and don’t kind of float along with it. Okay, so slight increase in pay, that was one thing. Another thing you mentioned was a change in pay frequency and pay timing. Out of curiosity, when you were an RA or otherwise not on these fellowships, what was the pay frequency for that kind of position?

21:36 Anne: It was every other week.

21:38 Emily: Every other week, so also biweekly.

21:41 Anne: Yes.

21:41 Emily: So the same with one of your fellowships, and then the other one was once per semester?

21:46 Anne: Yes.

21:47 Emily: I can definitely see that the ones per semester might be a challenge, but it sounds like since you were already budgeting, already in that mode, maybe you could handle it a little bit better. How did it work for you? Just explain to me how you managed it.

22:06 Anne: It didn’t change too much. I tracked every dollar in graduate school, I still do, so I was very aware of what my base spending was. It didn’t vary a ton over my years in grad school, so that was the basis of how I budgeted.

22:25 Emily: It sounds like you got this influx of cash into your checking account and you just left it there and kind of drew it down according to your normal spending pattern as the semester went on and then you got another in flow for the next semester. Yeah, I just think that that can be a really challenging situation for someone who doesn’t already have a handle on their finances. Maybe someone who it’s their first semester in a new city — you don’t really know what the expenses are going to be, and you have to make sure that money lasts you until you get that next check coming in. I was thinking actually, how did you handle irregular expenses with your budgeting in grad school? Maybe it’s traveling, or health, dental, vision, those kind of expenses, anything that’s kind of big and occurs one time a year, a couple of times a year. How did you handle that, let’s say with your biweekly pay?

23:22 Anne: Yeah, that’s a good question. I didn’t have a giant emergency fund, but I did keep a small emergency fund throughout grad school. That was where I would draw out of, and again, I kind of honed it in over the course of five years when those expenses would come, so I knew to expect them. I did track it throughout my five years so I could make sure that I wasn’t getting a lifestyle creep or anything and made sure I kept that cushion my emergency fund at all times.

23:57 Emily: Okay, so if that was your method, then having the once per term fellowship wouldn’t change it that much, it’s just you have more money on hand and it goes towards paying these normal, same expenses as always. Because you already had that stuff in place, sounds like it was pretty easy for you and not much difference. I also wanted to ask, you mentioned taxes, right? In one case you didn’t have automatic income tax being withheld, so did you end up paying quarterly estimated tax during that year?

24:30 Anne: No. I remember it took me by surprise when I was filling out my taxes, and again, thankfully I had the emergency fund, but I was just not in that mindset at that time, so I didn’t. I was lucky I had that emergency fund to smooth it over when tax time came and I owed taxes.

24:54 Emily: So it sounds like you weren’t even aware that it wasn’t being withheld.

24:59 Anne: Maybe vaguely, but not properly.

25:00 Emily: But not enough to prepare for it. Fair warning, to any listeners. It sounds like in one case you did have automatic tax withholding, in one case you didn’t, so hey, figure it out. Maybe you’ll be pleasantly surprised that you are having tax withheld from your fellowship. That could be the case, but you certainly need to know if you’re not, either for that large tax bill in April or for paying quarterly estimated tax, if required to.

25:30 Emily: Yeah. Any other effect on your personal finances from winning those fellowships?

25:36 Anne: No, I think that’s about it.

Professional Impact of Winning a Fellowship

25:38 Emily: And how about effects on you as a researcher, as a PhD? Did the fellowships do what they were supposed to do and further your development?

25:48 Anne: They strengthened my credentials, which was wonderful. They gave me the opportunity to attend conferences and present my work. I learned a lot of those conferences and they were inspiring to me. I definitely improved my writing skills through the application process and that continues to help me today. I also feel like the application process, in general, helped me hone my elevator pitch about what I was doing in graduate school, which I thought was really great. Like I said before, I do think it helped me to explore some other interests that I had, while a graduate student, and it also gave me encouragement and support while I was a graduate student, and that meant a lot.

26:42 Emily: I have an article on my site and again, we’ll link it from the show notes. It’s called something like why you should apply for fellowships, even if you’re fully funded as a grad student or postdoc. It was for me, to some degree, tempting to kind of just rest on, “well, I’m going to be funded, I know that’s going to happen, I don’t need to go this extra mile or many extra miles submitting all these applications”. But it really sounds, based on your experience and others, that it’s worthwhile, even just applying, even if you don’t end up winning anything, which like you said, if you end up applying a lot, it’s a numbers game, so hopefully here and there you’ll win something. But even the process of applying without even winning is valuable. Plus, if you do win then further and further, it really develops you as a scholar. I’m really glad to hear your examples of that.

Advice for PhDs and Postdocs Applying to Fellowships

27:37 Emily: Any final concluding words of advice from you on how a person who wins a fellowship can get the most benefit possible out of it, whether it’s financial, whether it’s benefiting them professionally? Any words on that?

27:56 Anne: I would really encourage people to take a look at some of those lesser known fellowships. Especially in my field, I remember there were some really big ones that everybody knew about that were more competitive, but there’s a lot of fellowships out there for all kinds of things. And get creative, try something new. Don’t get discouraged if you don’t get one, because yeah, it’s a numbers game. And have fun.

28:28 Emily: Well, thank you so much for sharing your experience with us and I’m really glad to hear such a positive process and outcome from you.

28:39 Anne: Well, thank you very much, Emily. I had a good time. Thanks.

Outtro

28:42 Emily: Listeners, thank you so much for joining me for this episode. PFforPhDs.com/podcast is the hub for the Personal Finance for PhDs podcast. There you can find links to all the episode show notes, a form to volunteer to be interviewed, and a way to join the mailing list. I’d love for you to check it out and get more involved. If you want to support the show and my business, please go to PFforPhDs.com/helpout. There are plenty of ways do so without laying out any of your own money. See you in the next episode. And remember, you don’t have to have a PhD to succeed with personal finance, but it doesn’t hurt. The music is Stages of Awakening by Poddington Bear from the free music archive, and it’s shared under CC by NC.

This PhD Student in Texas Side Hustles to Overcome Her Unique Financial Challenges

August 26, 2019 by Lourdes Bobbio Leave a Comment

In this episode, Emily interviews Allie Judge, a second-year PhD student at Baylor College of Medicine. Allie outlines her top five expenses in Houston, TX as well as her financial goals. Allie receives a good stipend, but her pet sitting side hustle enables her to supercharge her financial progress. She uses her stipend for her living expenses and Roth IRA contributions and her side hustle income to pay down her student loans and medical debt and fund her travel to see her long-distance partner. She concludes with excellent budgeting advice for other graduate students.

Links Mentioned in the Episode

Teaser

00:00 Allie: Now during a slow month, I usually net about $300-400 a month. Right now during the literal hot months, also when people are taking a lot of vacation and wanting to get out of the Houston heat, I’ll usually net $700-800. so it’s going well.

