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Do I Owe Income Tax on My Fellowship?

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

Links Mentioned in the Episode

income tax fellowship

Transcript

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

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

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

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

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

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

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

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

First, some definitions:

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

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

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

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

So let’s see how that can happen:

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

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

Additionally:

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

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

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

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

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

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

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

Thanks for joining me in this short bonus episode!

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

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

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

Further reading/viewing:

Using Data to Improve the Postdoc Experience (Including Salary and Benefits)

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In this episode, Emily interview Dr. Gary McDowell, the executive director of Future of Research. Future of Research is an advocacy organization that uses data to empower early-career researchers. Gary outlines the ongoing work at Future of Research before diving into the details of their recently published study on postdoc salaries. Emily and Gary discuss the complexities around categorizing and counting postdocs as well as the interesting results from the data Future of Research acquired by Freedom of Information Act requests. Current postdocs can contribute to this ongoing project by submitting their salary and benefits data to the Postdoc Salaries database.

 

Links mentioned in episode

postdoc salaries

0:00 Introduction

1:07 Please Introduce Yourself

Dr. Gary McDowell is from Northern Ireland and Scotland. All of his undergraduate and postgraduate education was completed in the United Kingdom. He moved to the United States to become postdoc. First, he worked at Boston Children’s Hospital, then he worked at Tufts University in the Boston area. As a postdoc in the United States, Gary became interested in the scientific system itself, such as setting scientists up for success and producing scientists, not just science. He experienced the frustration that many people feel with the scientific system and its hyper competition.

Now Gary is the executive director of the nonprofit Future of Research. Their mission is to empower early career researchers with evidence to help them change the research system and the enterprise they experience.

3:00 Can you give us an overview of Future of Research and the organization’s work?

Gary is the only staff member of Future of Research. The board of is comprised of twenty early career researchers. The organization originated with a conference to bring early career researchers together to discuss ways to reduce hyper-competition in biomedicine. They held conferences around the country and realized the need for a group that has these conversations. The nonprofit provides data and evidence to early career researchers to help them make better choices and to educate the rest of scientific community of the realities our generation is currently experiencing. Their work is done by the board and volunteers.

Future of Research has worked on two major projects which came out of local meetings. The project “Who’s on board?” aims to get more early career researchers into leadership positions, starting with scientific societies. Through this project, Future of Research seeks to generate a network of future leaders for scientific organizations to tap into. They are working on a project to address mentoring, because it is one of the biggest concerns of early career researchers. Junior faculty often ask, “How do I find out more about how to mentor and manage people?” Junior faculty are expected to be mentors, but don’t know how to. Future of Research will host a summit in Chicago to bring together people who work in this space and who research mentoring. They will discuss what grassroots action they can take to make sure institutions are putting mentoring at the center of their interests.

Future of Research has been responsive to needs that arise. They are beginning a project to examine peer review and address this phenomenon of grad students and postdocs essentially ghostwriting a peer review report that is then submitted to a journal under someone else’s name. This is a problem of appropriate scholarly recognition, but at the same time the academic community hears there are not enough reviewers. Journals are crying out for more reviewers, but there is lack of transparency about who’s doing reviews, creating barriers to journals having names of potential reviewers. Surveys suggest that principle investigators are not trained in peer review, their practices come from assumptions, and there is generally lack of clarity of expectations in the peer review process.

Future of Research has just finished a postdoc salary project. It started when they formed the nonprofit. At the time, there was a change to federal labor law being proposed. The change was going to affect postdocs by raising their salaries, or by causing institutions to have postdocs clocking in and out and tracking time. Future of Research watched the push to raise postdoc salaries, and started following what institutions would do in response. They had the question about what are the actual salaries that people in postdoc positions have?

8:34 What is your recent paper and where can people find it?

The title of their paper is “Assessing the landscape of U.S. postdoctoral salaries.” It’s open access in the Studies in Graduate and Postdoctoral Education, Emerald Insight Publishing Groups.

9:07 What is a postdoc?

