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How to Establish Credit in the US

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One of the most common issues international grad students face when they start grad school in the United States is how to establish credit. The US credit system draws its data only from debts incurred in the US, so whatever credit you had in your home country won’t transfer. Although your options for establishing credit are limited when you first arrive in the US, if you take the right steps, you will build credit quickly.

It’s important to note that in the US your credit is all about debt. The chief reason you want to have good credit is so that you will receive favorable lending terms on any future debt you want to take out. (A secondary reason is that potential landlords and employers sometimes check your credit score to verify your trustworthiness or check for conflicts of interest.) To have good credit, you have to have previously demonstrated that you can manage your debt well. Counterintuitively, having a lot of money to your name or paying your non-debt bills (rent, utilities) on time does not positively affect your credit score. Therefore, to establish your credit for the first time, you have to take out a form of debt, even if that is totally unnecessary for your finances.

What is a credit report and credit score?

A credit report is a list of all the financially-related accounts you have used in the past seven years. There are many different institutions that track this data, but the three main ones are Equifax, Experian, and TransUnion. Your credit report will include data on these accounts, such as how long they have been open, how much outstanding debt you have, and whether you have made any late payments.

A credit score is a number from 300 to 850 that summarizes how ‘credit-worthy’ you are. Another way to say that is how risky it would be for an institution to lend to you. Similarly to the credit report, each credit bureau will calculate its own credit score for you, but they will all be similar as they draw from the same data. A credit score above 750 is considered quite good.

FICO credit score range
Image by CafeCredit under CC 2.0

Lenders will look at your FICO credit score, but your attention should be on the accuracy of your credit reports. You can order one free credit report from each bureau once per year through annualcreditreport.com. Once per year (ideally on a 4-month rotation), you should order your credit report from each bureau and check its accuracy. Report any mistakes back to the bureau, and of course if you catch any identity theft, take steps to ameliorate that.

Further reading: “I Want a Credit Card, But I’m Scared”, Don’t Buy the Pro- and Anti-Credit Card Hype

How is my credit score calculated?

While the exact formula each credit bureau uses to calculate your credit score is proprietary, the components are widely recognized at a general level: payment history (35%), amounts owed (30%), length of credit history (15%), account mix (10%), and new credit (10%).

FICO credit score breakdown
source

The way to optimize your credit score is to:

  • make every single payment on time
  • pay down your outstanding debt
  • keep your debt utilization ratio (the percentage of your credit limit that you actually use – both for individual credit cards and all your accounts together) below 30%
  • keep your oldest accounts open (e.g., your first regular credit card)
  • let time pass (to lengthen your credit history!)

In rare situations, taking out a new, un-needed installment loan for the purpose of increasing your credit score might be a reasonable strategy, but you should conduct heavy-duty research that option before taking such a step (i.e., don’t let a bank representative/salesperson talk you into it).

While applying for new debt will have a small, short-term negative effect on your credit score, you should probably only consciously avoid taking out new debt for this reason in the months leading up to applying for a large loan such as a mortgage.

Further reading: Building Credit as an International Student

How can I establish credit for the first time in the US?

Step 1: Sign up for a secured credit card.

A secured credit card operates similarly to a regular credit card, but the lender holds an asset of equal value to the line of credit extended to you. You give the lender an amount of money (e.g., $500), and that amount is the limit of what you can borrow at a time. Use the secured credit card for purchases, then pay it off on time and in full the way you would a regular credit card (or be charged interest, which only harms you). After several months of using the secured credit card properly, you should have a high enough credit score to qualify for a regular credit card.

Be selective about which secured credit card you sign up for. Community banks and credit unions usually offer better products and customer service than national chain banks. Also examine the annual fee on the card and the interest rate (if there is any possibility of you not paying off the card in full every cycle) to minimize your out-of-pocket costs.

Further reading: What Is a Secured Credit Card? How Is It Different from an Unsecured Card?

Step 2: Close your secured credit card and open a regular credit card.