Introduction

00:24 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host Dr. Emily Roberts. This is season four, episode two and today my budget breakdown guest is Allie Judge, a PhD student at Baylor College of Medicine in Houston, Texas. Allie details her income from her stipend and lucrative side hustle and her top five monthly expenses. Two of Allie’s unique financial challenges are high medical bills and her long distance relationship and her ongoing financial goals are to max out her Roth IRA and repay her non-deferred student loans. You won’t want to miss the budgeting advice she shares at the end of the interview. Without further ado, here’s my interview with Allie Judge.

Will You Please Introduce Yourself Further?

01:16 Emily: I have joining me on the podcast today Allie Judge, who is going to share with us her budget breakdown — her top expenses and financial goals for her recent months. Allie, it’s a real pleasure to have you here and I’m looking forward to all the interesting subjects we’ll be covering in this episode. Will you please tell the audience a little bit more about yourself?

01:26 Allie: Thanks. I am a second year PhD student at Baylor College of Medicine in the Biochem department living in Houston, Texas right now.

01:46 Emily: Excellent. Is it just you in your household?

01:51 Allie: I have a roommate and a cat, but other than that, just me.

01:56 Emily: Great. How much money do you make?

01:59 Allie: Our stipend actually recently went up. It was $32,000/year coming in and went up to $33,500 starting this month, I think.

Pet-sitting Side Hustle

02:10 Emily: Very nice. Decent raise year over year. I understand you have a side hustle as well.

02:16 Allie: I do. I am a dog sitter on Rover. I started when I was a research tech and was paid even less than I am now, and have continued through grad school.

02:27 Emily: I’m sure a lot of people will be interested in that side hustle, so can you tell us about what it entails a bit, how much money you’re making, maybe hourly, if you know that, and that kind of stuff?

02:39 Allie: Getting started was pretty easy. You just have to do a background check that costs $10, which was nice. Of course, I had to earn reviews on the site and that took a little while. I didn’t make a whole lot of money at first, but now during a slow month, I usually net about $300-400 a month. Right now, during the literal hot months, also when people are taking a lot of vacation and wanting to get out of the Houston heat, I’ll usually net $700-800, so it’s going well.

03:13 Emily: That is very nice. What kind of time commitment is that?

03:18 Allie: I primarily do house-sitting, just because the other services tend to be requests that come in the middle of the day and I don’t like to take time in the middle of the day from lab. When I house-sit, I usually just stay at their house overnight and it’ll be maybe an hour or two a day of taking a walk with a dog or feeding, and cumulative attention time that I can usually multitask a little bit during.

03:47 Emily: That’s really interesting. I didn’t know anything about this service. Although I’ve heard of it before, I did not realize that hous-sitting was a component. That definitely seems like a pretty lucrative way to do this. I’m really glad you found a way to be able to stay at work all day and not be walking dogs in the high heat of the day. And presumably you love animals. Is this a fun thing for you to do?

04:11 Allie: Yeah, definitely. I’ve always grown up with dogs and cats and I had pet-sat for neighbors and such, so it was pretty easy to get testimonials on my little profile, but you can have friends and family do it too to get you started.

04:25 Emily: Thank you so much for telling us about that side hustle because if anyone is interested, loves animals, and wants a side hustle, that seems like a really, really good one to be doing. Why did you choose to go through Rover instead of striking out on your own?

04:45 Allie: As opposed to just independently pet-sitting? They do take 20% of your profit, so that’s a huge chunk, but the exposure that you get is so much better. I’ve lived in major metropolitan areas, and I just would not be able to network. Even with the 20%, I feel like it’s for sure worth the advertising.

05:12 Emily: Do you end up getting any repeat clients?

05:18 Allie: Absolutely. I think right now, this summer, it’s almost been entirely repeat clients just because now they’re going on longer vacations and want someone they’ve had before. A few of them will kind of go off platform, or some of them will try to suggest that at first I say, “No, we should stay on the platform because I don’t know you and you don’t know me.”.

05:44 Emily: Thanks again for that detail. You’re making what sounds like pretty decent stipend income, especially for Houston, I would imagine, plus you have this very significant side hustle.

#1 Expense

Emily: I’m really curious now to dive into your top five budget line items for each month. You said you’re going to be doing your most recent months in this summery, right?

06:07 Allie: Yeah.

06:08 Emily: Let’s dive into it. What is that top expense?

06:10 Allie: My top five would be my rent, some recent medical bills, student loans and groceries, in addition to travel, which I try to contribute to monthly, but doesn’t always happen.

06:25 Emily: Yeah, that sounds great. So top one, rent, of course, unsurprising there. What are you paying and what are you getting for it?

06:32 Allie: Thankfully I have a roommate that shares my two bedroom, two bath in Houston. We each pay $600 right now.

06:40 Emily: Sounds very decent. What’s the proximity to campus?

06:45 Allie: It’s about a 15 minute bus ride

06:48 Emily: And that’s how you typically commute?

06:50 Allie: Yeah. Gigantic medical center with very expensive parking.

06:55 Emily: How do you like using the buses? Is it a decent system?

07:01 Allie: I would say that given Houston traffic, I’d much rather take an extra five minutes on the bus, then have to deal with people on the road in the morning and in the evening.

07:12 Emily: And do you own a car at all?

07:15 Allie: I do. That’s pretty necessary in Houston. I am fortunately not paying my car insurance yet because it’s still in my parents’ name. That is not crucial but helpful.

07:30 Emily: So, fifteen minute bus ride — how do you like the location where you live other than that? Are we talking city, is it walkable to a lot of stuff, how is it?

07:42 Allie: It’s an area called “”condo land” so there’s a lot of condos, and it’s a lot of families, that type of thing. It is not the safest place if you go a block this way or a block that way, but generally where we are is pretty quiet.

08:01 Emily: That sounds good. Is your roommate another graduate student, or someone you found outside of the university?

08:07 Allie: I moved into the two bedroom by myself because I didn’t want to just find a roommate on Craigslist. Then, after about six months, my roommate was looking for a place to live too and moved on in.

08:22 Emily: That’s a nice way to be able to vet the person you live with before you commit to that relationship.

08:29 Allie: She is a grad student. I don’t know if I said that.

#2 Expense

08:32 Emily: Yeah, it sounds great. Okay. Expense number two?

08:36 Allie: Expense number two would be these medical bills I have coming up. It’s about $450 a month and then this month I had to make a quick trip to the emergency room and it was about $350 extra. So if you can go to urgent care, this is my big takeaway from that.

08:56 Emily: How is your health insurance?

09:03 Allie: We do have free health insurance through our graduate program, like a lot of biomedical students do. It’s generally pretty good for the most routine stuff. Hopefully I’ll be meeting the maximum out of pocket expense soon.

09:22 Emily: There are probably some people in my audience who have never really dealt with health insurance that much. What we’re talking about is usually you’re used to paying a copay and maybe co-insurance, a percentage of the bill above a certain amount. Maybe there a deductible to meet. But at some point, hopefully the plan will have a not crazy-high maximum amount of money you will pay out of pocket, after which everything should be 100% covered, usually in network, right?