According to Gary, the PhD is when the trainee is learning how to do science, how to carry out research, how to do experiments, and analyze,. The PhD is for learning the nuts and bolts of being a scientist. The postdoc is intermediate, after the PhD and before the professor position. Gary’s opinion is that a postdoc should be considered as a period when you should be thinking about your own research goals and how to take those foward. Postdocs should be learning under the mentorship or apprenticeship of an investigator. Postdocs should be learning how to manage a group, mentor people, manage budgets, write grants, and lead a team.

However, Gary says that the postdoc is more likely a period of further research. Many people change field and get experience in another research group. Postdocs are often trying to get a certain number of published papers. Postdocs are trying to demonstrate they can succeed in a different lab and accrue credentials to get a faculty position to start as a professor.

Emily adds that there are eleven different common titles under which postdocs can be hired. There is a discrepancy between how employers see postdocs and how postdocs see themselves. What level of awareness do universities have around their own postdocs?

11:55 How was the idea for a project to assess postdoc salaries formed? What question were you asking?

When the team at Future of Research was looking at policies that were being updated in response to labor law, they realized that these policies at an institution don’t tell us necessarily what people are getting paid. Though the institution has a policy about postdoc salaries, actually paying postdocs that amount requires adherence to policy and someone following up to enforce policy. The team saw a pre-print paper by Rescuing Biomedical Research, another nonprofit, which looked at National Science Foundation data on number of postdocs and concluded that the number of postdocs in decline. They questioned whether there is truly a decline, or instead a bubble of people staying in postdoc positions for longer. These questions led them to start the project to collect data on postdoc salaries.

The team at Future of Research found that institutions are doing a terrible job of reporting year to year how many postdocs they had. While institutions were receptive to policy changes, if the institutions don’t know who the postdocs are to begin with, will people fall through the cracks? Will the policies actually be reflected in reality? The institution could recommend salary, but never follow up.

Institutions are also in a constant argument over whether postdocs are employees or trainees. Unfortunately, it seems postdocs are employees when it suits, such as when the institution needs to keep postdocs out of things they need to do for students, but postdocs are trainees in terms of lower salaries and receiving no benefits.

14:18 What position counts as an employee or not an employee?

Gary explains that whether a position is designated as an “employee” is complicated by where the money comes from. Postdocs may be “staff” on a grant, or postdocs may be on fellowships of various kinds. When postdocs are on fellowships or paid directly, they are usually referred to as trainees, typically lose benefits, and the institution says they are no longer an employee. The U.S. Department of Labor created a specification about who is an employee, specifying that it’s not who pays you, it’s the nature of the work. The Department of Labor made this specification because some institutions tried to designate postdocs as fellows to get out of the new labor law. The Department of Labor explicitly sent this message to the National Institutes of Health, stipulating that the NIH had to raise fellowship stipend under the new law.

17:08 What did you do for the postdoc salaries project?

The team from Future of Research wanted to analyze postdoc salaries, but they learned that this information was not easy to find. They carried out Freedom of Information requests at public institutions. They contacted the Freedom of Information or Public Records offices at public institutions, which were legally required to give out data like this. They asked for the position title and salary of everyone who was a postdoc, on date of December 1, 2016 when the new labor law was due to come into effect and changes were likely to happen. This method forces the institution to provide information, and this method served as an internal metric of whether universities know what postdocs are. Certain institutions didn’t know what a postdoc was, and asked Future of Research to explain what a postdoc is. Future of Research cross checked the information they received from Freedom of Information requests with the National Science Foundation data on postdoc numbers.

20:05 What was your analysis of the data from public institutions?

Future of Research had a data scientist on the team, who analyzed the distribution of salaries. They brought out patterns by geographic region, by gender, and by title. They examined what variables were affecting the salaries. Their aim was to assess the landscape and figure out what salary distribution looked like. This could set the bar to work from for efforts going forward.

21:07 What were the broad conclusions of the postdoc salaries project? Was there anything surprising to you?