You can ask your lender to upgrade your secured credit card to a regular credit card, or apply for a new regular credit card and, once approved, close your secured credit card. When you upgrade or close your secured credit card account, your deposit will be refunded (assuming you had no balance due).

Continue to use your credit card perfectly, paying off the balance in full before the due date every month. Keep your utilization ratio low. You will probably have a low credit limit on this first card, so if necessary you can pay off the balance multiple times per month.

You should plan to keep your first credit card open for at least seven years, so choose one without an annual fee, even if it doesn’t offer the most lucrative rewards program.

Further reading: How International Student and Immigrant Workers Can Get a Credit Card

Step 3: Take out an installment loan (e.g., auto loan) or open additional credit cards.

This last step is optional, but helpful for building credit faster. After using your credit card perfectly for several months or a year, your credit score should be increasing gradually. At this point, you are eligible for debt with better lending terms than before.

If you want to buy a car, it should be possible to get an auto loan if you can’t pay for the car outright. If you do take out an auto loan and make payments on time, it will continue to improve your credit score. Similarly, if you open more credit card accounts, your credit score will temporarily dip, but your utilization ratio should also become lower to raise your credit in the long term.

But keep in mind why you are trying to build credit in the first place, and don’t harm yourself (e.g., by paying interest on an unnecessary loan or getting in over your head with credit cards) just for the sake of improving your credit score.

How do I build credit over time?

The best ways to build your credit after you first establish credit in the US are to:

1) Continue to pay all your bills on time and in full.

2) Allow time to pass, which will more firmly establish your track record as a responsible borrower and lengthen your credit history.

3) Pay down outstanding installment loans (though not necessarily off completely) and keep your credit utilization ratio low. (It is a myth that you have to carry a balance from month to month on your credit card for it to improve your credit score; in fact, this strategy will depress it.)

International students are not the only graduate students without credit; some domestic students who have avoided student loans and credit cards face the same issue. Just keep in mind your ultimate goal that motivates your desire to establish credit (e.g., qualify for a lease, borrow money for a car at a good interest rate), and don’t take unnecessarily extreme steps with your borrowing simply to achieve a high score. Making on-time payments, holding on to minimal amounts of debt, and time are the best boosters to your credit score.

Why I Didn’t Pay Down My Student Loans During Grad School

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Today’s post is a personal story on why I didn’t pay down my student loans during grad school, though I had the opportunity to. There are several factors you should consider when you make the decision of whether to pay down student loan debt during grad school. In my particular situation, based on both the math of the situation and my personal disposition, it made more sense to contribute money to other financial goals during grad school.

When I graduated from undergrad, I had $17k of student loan debt, $16k subsidized and $1k unsubsidized. I chose to defer my student loans during my postbac fellowship and PhD, and I didn’t pay down my student loans in that period. Although my stipend afforded me the flexibility to make progress on my loans if I wanted to, I had higher financial priorities than making payments on debt that was effectively at 0% interest.

I didn't pay down my student loans during grad school

My Debt Was Not Pressing

I’ll make a slight edit to my statement that I didn’t pay down my student loans in grad school: I kept my $16k of subsidized student loans throughout my training period, but I paid off the $1k unsubsidized loan during the 6-month grace period following my graduation from undergrad. I didn’t like the fact that it was accruing interest, unlike my subsidized loans, so I paid it off as soon as I could.

Because the rest of my loans were subsidized, not only did I not have to make payments during their deferment, they were not accruing interest. I was effectively borrowing money at 0% interest. While in some cases it would still make sense to prepare to pay down or off the loans when they came out of deferment, in my case I had higher financial priorities.

I Had Higher Financial Priorities

I can divide my seven-year training period into three sections: my postbac fellowship, my first two years in grad school, and my last four years in grad school (after I got married). My financial priorities were different in each of these periods, but in all of them paying down my student loan debt was a low one.

Postbac Fellowship

Right after I finished undergrad, I helped my parents pay down their parent plus loans from my undergrad degree, which were accruing interest. I gave them $500/month throughout the year, which at first was a rent-equivalent because I was living with them, but even when I moved out I continued to send them the money.