09:51 Allie: Yes.

09:53 Emily: You’ll may be meeting that at some point. And it’s hard, it’s tough to pay until you get to that point. But you can kind of look forward to say at least after that point for the rest of the calendar year, I’m not going to have any more out of pocket expenses should things go as they usually will. For those of you who are thinking about creating an emergency fund, having the amount of money to meet that whole out of pocket yearly expense in an emergency fund is a pretty good number to take a look at. It may be a few thousand dollars, or may be lower or may be higher depending on the type of plan that you have.

#3 Expense

10:29 Emily: Thanks for telling us about that. Hopefully this will not be a large expense in your budget forever. So your third expense?

10:37 Allie: So my third expense is my student loans. Right now with the medical expenses, I’m paying the minimum payment, which is $204, I think, but prior to those expenses I was throwing more like $500 or $700 a month, whatever my Rover income allowed.

10:57 Emily: Why are you paying student loans right now as a grad student?

11:04 Allie: As an undergrad I went to my small liberal arts college and took out plenty of student loans for it.

11:11 Emily: I guess what I mean is you have the option to defer your student loans, but you’ve sounds like you’ve chosen not to. Talk me through that decision.

11:20 Allie: My student loans are through the government, they’re public student loans and they granted discount of 2.5% interest if you set it to auto pay. I not only wanted to get my loans paid down, but there is actually a benefit to having them not deferred and being able to set them to auto pay.

11:40 Emily: Are any of these loans subsidized or are they all unsubsidized? Is there any calculation you’ve done there?

11:49 Allie: They’re unsubsidized. I believe that if you have subsidized loans, they don’t collect interest during deferment. So that 0.25% would be irrelevant.

11:59 Emily: It’s an unusual decision, I think. Some graduate students I talk to pay on their student loans, but you’re the first person I’ve talked with who has chosen not to defer at all, but it sounds like based on your totally decent stipend income, plus all your side hustle income, that minimum payment of $200 a month is totally manageable. Plus, you usually are able to pay much more than that, so I definitely think this can be a very, very smart decision. It’s just an unusual one, but I think it potentially is a really good one in your situation. It must feel good to be working on paying down that debt at whatever interest rate it’s at since it’s unsubsidized. You know, many, many people in our community will, during graduate school be watching that interest accrue if they’re not able to make payments, and that’s a painful thing to do, right? I’m glad to hear that you are being proactive about paying these down.

12:57 Allie: And it helps to know that I could defer them if expenses really were tight.

#4 Expense

13:03 Emily: All right, fourth expense?

13:07 Allie: So my fourth expense would be groceries. I spend about $200 a month on groceries. I probably could bring it down, but I’m trying to prevent myself from going to restaurants more and more.

13:21 Emily: There’s, of course, an interplay there, between grocery spending and eating out spending, so you’ve chosen to maybe spend a little bit more on groceries but not eat out very much, sounds like.

13:33 Allie: Yeah, I keep my restaurant budget to $50 a month or less.

13:38 Emily: Do you have any guidelines for yourself around when you do choose to eat out?

13:46 Allie: I’m in a long distance relationship, so when my partner, who lives in a small town in New York, comes to Houston where there’s an array of restaurants, that’s when we tend to eat out.

13:58 Emily: $200 a month on groceries sounds pretty low to me, actually, for one person. Are there any particular strategies that you use around grocery shopping, or around cooking, that you’d like to share?

14:11 Allie: It helps that I do live in a major urban area, so I’ll usually check out the mailer on Aldi deals and I’ll go shop at Aldi and then I’ll check out the same for Kroger and I’ll make a trip there and they’re within 10 minutes, which is convenient.

14:28 Emily: Love that your using Aldi. I used to shop at Aldi when I lived in Durham. I don’t have one close to me now, but if anyone in the audience is near an Aldi and has not checked it out, you really owe it to yourself. You won’t necessarily get all your grocery shopping done there, but you can get a lot of your staples and the prices are amazing. It’s a different kind of shopping experience. I prefer it to the standard grocery store. And Allie, how do you manage cooking as a graduate student and also as someone who’s doing all this house-sitting. If you’re not in your home a lot of the time, how do you manage that?

15:03 Allie: I do usually meal prep. Not to an extreme where my freezer is stocked full, but I’ll usually have at least half of the meals I need for the week done on Sunday. So that for the rest of the meals I can take a little more time or enjoy cooking a little more. Or sometimes it’s just a very quick canned soup kind of night.

15:28 Emily: I presume you bring your lunch with you virtually every day and then you would also be packing food when you’re going on job somewhere?

15:39 Allie: A lot of my friends do buy food almost every day in the cafeteria. I can’t imagine how much more that would cost.

15:50 Emily: Do you eat lunch with other people or do you eat by yourself?

15:54 Allie: I’m not in the immunology program, but the first year immunology students have adopted me into their friend-circle, so I usually try to catch up and eat lunch with them now that we don’t have classes together.

16:06 Emily: I think that’s one of the wonderful things about being on a campus is that it’s totally fine to bring your lunch into cafeterias or whatnot, public-ish eating spaces, and it’s not a weird thing to do. It’s not like you’re paying to have access to that space with the food that you buy. It’s great that you can be social and bring your lunch every day. I wanted hear a tiny bit more about meal prep, maybe just the resources that you use to learn about that?

16:35 Allie: I’m subscribed to a lot of subreddits that have recipes, Eat Cheap and Healthy and Meal Prep Sunday and that give some loose inspiration for recipes that all then go search for myself.

Commercial

16:53 Emily: Emily here for a brief interlude. Through my business, I provide seminars and webinars on personal finance for graduate students, postdocs and other early career PhDs, for universities, institutes and conferences, associations, etc. I offer seminars that cover a wide range of personal finance topics and others that take a deep dive into the financial topics that matter most to PhDs, like taxes, investing, career transitions and frugality. If you’re interested in having me speak to your group or recommending me to a potential host, you can find more information and ways to contact me at PFforPhDs.com/speaking. That’s p f f o r p h d s.com/speaking. Now back to the interview.

#5 Expense

17:41 Emily: All right then, your fifth expense in your budget?

17:44 Allie: That last expense that has not gotten much love recently is typically travel. That’s a secondary savings account where I throw whatever extra I have that I have decided not to put toward my student loans that month into a designated savings account for travel. That way when I find a cheap flight, I can go ahead and book it and I don’t have worry about whether I can afford it that month.

18:12 Emily: It sounds like it varies, but what would you say average you’re putting into that savings account?

18:19 Allie: On average it’s about $200.

18:23 Emily: Tell me a little bit more about how you’re managing the long distance relationship with respect to the money and the travel components of it beause I know this is a really common thing in the PhD population. How does it work for you?