Gary says they got broad distributions of postdoc salaries. Nature published a write-up that emphasized that postdoc salaries vary wildly by institution. Most people received between $40,000 and $49,999 annual pay. They found that 22% of all their data was within a $25 range around the new National Institute of Health minimum stipend, which was very close to the proposed salary threshold is under the federal labor law. Gary shares that when Future of Research considers the levers they need to pull to raise postdoc salaries, it is a very useful finding that the median salary of all postdocs across the US, regardless of field, was pegged to minimum NIH National Research Service Award stipend amount. The most effective policy lever for raising postdoc salaries in the U.S. is to get NIH to raise the NRSA award stipends.

Emily emphasizes that so many universities go off the NIH minimum salaries, even though it’s just a recommendation, and it’s just a minimum. She points out that this minimum doesn’t take into account different cost of living. Is this the minimum for Bethesda, Maryland, where the NIH is located? Institutions go off this as if it is absolute truth. Gary brings up that in December 2018, NIH raised minimum salary. Now the minimum is $50,000, this amount has been recommended for quite some time. Gary and Jessica Polka, president of Future of Research, are on the National Academies study for the Next Generation Researchers Initiative. They will be releasing recommendations informed by this data.

Gary was surprised by how many salaries were in the $50,000 range. They broke down the distribution by field for a large subset and found no real field dependence for the salaries. People would expect the humanities to be lower, but the humanities were not lower. Gary was surprised by how often biomedical engineering salaries were in the lower end of the distribution. Gary wonders who negotiates, and if there’s a disparity in who’s negotiating. He mentions that talking about money in academia is stigmatized.

Emily created the website PhD stipends with her husband. Now it has over 4000 entries in it. It is a great place to go for prospective graduate students. She has thought there should be the same resource for postdocs. They have started postdocsalaries.com for people to self-report their salaries. Future of Research obtained information from public institutions, but they are completely missing private institutions. Self reporting also provides a check on whether what the institution reports matches what postdocs report. Postdocsalaries.com is a useful self reporting tool, that helps other people compare salaries and gives them the opportunity to comment on issues.

Gary discusses that when he gives a talk at institution, he loves to bring up money. He wants to break the stigma that ‘we’re not supposed to talk about this’ and tell people that this should be one of the questions that you ask your prospective PI. Gary says how that question is answered will tell you a lot about the PI as a person. You should look for someone who responds “I would love to pay you more, we can look into fellowships or I can find opportunities to pay you extra,” and steer clear of potential advisors who say “This isn’t about the money.” This is part of gathering information for your decision.

37:08 What are some action steps that postdocs can take today to improve their salaries, benefits, or working conditions?

Gary says always having data at hand is useful for individuals and groups to advocate. With data, you can approach an institution with the salaries that people are getting in your field, and point out that this is what the policy says so this is the expectation. This is action you can take on the personal level.

When Future of Research compared institutions publicly, there were administrators who could now use the data to say that the institution is being compared to everyone else, if they want to be competitive for postdocs they need to raise postdoc salaries. For groups looking to push for change in an institution, there are a number of lines of evidence. Gary says that comparing with peer institutions is useful. The most recent recommendations are that postdoc salaries should be at least $50,000 then adjusted for cost of living, then for your years of experience.

Listeners should go to postdocsalaries.com to get involved and learn more.

40:56 Conclusion

Negotiating PhD Funding Offers: This Grad Student Did It Successfully

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

Links mentioned in episode

negotiating PhD offer

0:00 Introduction

1:05 Please Introduce Yourself

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

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

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

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

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

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

Further Reading: How to Read Your PhD Program Offer Letter

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

29:33 Final Comments

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

31:27 Conclusion

As a Single Parent, This Graduate Student Utilizes Every Possible Resource

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In this podcast episode, Emily interview Lauri Lutes, a fourth-year PhD student at Oregon State University and single mother. Lauri’s stipend is equivalent to the local living wage for just one adult, yet she supports herself and her daughter on it without using student loans. Lauri details how she makes ends meet by taking advantage of every possible university and community benefit, such as subsidized and free childcare, food assistance, and recreation and arts scholarships. Lauri additionally serves her community by advocating for graduate student parents on two university boards.