I also contributed $200/month to my Roth IRA (10% of my gross income) because I had started learning about personal finance and found that to be commonly given advice.

After contributing to my Roth IRA, sending my parents the loan repayment money, and paying for my living expenses, my stipend was exhausted. Thankfully, I was released from the relational obligation of sending my parents money shortly after I started grad school.

First Two Years of Grad School

Starting grad school brought a new kind of debt into my life: an auto loan. I still had the attitude that any loan that was accruing interest was one worth paying down first, so I decided to send $200/month to that loan to pay it off in two years. I was still contributing 10% of my gross income to my IRA, and I also started tithing. After fulfilling those monthly obligations and paying for my living expenses, I didn’t have a lot of discretionary money remaining, and I didn’t even consider using it to pay down my student loans.

Last Four Years of Grad School

My husband, Kyle, (also a grad student) and I got married after my second year in grad school, and combining our finances meant a complete reset of our financial status and priorities.

Kyle had been living an effortlessly frugal lifestyle (unlike me – my frugality took a lot of effort!) and also had only started contributing to his Roth IRA a year before we got married, so he actually had a good amount of cash sitting around. After paying for our portion of our wedding expenses, we found that we were left with about $17k. We created a $1k emergency fund and set $16k aside as my student loan payoff money. Our top financial priorities became maxing out our Roth IRAs every year (which we didn’t quite manage to do, but we slowly incremented our saving percentage up to 17% by the end of grad school) and building up the balances in our targeted savings accounts.

We could have paid off my student loans with Kyle’s savings when we combined our finances, but instead we decided to experiment with investing.

I Wanted to Experiment with Investing

Kyle and I were already investing for the long term in our retirement accounts, but we were curious about mid-term investing.

It’s pretty hard to pin down precise advise for how to invest for a goal 3-5 years away. Many financial people will tell you to keep your money completely in cash, while others will say bonds are best, and still others perhaps a conservative mix of stocks and bonds.

Our goal was to grow our student loan payoff money during the remaining time they were in deferment, but still have a fairly good chance of not losing any of the principal. Our plan was to pay off my loans right when they came out of deferment. We were averse to paying any interest on debt, yet wanted to take some risk with the money for the chance at growing it modestly.

After wasting about a year waffling over our choices, we ultimately decided to keep part of the payoff money in a CD, put part into mutual funds that were a conservative mix of stock and bonds, and put part into all-stock mutual funds/ETFs. We treated this as an experiment, the goal of which was to learn more about mid-term investing and also about ourselves as investors.

As this period of mid-term investing (2011-2014) coincided with the post-Recession bull market, our investments did earn a decent positive return, so we retained both the $16k student loan payoff principle and made about $4,500.

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Hindsight: Would I Make those Same Decisions Again?

The math of why I didn’t pay down my student loans during grad school is stark. The $1k unsubsidized loan was at a fairly high interest rate, so I would definitely pay it off ASAP again. It’s also pretty hard to argue with the 0% interest rate on the subsidized loans making them a low priority.

My personal disposition toward debt changed over my training period. I started off fairly insensitive to interest rates. Interest accruing on my debt bothered me – so the subsidized loans didn’t register as a priority – but I wasn’t bothered in proportion to the rate itself. Now, I am much more careful to consider how the interest rate on any debt compares with 1) the long-term average rate of inflation in the US and 2) the possible rate of return I’m likely to get on investments. So I would still choose to not pay down my subsidized student loans during grad school, but I would pay more attention to the interest rate they would reset to when they exited deferment.

If I had it all to do over again, I would still pay off my unsubsidized student loan and keep my subsidized student loans throughout grad school, preferring to prioritize long-term investing.

With the hindsight of knowing about the continued bull market and low interest rate environment, it would have turned out better for our net worth if we had aggressively invested most of the payoff money, keeping somewhat safer only the money needed to pay off my highest interest rate (6.8%) subsidized loan immediately upon graduation. (The rest of my subsidized student loans, being at variable interest rates, have stayed at about 2-3%, which to us is low enough to keep around.) But as no one can predict the future and at the time we expected to pay off the loans right after graduation, I think it was a fine decision to hedge our bets and invest conservatively in the time period that we did.