18:36 Allie: What we do is we split our flights 50/50 pretty much every time and those tend to be between $300 and $500 because it is a pretty small airport that I’m flying into. Unfortunately, he is in law school and collecting student loans at 9% interest, so while we do split 50/50, kind of as the agreement because we’re not married yet, I try to be mindful and foot some of the bill if I can and have a lot of extra.

19:18 Emily: Do you find that you are traveling about at the same frequency to see one another or does one of you travel more?

19:24 Allie: It’s varied, just on convenience for whichever one of us has the time. At Baylor, we have a week break between terms in the first year that we take classes, so it made more sense for me to go see him for a couple of those breaks. Then of course he had a fall break and spring break, so he came to see me for that. It was more circumstantial than it was just trying to keep it even on who had to travel.

20:00 Emily: I almost forgot that classes were involved with being a PhD student because that will not be the case for much of your degree, but presumably he’ll have classes that he has to attend the entire time. Do you see that changing up at all once you’re free from that aspect of your scheduling?

20:20 Allie: Good point. We finish classes in a year at Baylor so I’m done, which means I will probably be taking more time to go see him. He tends not to have classes on Fridays in law school, so it’s more likely that I make a Thursday night trip to go see him.

20:38 Emily: Are you able to work remotely when you travel or are you still considering one of those days a work day?

20:45 Allie: I have not talked depth with my PI about any kind of specific arrangement, but I do have a pretty heavy computational component to my research, so that would probably make it easier.

20:58 Emily: Yeah, it’s really nice to have that flexibility. I remember much of my PhD having to go in and feed cells on weekends and that it makes travel a little bit difficult. You have to really plan long-term to be able to be away from more than a couple of days. Have you started using any kinds of travel hacking strategies or travel rewards strategies since you are taking the same kinds of flights pretty frequently?

Travel Hacking and Strategies

21:25 Allie: First of all, your best friend is Google Flights. It’ll help you track prices so you can decide when is the best time to buy your tickets and it’ll send you email notifications and it’s been really helpful. We tend to just fly the cheapest airlines that will fly between us, which includes three different airlines, so I have not gotten a co-branded credit card, but I have used points and cash back from credit cards. Right now, I have a Chase card that gives me 2% back on all travel and the points can be redeemed usually at a higher value than just simple cashback. That’s what we’ve been using to book flights, when we can, through their travel portal. The signup bonuses have also been really helpful in getting us a couple free flights back and forth.

22:22 Emily: That’s excellent. The Chase card that you’re using, or maybe in general, do you use cards that have an annual fee or always ones that don’t?

22:31 Allie: That is my only card that has an annual fee actually, and I mostly got that card for the signup bonus. A lot of them you can do the first year with no annual fee, so I’ll have to decide at the end of the year whether that annual fee will be worth it for next year.

22:49 Emily: Thanks for sharing those strategies. I did not really get into travel hacking when I was in graduate school because living in Durham and flying to lots of different parts of the country, I was always taking different airlines, so at that time I was kind of like, “Well, it doesn’t really make sense. I’m never loyal to one airline.” I didn’t get a co-branded card at that time. Now that I live in Seattle, I fly Alaska so much because it’s a hub, so at this point, for my specific situation, it makes a lot more sense to get that card and just take the strategy a whole different way. I’m really glad to hear that you found a solution that’s working for you, even though you aren’t loyal to one airline, and using those general rewards cards that work across any type of travel is an excellent way to do that, so thank you so much for sharing that with us.

23:34 Allie: Still make a frequent flyer account for any airline that you’re going to fly on, because if you fly on it again, you might collect enough points to do something with it.

23:45 Emily: Great point.

What are your top financial goals?

23:46 Emily: Okay, so that was your, your top five expenses. Let’s then switch to talking about your financial goals, if you have any. We’ve already talked about paying above the minimum payment on those student loans, so that’s awesome that you’re doing that. Are you working on any other financial goals?

Maxing out Roth IRA

24:02 Allie: I’m also at the moment maxing out my Roth IRA for retirement, so that’s $500 a month since the maximum contribution is now $6,000 a year. I decided not to dip into that goal for these medical expenses that have come up because my student loan interest is only 4% and generally that’s kind of the breaking point on when you’re likely to beat the market and a non-taxable account versus paying down debt.

24:34 Emily: Thanks for that insight. I really love that now in 2019 we have that $6,000 limit on the IRA because it makes the math so much easier. It’s $500 every month. I don’t know if you think about things this way, but are your Roth IRA contributions coming from your stipend, or are they coming from your side hustle income?

24:55 Allie: So I do track my budget on Mint, but I’ve also been putting it into a spreadsheet so I can plan ahead because Mint won’t let you plan for next month. I put my money in one big pot, but because my IRA is something that I would not stop contributing to if I didn’t have Rover income, I’d probably say it comes from my stipend.

25:22 Emily: That makes sense. In terms of your priorities, maxing out your IRA comes before paying off your student loans and so you’re using a side hustle income really for the student loans and the contribution to the IRA as the more stable, constant goal that you have. Well, I think that’s just fantastic that you’re able to and that you’re choosing to max out that IRA. I’m so excited for you.

Emily: If anyone is thinking about doing an IRA during grad school, I’ll link in the show notes, a post that I’ve done about how much of a difference to your net worth doing that IRA during graduate school will make. Top line numbers, you can read more about it in the post, is that if you contribute $250 per month during grad school for five years, and we make some assumptions about your rate of return, if you look out 50 years from when you finish, you will be solidly into retirement at that point, that contribution just during graduate school turns into $1 million based on these compound interest calculations. You contributing $500 a month, if you do that for five years, we’re looking at $2 million, 50 years out from graduate school. Again making certain assumptions, but that’s the kind of scale that we’re talking about for making room for this within your stipend and your budget and so forth. I’m really excited for you, Allie, and what the future holds for your finances.

Targeted Savings Accounts

26:52 Emily: Any other goals that you want to discuss now?

26:55 Allie: Other than that student loan, which is kind of on the back burner, I’ve hit my emergency fund goal and some other savings goals. I do have separate designated savings accounts for my cat in case of medical expenses and for my car, just for repairing and eventually in like five or six years, probably buying a new car.

27:23 Emily: It sounds like you’re employing what I call the targeted savings accounts model or sinking funds model, which is excellent. I really love that for graduate students to help them through the months where one, two, three large expenses hit and your normal cash flow can’t handle that. I’m really glad to hear about that.

What are your top financial tips for your peers?

27:41 Emily: So let’s wrap up here, Allie, with your best advice for your peers.

27:46 Allie: One big thing is keeping some extra money in that checking account. This will allow you to automate everything. What I did is I contributed to my emergency savings until I had some extra and then I just pulled that back into the checking account. That way I had $500 buffer so that on first of the month I can always pay my rent, so that I set those credit cards to auto pay, so that I set my targeted savings accounts to auto withdraw, and the same for my retirement and my student loans. It just makes me worry so much less. Then my second tip is for those with a side gig, if you can, push the income you get from that side gig into next month’s budget. For a little while, I was taking the $50 I made last week and including it in this month’s budget, which made for really erratic budgeting and also made me more likely to put that $50 toward something I want to do instead of a savings goal.