Links mentioned in episode

resourceful grad student

0:00 Introduction

1:02 Please Introduce Yourself

Lauri Lutes is a PhD student at Oregon State University. She studies viruses on sweet cherry trees. She has an 8 year old daughter and she’s a single mom.

2:19 What is your current annual income and expenses?

Lauri’s graduate stipend is $24,000 per year. Her assistantship is assured for her entire PhD, for either teaching or research. Her modest estimate of her current annual expenses is $27,000 to $30,000. These expenses cover a bare minimum, like paying rent, and don’t include expenses like a car payment. Her estimates don’t take into account her supplemental income from food assistance programs.

According to MIT’s Living Wage Calculator (livingwage.mit.edu), the living wage for one adult with one child in Benton County, Oregon is $51,000 before tax/$42,000 after tax. In order to live with her daughter on her Oregon State University PhD stipend, Lauri has to take advantage of every possible resource.

4:24 What benefits do you receive and how did you find these benefits?

When Lauri was considering graduate school, her daughter was four years old. Lauri was most interested in Pacific Northwest universities, and she was surprised to learn that Oregon State University offers resources to help graduate students who are parents be successful.

Lauri receives two main benefits from the university. First, she receives a childcare subsidy that is provided through student fees and donor funding. Through the childcare subsidy, up to 50% of childcare expenses are covered. This subsidy is applicable for childcare for very young children before they’re in school, as well as for before and after school programs for children in public school. Lauri says it’s rare for a university to offer this assistance, and for the subsidy to cover up to 50%.

Second, Lauri receives assistance for non-school childcare. Oregon State University has two childcare facilities that are drop-in for up to three hours per day. This service is free. The childcare facilities are located in the library and in the recreation center. They are open from 10am to 7pm on the weekends and during the weekdays as well. They accept children on a first-come, first-serve basis, but Lauri has not had problems with accessing childcare from these facilities. Student workers from child development, education relevant fields are the childcare providers. Lauri says the facilities are a well-managed, reliable resource for student parents.

9:31 What is your daily routine like? Is your advisor supportive?

During Lauri’s first couple of years in her PhD program, she served in orchards throughout the entire State. Lauri had to take day trips and overnight trips for her work. She relied on friends and her community for help. Lately, she is in the lab for most of the day. She tries to keep a 9 to 5 work schedule. Her work doesn’t require her to be in the lab on the weekends. When she does travel, the bulk of her work is in the Columbia River Gorge, which is three hour drive from her university.

Laurie says she has an incredibly supportive advisor. She says she is fortunate that her advisor doesn’t make her compromise her parenting for her work. During her graduate school interviews, Lauri didn’t emphasize that she had a daughter, but she didn’t make it a secret. She encourages other people to consider how their potential advisors would support them.

13:06 Tell us about your service experience on advisory boards and committees.

Lauri was invited to join the advisory board of the university’s Family Resource Center. She viewed this as a place to get her voice heard, and to give a voice to graduate student parents. The advisory board decides on the budget for student fees, where that funding goes under the umbrella of the Family Resource Center. This budget includes the childcare assistance stipend, which is available for students with families on campus and employees with dependents.

Additionally, Lauri is the graduate student representative on the committee for children, youth and families in the university’s faculty senate. This committee reports directly to president of the university. To Lauri, this seems like they can make changes on the university level. This committee considers the university experience of students and faculty with dependents, not limited to only young children. Lauri says they want to cultivate a culture of care at the university, that includes being able to support students and faculty in whatever is going on in their lives. When employers are sensitive to family and personal issues, people are kept in the workforce.

17:34 What strategies do you use to keep expenses down?

Lauri emphasizes how important it was to let go of the stigma of needing help and asking for help. Before graduate school, Lauri had a stable position in industry and an income to support herself and her daughter. Graduate school brought a drastic change in income which was difficult to accept and deal with. To achieve her goal of getting a PhD, she had to use university and community resources.