But this decision was right for us only because we were willing to invest and not too concerned about the student loans. Other people are disposed to be much more risk-averse, so for them the right decision could be to pay off their student loans during grad school, even if the loans are subsidized or at a low unsubsidized interest rate.

Where does paying off subsidized student loans rank on your list of financial priorities? Are you paying down your student loans during grad school, and if not what goals are you working on?

The Best First Step to Improve Your Finances

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Sometimes when I meet someone in a social setting and they find out what I do, they ask me for my very best tip to help them improve their finances. I know I only have a few seconds to impart potentially life-changing information at a moment when they are open to it, so I have to keep it simple. I tell them, “The best first step to improve your finances is to start tracking where your money goes. You’ll be amazed at what you find out, and the simple act of tracking will cause behavior change.”

If you’re inclined to take this suggestion right now, stop reading this post and do it! It doesn’t matter how you accomplish this – paper and pencil, a spreadsheet, software like Mint or You Need a Budget – just get started. Even if you don’t act on the information right away, when you’re ready to you’ll have the data ready.

best first step to improve your finances

If you need some more convincing or details, read on.

Actually, it doesn’t matter the setting or how long I have to talk to someone about money. I truly believe that tracking how you use your money, if you’ve never done it before, is the best first step to improve your finances that you can possibly take. It’s even more fundamental and easier than budgeting.

Why to Start Tracking Your Money

There’s an old saying, “Look at a man’s checkbook and you’ll see his values.” I don’t know who keeps a checkbook register any longer, but the principle is this: What you spend money on, you value. Without that transaction log, there is no way to check that what you think you value is actually represented in how you use your money.

1) You almost certainly don’t know where it’s going

Unless you have a superhuman memory, without tracking your spending you simply do not know where your money goes. This may be an acceptable state if you have a high income relative to your expenses, but I don’t think many grad students have that problem. If you desire to use your money to maximize your life satisfaction, you need to know what it’s being spent on now.

2) It will cause behavior change

The personal finance version of the observer effect is this: The act of tracking your spending necessarily changes your spending. Just knowing that your transactions are being recorded and scrutinized (by you!) will cause behavior change. You might forgo a small purchase you would have made unthinkingly before, like buying a drink or paying for parking. You might shop around a little more for a good deal on a purchase you want to make. You might decide to bring your dinner to work instead of visiting a campus dining establishment. While you can never get a clear picture of what your spending was before you started tracking, starting to track will put you on a path to optimizing your use of money.

3) You can analyze the data to use your money better

Once you have tracked your spending for a period of time, such as a month or even a week, you can start to identify patterns. You have your fixed expenses that will be the same every month, your variable expenses that you always have but in different amounts, and your irregular expenses that pop up only once or a few times per year. Ask yourself if you are happy using your money the way you are in light of what else you might do with it. One category might jump out at you as being particularly over- or under-funded or out of proportion in comparison with what you spend on another area.

4) You can catch mistakes

Retailers, banks, and lenders are not perfect; computer glitches and human error happen frequently. While they may or may not be actively malicious, some companies (e.g., cable and mobile phone) and banks (e.g., big banks) make a lot of ‘mistakes’ in their own favor. If you never looked at your tracked spending, you might not notice that you were double-charged for a purchase, a refund didn’t go through, or a bill was higher than your contract stated. With your tracked data, you can keep from being taken advantage of and put money back in your pocket.

5) It’s a great lifetime habit to start now

Eventually, a great tracking system will operate in the background of our life through automation or habit, bringing just enough awareness that we hold ourselves accountable for our spending but not becoming a burden. Even if you go through periods when you aren’t doing much with the tracked information, your future self will thank you when you do want to use the data for budgeting or another purpose. The best time to implement such a system or habit is today! Given that tracking is so low-effort, once you start why would you ever stop?