28:49 Emily: I think those two pieces of advice are really excellent and I’ll just expound on them a little bit more. The basic concept that you’re talking about, with pushing your income forward into next month, is what I call being on time with your budget. I recently read the book, “You Need a Budget”. So there’s a budgeting software “You Need a Budget”, there’s an associated book called “You Need a Budget”. What they call it is aging your money. What this means is basically in the course of a month, whatever paychecks you receive, those go towards funding your next month’s budget.

Emily: A lot of people play a game, especially people who are paid bi-monthly or bi-weekly, where the paycheck they receive is immediately going to pay for expenses — so it’s like first paycheck of the month pays for these immediate expenses, second paycheck of the month pays for the bills I’ve time to be in the second part of the month. Instead, to give yourself a little bit more margin, a little bit more space and calm, take all the income you make in a given month, and say that’s funding my next month’s budget.

Emily: That’s exactly what you’re doing with your side hustle income, so you’re not turning around and spending the money you make the next week, you’re saving it for the next month. I think that’s really smart, especially for what you just said. When you put off spending the money until the new budgeting period, you can have some more time for reflection and planning and making sure that you’re using the money in the way that you think is best and not something more impulsively. I actually think that it’s somewhat easy for graduate students, if they’re paid monthly, to do this. Are you paid on a monthly schedule?

30:21 Allie: We’re paid biweekly.

30:23 Emily: If you haven’t already done this, my suggestion would be to age that second paycheck or the first one, I guess to be for that next month. It’s a very challenging thing to do, especially for someone who has really, really tight cashflow because essentially you’re saving up half your month’s salary to be delayed until using it the next month. It’s a very, very challenging thing to do, but a really excellent one and again, I really admire the “You Need a Budget” framework for calling that out as ageing your money and they have a specific tool within the software that helps the user do that. So thanks for those two pieces of advice.

31:06 Emily: Allie, thank you so much for breaking down your budget with us today and giving us this wonderful insight and wonderful advice and best of luck to you with your finances and the upcoming year.

31:16 Allie: Yeah, absolutely.

Outtro

31:19 Emily: Listeners, thank you so much for joining me for this episode. PFforPhDs.com/podcast is the hub for the Personal Finance for PhDs podcast. There you can find links to all the episode show notes, a form to volunteer to be interviewed, and a way to join the mailing list. I’d love for you to check it out and get more involved. If you want to support the show and my business, please go to PFforPhDs.com/helpout. There are plenty of ways do so without laying out any of your own money. See you in the next episode and remember, you don’t have to have a PhD to succeed with personal finance, but it doesn’t hurt. The music is Stages of Awakening, by Poddington Bear from the free music archive and it’s shared under CC by NC.

How to Financially Manage Your NSF Graduate Research Fellowship

April 5, 2019 by Emily 1 Comment

Congratulations on being awarded the National Science Foundation (NSF) Graduate Research Fellowship (GRF) (or a similar remunerative, competitive, national fellowship)! Whether you’re a prospective grad student or a current first- or second-year PhD student, this fellowship is a great boon to your research, your CV, and almost certainly your finances. However, you may not yet realize that your finances will become a bit tricky once you start receiving your fellowship. With the help of this article, you can avoid the pitfalls associated with fellowship income and fully capitalize on the benefits.

The NSF GRFP’s Negotiation Power

I’m sure you didn’t miss this headline info about the NSF GRFP: The fellowship pays you a stipend of $34,000 plus $12,000 of educational expenses to your institution for three years. Awesome! At the majority of universities in the US, that stipend amount is well above what you would be paid if you didn’t receive the fellowship, so you’ve effectively achieved a raise for the next three years.

But the good news doesn’t stop there: Your university/department might confer even more benefits upon you for winning independent funding. If the administration isn’t forthcoming about these additional benefits, it is appropriate to inquire about them.

Independence

Your new outside funding may give you a degree of independence in your research that you wouldn’t otherwise enjoy. This is highly dependent on your field, department, and advisor, but the fellowship may enable you to take your doctoral research in a direction that you advisor couldn’t or wouldn’t have supported without it. Perhaps you could take a risk on a side project, establish a new collaboration, or take extra time to rotate through a lab to gain new skills.

Additional Funding

At many universities, there is a standard offer of additional funding for winning a multi-year, lucrative fellowship like the NSF. This offer could come in one or more forms, such as:

A guarantee of funding for additional years
A one-time bonus
A stipend supplement above $34,000 while you have the fellowship
A stipend supplement after the fellowship concludes (e.g., up to $34,000/year for your remaining time in graduate school)

Not all departments offer additional funding to NSF GRFP recipients, but it’s worth inquiring about with your advisor, the administration, and current NSF fellows at your university. Stipend supplements during the time that you receive the NSF GRF are more common in high cost-of-living cities where the departmental base stipend is near $34,000/year to begin with. For example, searching “NSF” in the PhD Stipends database reveals stipend supplements awarded during the NSF GRFP years to students at the University of California at Berkeley, Northwestern University, and Columbia University, while a student at the University of California at San Diego writes that he/she received no funding incentive for winning the NSF GRF.

For Prospective Graduate Students

You’ll never have more negotiation power than you do as a prospective graduate student with an outside fellowship in hand. Unfortunately, you don’t have a lot of time to negotiate as the NSF GRFP awards list comes out approximately two weeks before grad school decision day, April 15.

Further reading: Vote with Your Feet, Prospective Graduate Students

As quickly as possible, you need to clarify if the offers from the universities you are still considering are going to be sweetened at all now that you have your fellowship. If the financial package from your preferred university isn’t up to par with your other offers (after considering cost of living differences), you can tactfully ask if a bonus, stipend supplement, or guarantee of future funding is possible.

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Budgeting with Your Fellowship Income

There are two vital questions you need to ask of your department before you can begin creating a budget for your NSF GRF stipend.

After the fellowship ends, what will my stipend be?
How frequently is my fellowship disbursed?

Accelerate Progress on Financial Goals

In my ideal personal finance-oriented world, an NSF fellow would live on (less than) the base stipend from his department and put all the excess income received toward growing his wealth. There are a few advantages to that approach:

Your lifestyle roughly matches that of your peers in your department.
You can relatively quickly achieve financial goals such as saving or debt repayment.
If your income is set to drop once the fellowship ends, you avoid acclimation to the higher, temporary income and don’t have to make major lifestyle sacrifices once the three years are up.

Some financial goals you could work on during the time you receive the additional fellowship funds are:

Eliminating any troublesome debt (e.g., credit card balances, medical debt, car loan)
Saving up cash for short-term needs and expenses (e.g., emergency fund, targeted savings accounts)
Investing for long- and mid-term goals (e.g., retirement, house down payment)
Pay down student loans

Further reading:

This strategy is easiest to implement for graduate students who start the NSF GRF after one or more years in grad school. Just put all of your ‘raise’ toward financial goals and don’t change anything about your lifestyle! Prospective grad students will have to be more conscious about setting up their grad student lifestyle on a lower income than they will start out with.