How to Start Tracking Your Money

How you choose to track where your money goes is really a personal preference. You should use whatever method you’re most likely to maintain and that makes the data available in a useful form.

When I first started tracking my money, I simply set up a spreadsheet with a handful of categories and manually recorded every one of my transactions. I categorized the transactions appropriately or as “miscellaneous” and made notes next to them as needed. It was a very simple system that worked well for me. At the time, I didn’t make a whole lot of transactions and I only had one bank account and one credit card to monitor.

A few years later when my husband and I got married and joined our finances, our financial lives were much more complicated. We had many more checking, saving, and credit accounts open, and my husband was uninterested in manual tracking. So we started using Mint, a web-based tracking tool and app, which linked up with all of our accounts and downloaded and categorized our transactions for us.

The big advantage to manual tracking is that – if you stick to it – it forces you into a high level of awareness of your finances. You have to notice every single transaction, no matter how inconsequential. You can practice manual tracking with pencil and paper, a spreadsheet that you create (or download a template), software, or an app. A few examples of free manual tracking software and apps are EveryDollar (Dave Ramsey’s software), GoodBudget, and Wally.

The big advantage to automatic tracking is that it’s incredibly easy (maybe too easy!). You can link your accounts to the software/app and, if you want, forget about them. The tracking will go on unnoticed by you. That’s great if you’re a busy person with lots of transactions because nothing will slip through the cracks. If you check in on the tracked data at least once a month, that automatic tracking will probably work well for you. But if you never look at it or just take a glance it probably won’t affect your behavior. However, it is useful to have the tracked data if in a few months or a year you decide to start engaging with it. A few examples of free automatic tracking software and apps are Mint, You Need a Budget (one year free with proof of student status), and mvelopes.

What to Do Once Tracking Is in Place

Once you’ve had your tracking system in place for about a month, you can start using the data.

If you want to only take a small step or two, just notice where your spending might be out of alignment with your values and goals. For example, if you can’t seem to save money for a short-term goal like travel, maybe there are a few outsized areas of discretionary spending you can cut back in.

The next larger step that would be useful for any grad student willing to undertake it is to start budgeting. With tracking, you’re looking at what your money did. With budgeting, you’re creating a plan for what your money will do. While a stereotypical budget prompts you to limit your spending in one area or another (always something fun, right?), your budget may or may not serve that purpose. In fact, I found budgeting freeing in a way; after I planned for a certain level of discretionary spending (e.g., clothes shopping), I stopped second-guessing my purchases.

At its most basic, a budget is a spending plan, no more and no less. Tracking your spending is the accountability tool that helps you stick to your budget. While the best first step to improve your finances is tracking, budgeting is the best second step to take. With your budget, you plan how to use your money in the way that brings you the most satisfaction in life.

Whether You Save During Grad School Can Have a $1,000,000 Effect on Your Retirement

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Today I’m sharing with you a graph that I show during “The Graduate Student and Postdoc’s Guide to Personal Finance.” It’s always shocking to the audience. It motivates some people to save during grad school and some people think it’s unreasonable; I’ll break all of that down here.

save during grad school

The point of this graph is to illustrate the power of compound interest, which roughly translates to investment returns. (More on that ‘roughly’ later!) I used Illuminations to create the graph.

Here’s the toy example:

Alana receives a $30,000 per year stipend and she saves 10% of it consistently into an IRA that is invested for her retirement (i.e., rather aggressively). So she is saving $250/month every month throughout her five years in graduate school. Her investments generate an average annual rate of return of 8%.

Over those five years, Alana puts in $15,000 and her ending balance is $18,369.21. So that’s cool and all – an extra $3k.

But then, she keeps the money invested for the same average rate of return for the next fifty years. So if she graduates when she’s 30, she checks her balance again at age 80. Remember, she’s not making additional contributions to this money at all – it’s just what she saved during grad school.

Alana’s investment balance has grown to a breath-taking $989,688.35! Her diligence to save during grad school translates to an extra $1M in retirement!!