Preparing for the Post-Fellowship Income Drop

If you choose to upgrade your lifestyle with your fellowship stipend, be careful to maintain any long-term financial contracts at a level that will be sustainable for you after your income drops (if it will). The two key areas to watch out for are housing and transportation expenses. While it is possible to reduce your spending in either of these areas during grad school, it is a painful process, so it is preferable to lock in your spending in those areas at a level that you can maintain long-term.

Budgeting with an Irregular Income

Sometimes, fellowships are disbursed to the recipient at a frequency other than monthly, e.g., once per term. This schedule can cause issues for budgeting, which is usually framed as turning over each month.

One of the advantages of an infrequent disbursement schedule is that you are paid at the beginning of the period rather than the end, so the money you need throughout the period is already available to you. However, you may not be able/inclined to use typical budgeting software functions and prefer to set up your own budgeting system.

One of the most useful budgeting concepts for people with irregular incomes is that of fixed vs. variable expenses. At the beginning of your budgeting period, project the fixed expenses that will be paid during the period, such as your rent/mortgage, debt payments, certain utilities, subscriptions, etc. Then allocate your remaining income to your variable expenses at a frequency that is convenient for you. For example, you can estimate the variable utility bills that you may pay monthly during the period, plan to spend no more than a certain amount of money each week on groceries, and give yourself a lump sum of money for entertainment for the entire period to be spent as opportunities arise. In this way, allocate your fellowship disbursement so that you are sure that your expenses won’t exceed your income (leaving some buffer for unexpected expenses).

Income Tax Implications of the NSF GRFP

Your NSF GRFP stipend is subject to federal income tax. (It is usually subject to state and local income tax as well, but there are some exceptions.)

Further reading:

However, the taxation of fellowship stipends is handled completely differently by universities than assistantship pay.

Tax Reporting

While assistantship pay is reported on a W-2, fellowship stipends are not required to be reported in any particular way.

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Essential information to help funded US domestic graduate students with their federal tax returns

A large fraction of universities, possibly the majority, do not report outside fellowship stipends on any official tax form. At most, the fellow might receive a courtesy letter, which is an informal letter stating the amount of the fellowship stipend received during the calendar year.

Some universities report fellowship stipends on Form 1098-T in Box 5 (along with other scholarship and grant income).

A small minority of universities report fellowship stipends on Form 1099-MISC in Box 3.

Whatever reporting mechanism used or not used, the important information to bring to your tax return preparation process is the amount of fellowship stipend paid to you during the calendar year. From that point, the fellowship stipend income is treated the same as any other fellowship/scholarship/grant income, and (possibly after some adjustments) it will ultimately be taxed as ordinary income.

Further reading:

Quarterly Estimated Tax

While you are required to pay federal and usually state income tax on your fellowship stipend, the vast majority of universities do not offer automatic income tax withholding on your fellowship stipend as they normally do for employee pay. (You should inquire whether automatic withholding is an option and use it if so, but the remainder of this section assumes it is not offered.)

This means that you will receive 100% of your gross fellowship stipend instead of your stipend net of income tax as you would assistantship pay. However, the IRS still expects to receive income tax payments throughout the year, so you will have to look into filing quarterly estimated tax.

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

As a default position, you should assume you are responsible for paying quarterly estimated tax. It’s possible that you won’t be required to in the year you switch on or off of the fellowship or if you’re married to someone with a high income and high withholding, but even in those cases it’s prudent to check.

The way you calculate your quarterly estimated tax due (and figure out if it’s required of you) is by filling out Form 1040-ES. That form will give you the amount of the payment you are supposed to make four times per year and an estimate of your total tax due for the year. You can make the payment online at IRS.gov/payments or through a host of other mechanisms.

Whether or not you are required to file quarterly estimated tax, it’s a great idea to set up a personal system that simulates automatic tax withholding. Open a separate savings account labeled “Income Tax” and transfer in the fraction of each paycheck you receive that you ultimately expect to pay in tax each time you are paid. Then, draw from that savings account when you make your quarterly or yearly tax payments.

This upcoming weekend I’m running an online workshop to help fellows file quarterly estimated tax. This is my first time giving the workshop, but if it goes well I plan to repeat it at least twice per year. If you would like to join my mailing list to be notified about future iterations of this workshop, please enter your information in the form immediately following this paragraph or at the end of the article.

Investing Implications of the NSF GRFP

The upside of receiving the NSF GRF is that your income is most likely higher than it would have been, which means you have an increased ability to achieve financial goals during graduate school such as debt repayment, saving, and/or investing.

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The downside of receiving the NSF GRF is that the stipend is not considered “taxable compensation” or “earned income.” It is taxable income, as discussed in the previous section, but it is not “compensation” or “earned.” If you receive only fellowship income in the course of a calendar year (and you’re not married to someone with taxable compensation/earned income), you become ineligible for certain tax benefits. The lost benefit that most commonly concerns graduate students is the ability to contribute to an Individual Retirement Arrangement (IRA).

Further reading:

An IRA is a tax-advantaged retirement savings vehicle. It’s a great idea to use an IRA (or other tax-advantaged retirement vehicle such as a 401(k) or 403(b)) for your retirement savings as it helps you maximize your long-term rate of return by protecting your investments from taxes. As a graduate student, you almost certainly don’t have access to the university 403(b), so the IRA is basically the only game in town for tax-advantaged retirement savings.

The catch is that you (or your spouse) must have taxable compensation during a calendar year for you to contribute to an IRA for the year. So if you go an entire calendar year with only fellowship income (you don’t have compensatory income from an assistantship or outside job and you’re not married to someone with taxable compensation), in that year you’re not eligible to make any IRA contributions.

It’s a catch-22: While you are likely more financially capable than ever of investing for the long term, you’re barred from doing so in a tax-advantaged retirement account.

I don’t think your inability to contribute to an IRA should stop you from working on your financial goals. It may be that you choose to prioritize another goal over retirement savings as a result of not being able to use an IRA, e.g., paying down student loans. But if saving for retirement is your top priority, you should pursue it; just use a taxable account instead of an IRA during any years of ineligibility.

Your tax burden can actually be quite low during grad school if you choose a long-term, low-turnover investing strategy. If you are single and your income in 2019 is below $39,375, your long-term capital gains and qualified dividends will be taxed at 0% at the federal level (you may still owe state and local tax). So it’s really not too bad to save in a taxable account as long as your income stays low. When you have access to an IRA or other tax-advantaged retirement account, you can probably shift your taxable assets into that account time to maximize the growth rate in the long term.

Further reading: Fellowship Recipients Can Save for Retirement Outside an IRA

What other questions do you have about financially managing your NSF GRF stipend?

Purchasing a Home as a Graduate Student with Fellowship Income

March 11, 2019 by Jewel Lipps 1 Comment

In this episode, Emily interviews Jonathan Sun, a second-year PhD student at Yale University. Jonathan purchased a house in New Haven after his first year in graduate school. He shares the process he used to search for and ultimately go under contract on a home, including applying for various incentive programs. But his home ownership goal was nearly derailed; his original mortgage lender pulled out because his fellowship income isn’t reported on a W-2, and he had to scramble to find another lender at the last second.

Links mentioned in episode

0:00 Introduction

1:02 Please Introduce Yourself

Jonathan Sun is a second year PhD student in Pathology at Yale University in New Haven, Connecticut. His stipend is $35,000 and it increases annually. When he moved to New Haven, he started by renting a two bedroom, one bathroom apartment with his girlfriend. He was paying about $1,500 monthly for rent.

3:10 What made you think that it would be a good idea to buy a home as a graduate student?

When he began his PhD program, Jonathan had in mind that he would want to buy a home. He thought between his first and second year would be the ideal time to buy. At this point in his PhD, he would know if he would be staying there for five or six years. Emily mentions that it’s a good idea to learn about the neighborhoods before buying a house. Jonathan agrees that it was a good idea to get to know the city and neighborhoods. He shares that if he had bought a home when he first moved to New Haven, he would have chosen a less convenient or less desirable neighborhood.

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

5:11 Was your interest in buying a home specific to New Haven or anywhere you moved to for your PhD?

The idea of buying a home occurred to Jonathan when he was interviewing at Johns Hopkins. He saw that homes were affordable near Johns Hopkins. He realized that homes could be affordable even on a graduate stipend. When he chose to attend Yale, he did some housing market research on New Haven and saw he could afford homes there.

When Jonathan was interviewing for PhD positions, he met a current graduate student at Johns Hopkins who owned their house. He didn’t meet any graduate student at Yale who bought a home. Jonathan says owning a home as a graduate student is not that common in New Haven. Emily shares that when she was a PhD student at Duke University, it was fairly common for grad students to own home.

7:20 How did you prepare your finances in the months leading up to buying a home?

Jonathan worked on improving his credit. He says that good credit is definitely important. To get a mortgage at a decent rate, or even to get a mortgage at all, he had to have good credit. Jonathan also searched for incentive programs around New Haven. He says he saved about $10,000 with incentive programs. He shares that while Yale University offered incentive programs for employees, he could not qualify for them as a PhD student. He relied on incentive programs instead of savings because he was paying expensive rent in New Haven.

To research incentive programs, Jonathan talked to a real estate agent who pointed him to incentive programs. Shortly after Jonathan arrived in New Haven, he started working with an agent. Jonathan didn’t have connections to an agent when he started to process. He simply dropped into a real estate office and met an agent there.

9:54 What were the steps you went through to buy a home?

Jonathan started looking for houses with agents about three months after he moved to New Haven. He didn’t start seriously looking until six months after his move. He says that even if you don’t have intention to buy right away, it is important to familiarize yourself with the neighborhoods. He was looking at four different neighborhoods around Yale University. He got an idea of price range for homes and who are the neighbors. This process gave him a firm idea of whether he wanted to rent or buy. Most of the time, he looked at houses through private showings with his agent. He went to just a few open houses without his agent.

During Christmas break, Jonathan thought carefully about whether he should pursue buying a home or not. He talked to his friends and family, and it seemed like the right thing to do. He asked his family if they could help with his downpayent, and made sure to have open communication with his family.

Buying a home took at least two months of seriously looking. Jonathan went through some experiences of making an offer but not getting the hoouse. He recalls three homes that he made an offer for, and there were some other situations where he almost made an offer. He didn’t want to settle for a house that he wasn’t satisfied with. However, his offers were outbid or made too late, and this added to the challenge of buying a home. Emily shares that in Seattle, she hears stories about bidding wars and people struggling to get the house they want, then they end up settling for a home that wasn’t all that they wanted.

13:54 How did you balance the process of buying a home with your first year of graduate work?

After his offers on homes were rejected multiple times, Jonathan felt demoralized. He had lowered his standards for a home. But then when he was browsing an online resource, he found a house that looked perfect. This house ended up being the one he bought. He says it was challenging to balance his graduate work with buying a home, but he was glad he did this in his first year rather than in his second year. He shares the example that on the day that he gave his offer, he was giving a presentation on a paper. He barely read the paper because he was so tired, but he still managed to give a compelling presentation. Right after he finished the presentation, he ran off to give an offer on the house. Much of the stressful part of home buying is waiting to get a response on the offer.

16:01 Tell us about the house that you ultimately purchased and live in now.

Jonathan was browsing online on the day before his presentation. He noticed the house was ten minutes away from where he was living. The house had just gone on the market that day. He pushed his agent to get a showing the very next morning. He got to meet the owner and exchanged contact information directly. The owner was a Masters student, and they had a connection. About two hours after the tour of the house, Jonathan gave an offer of $2,000 over the asking price. This was right after his presentation. He asked to receive a response in one day. The next day, someone else made an offer of $5,000 over the asking price with full cash. Jonathan raised the offer to $2,000 over the other offer. Jonathan’s offer was accepted, and he says that meeting the owner in person helped him get the house.

19:06 How was the process of getting a mortgage?

Jonathan didn’t have his mortgage ready until after his offer was accepted. He did have a pre-approval, but this didn’t work out for him. The lenders didn’t understand his financial situation as a graduate student with a stipend. The pre-approval came from a lender with connections to multiple banks. When you make an offer on a house, it is important for the seller to know that you can afford the house. For a pre-approval, the lender does a very brief credit check on you. The pre-approval shows that you can take out a loan of a certain amount. The pre-approval shows the seller that you can take out a loan for the house. Pre-approvals are very superficial, since they do not ask for a W-2. The lender asks for monthly income and proof that you reliably pay rent.

After his offer was accepted, Jonathan first explored incentive programs. He found an incentive program that stipulated if he stayed at least five years in New Haven, the program would pay at least $2,000 per year and contribute to the downpayment. The application for the incentive program took a while. Jonathan says that ideally the application should be done before submitting an offer. The seller wanted to move out three months after the sale, so this gave Jonathan the right amount of time to sort out the finances.

Jonathan qualified for two incentive programs, but he was happy to get just one because the programs were slow to respond. The incentive programs have a list of lenders that you have to use for a loan. The lenders were local banks in Connecticut. Everything seemed like it would work. He submitted all his documents, but about three weeks before closing, he got a phone call saying that they couldn’t pre-approve of his mortgage because the university wouldn’t be able to provide W-2. The university wouldn’t submit a form indicating that his stipend is guaranteed for 3 or 4 years.

Emily explains that there are different types of pay for graduate students. The W-2 is provided for assistantships and this represents a more typical employment situation. Jonathan says he doesn’t know the name of his pay. He gets the 1098-T, and he simply calls his pay a graduate stipend. Emily says that the 1098-T usually means you are funded through an award or outside fellowship. Lenders get confused by fellowship income. Jonathan says his acceptance letter from Yale says his stipend is guaranteed for several years, but the lender wanted the university to sign a form. The university was unwilling to compromise on signing that form that indicated the stipend is guaranteed. Emily says this “guarantee” of income is strange, because even with a W-2, the typical job is not guaranteed for multiple years.