I really want you to let that exercise sink in. That is the power of compound interest. Even a modest amount of money, given enough time and a high enough rate of return, can turn into an enormous amount of money! That is why any small amount of money that you can invest during grad school will have a huge impact on your long-term financial wellbeing.

I hope you had a “wow” moment there and are motivated to start investing or increase your investing (or pay off debt). I’m going to break down the exercise now to address the common questions and objections that I hear.

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1) It’s unreasonable for a grad student to save $250/month.

Whether or not saving $250/month is possible or reasonable is highly individual and depends both on the grad student’s income (usually a stipend rate set by the university/department) and personal living expenses. $250 is absolutely possible for many grad students (by the end of our PhDs – after lots of optimization – my husband and I were saving about $800/month together), and it’s not for others. Sometimes stipends are just too low, the local cost of living is just too high, or you have a challenging situation like paying off a lot of debt or supporting family members.

I do think 10% or $250/month are good benchmarks for grad students who have the ability to save. If they’re not saving that much yet, this illustration should encourage them to find a way to save more. If they’re already at that level, they can feel good about their efforts and maybe push for more as well.

The point of the exercise is not to say you have to save $250/month or it’s all useless. It’s to illustrate that saving early – whether it’s $250/month or $25/month, whether it’s every month or in one lump sum – has an incredible impact on your wealth over the long term. So any amount you can invest during grad school is wonderful. At just $25/month, that ending balance is nearly $100,000 – an amazing amount of money as well!

2) A guaranteed 8% rate of return isn’t available.

The objection to the 8% average rate of return figure is two-fold: 1) Why 8%? 2) You can’t get a high fixed rate of return in today’s market.

The reason investment returns are illustrated using compound interest is to make the math easier and keep the point clear. If you looked at models that include how the stock market really behaves, they get complicated and difficult to parse. You don’t end up with a nice single value but rather a distribution of possible results. There is a chance (minuscule over long periods of time, but non-zero) that you could lose all your money. There is an equally small chance that you end up a billionaire. And everything in between. But somewhere in the big fat middle of that distribution is the answer that a clean compound interest calculation gets you to.

The point of the exercise is not to predict exactly how much money you’re going to end up with in retirement down to the cent. It’s to show you the scale of change that’s possible over a long period of time with a reasonably high rate of return and motivate you to harness the power of compound interest.

If you look at enough of these types of compound interest examples, you’ll see a few different interest rates chosen. When we’re talking about stock investments, 8% is on the modest side. The long-term average return for the total stock market is often pegged at 10%, so that’s a popular figure. Dave Ramsey likes to use 12%. I chose 8% because it’s reflective of a largely-but-not-completely stock investment portfolio, which is appropriate for aggressive long-term investing (not speculating). It’s also pretty unlikely that you would have a single expected average rate of return over 50 years, as the standard advice is to move toward more conservative investments as retirement draws nearer, but the illustration ignores that detail as well. If the stock market future more or less resembles its past, 8% is a very achievable long-term average rate.

To really blow your mind, the same example above with a 12% rate of return gives an ending balance of $7,192,995.42. So this rate of return choice really matters to the illustration, and even the breath-taking ending balance I got to is a conservative example of the power of compound interest.

3) I don’t want to wait 50 years to retire.

I actually have never heard this objection from an audience member, but it’s one I have in my own mind. When I break the news that we’re looking at a 50-year compounding period, I say “So if you get out of grad school when you’re 30, you’re now 80. But don’t worry because by then 80 will be the new 50.” There’s some truth to that; people are living longer, and Ray Kurzweil thinks that by 2029 it may be possible to live forever.

There’s no special reason to use 50 years in this example, except that it’s a round number that when added to a grad student’s age puts them past the current retirement age but probably still kicking. The point is that the more years you give compound interest to work, the more impressive the outcome. It really does matter whether you start saving during grad school or after! If you’re shooting for a specific number that represents financial independence, starting earlier gets you there earlier.

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4) You’re not accounting for inflation.

Good catch! $1M in today’s money is very different from $1M in 2067 money. It won’t seem nearly so impressive at that point. But that should not stop you from saving. If anything, the existence of long-term inflation (in the US, a bit higher than 3% annually on average) argues for more saving and more aggressive investing. You are losing purchasing power if you keep it in cash and barely maintaining it using bonds.

5) Can’t I achieve the same result by maxing out my 401(k) in my first year with a real job?

I fielded this question only once, and it was during my very first seminar ever. And it’s a great one. My argument is that you come out of grad school with $18k in savings and continue to invest that for 50 years. Currently, the maximum someone under the age of 50 can contribute to a 401(k) is $18,000 per year. The point is correct: If you just max out your 401(k) in your first year with a real job and keep it invested for 50 years, you get the same outcome as you would by saving that $250/month all through grad school. The compound interest math is identical.

But guess what’s even better? Saving $250/month during grad school and maxing out your 401(k) in your first year with a real job – and every year after. And who is more likely to max out their 401(k) (no mean feat!): someone who has never saved a dime or someone who is already in the habit of saving, even in a challenging time of life like grad school?

Becoming a mega-saver with your first real job is a great step. But it doesn’t erase the opportunity you have to start investing during grad school. You can have your $1M in retirement from that first year’s 401(k) and your $1M from grad school.

Serial Graduate Assistant

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Today’s post is by a grad student who expanded her transferable skills through a series of summer jobs.

Name: Sudiksha Joshi

Institution: West Virginia University

Department: Natural Resource Economics

1. What was your side job and how much did you earn?

While pursuing my Master’s Degree I worked in the Library (Cataloguing) and was paid around $8/hr. While pursuing my Ph.D. some Summers, I got to help my Professor out and was paid additional 20 hrs/week which was between $20-$25/hr. One summer I worked on an outside research project in which one of my Faculty members was a consultant and so for that I was paid $12/hr. While these are not the side jobs, during the final two years of my Ph.D. I was not funded by my department. One Semester I taught and was responsible for Introductory Biology Labs ($18-20/hr) and then I was a Graduate Student Assistant  ($18-20/hr) for the McNair Scholars Program which led to the Project Coordinator role after I defended my Dissertation.

2. How did you balance your job with your graduate work?

These were done during the summer when I was not taking summer classes.

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3. Did your job complement your graduate work or advance your career?

Most of them did. I learned something new in every job. Working as a teaching assistant in the biology lab was taxing especially due to the grading that needed to be done (at least 100 papers to be graded every week and 200 if I have them a quiz that week) but I had completed all other requirements for my Ph.D. other than defending my dissertation. Working in McNair even though it was a lot of work became a turning point in life and working with students in such a close setting showed me a better way to prepare students for further studies and life outside. This also provided me the motivation which had dwindled to finally finish my dissertation, defend, and graduate.

4. How did you get started with your job?

It started with reaching out to the University career services or for the most part reaching out to the Faculty members in my department.

5. Is there anything else you would like to share about your experience?

I have learned a lot of transferrable skills from taking on various responsibilities during my graduate studies and those experiences continue to help me even today. I would highly recommend taking jobs/roles (even volunteer roles) outside or even within the department that have different responsibilities than what you are doing now. A broader perspective on things and new skills are going to allow you to consider alternatives and allow you to explore your own strengths and weaknesses and interests in new ways.  Keep on exploring!

Sudiksha Joshi, Ph.D. is a Learning Advocate who connects the dots between people’s strengths, ideas, and data to enable curious and conscious individuals to personalize their learning and life. Sudiksha currently works as a Data Engineer, is a HuffPost Contributor and writes about her personal journey on WeAreAlwaysLearning.com.

The Full Cost of Applying to PhD Programs

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

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

cost of applying to PhD programs

Know Your Programs

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

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

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

The GRE(s)

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

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

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

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

Download the PhD Applications Budget

This spreadsheet lists all the application costs in detail and calculates your total budget.

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Application Fees

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

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

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

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

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

Visits and Interviews

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

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

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

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

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

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