28:15 How did you resolve the problems with the lender?

Jonathan was calling Yale’s financial office daily. He asked for help from the Dean. He started looking at the other banks on the incentive program’s list, because he had a feeling it wouldn’t work with this bank. There were a few banks around the university, so he went in person to the bank. He talked to a mortgage broker in person. They sat down together, and Jonathan filled out the form during the meeting with the mortgage broker at the new bank near the university. Jonathan resolved the situation because he found someone who was willing to work with him through his unique financial situation.

Jonathan said that this bank offered their own portfolio mortgage with their own requirements. It was harder to qualify for, but it came with a lower interest rates. He had little debt and good credit so he could qualify. It was a different type of mortgage than the first lender offered.

Jonathan was really caught of guard by the phone call from the first lender. It seemed fine, then suddenly he got the call, with no easy way to resolve the issue. Closing got delayed from Friday to Monday, but the closing went very smoothly with the new lender.

32:29 How does it feel to be a homeowner and to be a graduate student?

Jonathan says it feels good to come back to his own house. He can rent out some of the rooms. If he rents out two bedrooms of the three bedroom house, he can cover a good chunk of monthly mortgage. He says this is a great financial decision for him. The mortgage is less than what he paid in rent, plus he has the potential to rent out rooms. Two months after he moved in, he started renting out the rooms. He has two tenants and they are covering good fraction of mortgage payment.

Jonathan has to stay in the house for at least five years. He says that in five years, he will definitely be in a better financial situation from buying instead of renting. He bought in a very good location, in the up and coming neighborhood near Yale. He thinks the market value of the home will increase.

35:25 Have you thought about what you will do when you finish your program?

Jonathan says he has two different options after he finishes his PhD. First, if there’s a good market value to sell the home, he can sell it. Second, the location near Yale University will make it very easy to continue to rent the rooms in the house. He doesn’t see himself working in New Haven after his PhD unless it’s for an academic position.

36:24 Final Comments

Jonathan shares that he had a huge budget for his move, but he didn’t spend very much. He estimates he spent less than $1,000 to move into the house. He moved during the summer, so everyone was getting rid of furniture for free. He used his Toyota Corolla to pick up furniture, and hardly spent any money to furnish the house. He is replacing pieces over time as he saves money. He recommends overestimating expenses for a move.

38:44 BONUS INTERVIEW with Sam Hogan, mortgage industry professional.

Emily chats with her brother, Sam Hogan, who works in the mortgage industry. She asks him about solutions for graduate students and postdocs who are receiving fellowship income but want to buy a house.

Sam Hogan is based out of Northern Virginia. He works for PrimeLending and he is licensed in all 50 states. He explains what lenders look for in the risk profile. They are looking for the ability to repay, and to see verification of history of the type of employment as well as the likelihood of employment to continue. Sam says that ten years ago, anyone could get a no document loan. This meant anyone could verbally verify their finances, but this practice led to many foreclosures. Now, lenders require written verification of employment.

Sam explains that in Jonathan’s case, the lenders sent a form for verification of employment to the university. On the form, there is a tiny check box that asks if employment is likely to continue. It is a yes/no checkbox. Universities won’t check this box because technically a PhD candidate could discontinue their PhD by going into the workforce or transferring institutions.

Sam shares that the best approach is to document likelihood of continuation of income. This may be in the fellowship offer letter. Conventional loans look for at least three years of guaranteed income. When it comes to approving loans, it is all about the presentation of the buyer. Sam says to work with someone goal-oriented like yourself, who will be able to over-document your income. For example, you can write a letter about why you got the fellowship, and include that even after your PhD you will have income. This approach ensures you have good presentation to the underwriter. Loan approval comes down to one person’s decision, a human’s opinion. He says to work with underwriters who are flexible and will give you personalized attention.

Emily recommends that PhD students and postdocs work with Sam because he understands fellowship income situations. Sam can be contacted by cell phone at 540-478-5803. He can be emailed at samhogan03@gmail.com. His national licensing number is 1491786. He has a Zillow profile under Sam Hogan.

46:28 Conclusion

How to Read Your PhD Program Offer Letter

March 7, 2019 by Emily 3 Comments

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.

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?

February 19, 2019 by Emily 2 Comments

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

Publication 970

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!

stipend

Links Mentioned in the Episode

Teaser

Introduction

Will You Please Introduce Yourself Further?

Finding and Applying to Fellowships

Fellowship Application Tips and Tricks

Building Up Your CV

Writing the Fellowship Application

Commercial

Financial Impact of Winning a Fellowship

Professional Impact of Winning a Fellowship

Advice for PhDs and Postdocs Applying to Fellowships

Outtro

Links Mentioned in the Episode

Teaser

Introduction

Will You Please Introduce Yourself Further?

Pet-sitting Side Hustle

#1 Expense

#2 Expense

#3 Expense

#4 Expense

Commercial

#5 Expense

Travel Hacking and Strategies

What are your top financial goals?

Maxing out Roth IRA

Targeted Savings Accounts

What are your top financial tips for your peers?

Outtro

The NSF GRFP’s Negotiation Power

Independence

Additional Funding

For Prospective Graduate Students

Join Our Phinancially Distinct Community

Budgeting with Your Fellowship Income

Accelerate Progress on Financial Goals

Preparing for the Post-Fellowship Income Drop

Budgeting with an Irregular Income

Income Tax Implications of the NSF GRFP

Tax Reporting

Download Your Tax "Cheat Sheet"

Quarterly Estimated Tax

Investing Implications of the NSF GRFP

Free Email Course: Investing for Early-Career PhDs

Links mentioned in episode

0:00 Introduction

1:02 Please Introduce Yourself

3:10 What made you think that it would be a good idea to buy a home as a graduate student?

5:11 Was your interest in buying a home specific to New Haven or anywhere you moved to for your PhD?

7:20 How did you prepare your finances in the months leading up to buying a home?

9:54 What were the steps you went through to buy a home?

13:54 How did you balance the process of buying a home with your first year of graduate work?

16:01 Tell us about the house that you ultimately purchased and live in now.

19:06 How was the process of getting a mortgage?

28:15 How did you resolve the problems with the lender?

32:29 How does it feel to be a homeowner and to be a graduate student?

35:25 Have you thought about what you will do when you finish your program?

36:24 Final Comments

38:44 BONUS INTERVIEW with Sam Hogan, mortgage industry professional.

46:28 Conclusion

Gross Stipend/Salary

Tuition and Fees (Your Responsibility)

Source of Stipend

Duration of Stipend

Who Pays What for Health Insurance?

Is There a Guarantee?

What Happens after the First Year?

Links Mentioned in the Episode

Transcript

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