Lauri uses the food bank on campus, and has let go of the stigma of actually going to food bank. Food insecurity is not only experienced by people with families. It is an all too common issue being discussed at many universities. Over half of Lauri’s income goes to rent, and there is no way for her to make that better. Lauri says one way to supplement her income is in food assistance. She says she has to accept that this is where she’s at right now. Oregon State University manages a twitter account @eatfreeOSU that provides centralized posts of where there is leftover free food from events. Some people rely on free food from seminars.

Lauri gets some funding through the SNAP food assistance program. She applied online, which she says was a fairly easy process, and had a phone interview. She had to prove her income initially and again every six months or whenever her income changes. SNAP benefits are for her daughter, not for use by her. The State of Oregon provides information for SNAP online. Oregon State University’s Human Services Resource Center is very helpful for students. Not every university has a centralized center for finding food assistance.

Lauri is enrolled in Mealbux, a university program funded by student fees. She applies every term. The application is a questionnaire about a student’s income and food insecurity situation. The funds are loaded onto the student id card for use on campus. This assistance is specifically for Lauri. Mealbux helps with a student’s sense of belonging on campus.

Lauri recently moved her daughter to school closer to home. At this new school, her daughter participates in free lunch program. Lauri has a car that is very old so she doesn’t have car payment. She rarely uses her car and expects it to break down anytime. She uses her bicycle to get around. She knows food expenses are hard to minimize.

Lauri finds community resources in many places. Local parks and recreation department has scholarships available, such as one that allowed them membership to community pool. Her daughter gets scholarships to take classes, like dance class or painting class. These are things Lauri wouldn’t be able to afford otherwise. Another resource is the Arts for All programs that provide inexpensive tickets to theater events. Lauri says don’t be afraid to apply for help and scholarships. She wants to give her daughter opportunities that she can’t afford on her own. She’s always looking for resources and she’s not afraid to take advantage of available programs.

30:30 Why have you chosen to this frugal strategy instead of taking out student loans?

Lauri has debt from her undergraduate education. These loans are deferred, but they are looming over her. She does not want to contribute more than she absolutely has to. She did take out a few loans to help transition into the PhD program. She has $30,000 loans for undergrad, and she’d rather make sacrifices now than contribute more to debt.

Lauri used to make living wage and be comfortable. Her goal isn’t to increase her wages with her PhD. Her field, plant pathology, is not known for high wages. She wants to be open to a postdoc position after graduate school. She expects to make similar wages as she did in the industry job she had with a Bachelors degree. She went to graduate school for education, fulfillment, and opportunity. When she finishes her PhD, she won’t make a lot of money that she can use to pay off debt. Emily adds that it’s challenging to pay off debt at any time.

33:55 Final Comments

Lauri advises graduate student parents to take advantage of resources. Search for them, ask about them, and talk to others about possible benefits. By diving into resources, you’ll become aware of more. She believes that getting a PhD is worth the financial sacrifice. Though it is a financial challenge, don’t give up on your dreams.

34:55 Conclusion

An Unfunded Summer Didn’t Deter this PhD Student Thanks to Her Creative Side Hustle

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In this episode, Emily interviews Bailey Poland, a rising second-year PhD student in rhetoric and writing at Bowling Green State University. Bailey earns a stipend of just $14,000 for the academic year, but manages to live a comfortable life thanks to her disciplined budgeting and two side hustles. Unlike many of her classmates, she devoted her first summer as a PhD student exclusively to research, relying on her side hustle income and savings from her stipend to tide her over until the next academic year started. Emily and Bailey discuss in detail Bailey’s housing choice, frugal habits, and unique Patreon side hustle that complements her graduate work.

Links mentioned in episode

unfunded summer PhD

0:00 Introduction

1:26 Q1: Please Introduce Yourself

Bailey Poland is a second year PhD student in the Rhetoric and Writing program at Bowling Green State University. Bowling Green is a city in Ohio, located to the south of Toledo, Ohio. Bailey’s stipend is $14,000 per academic year. Additionally, Bailey earns $460 per month from Patreon and $150 quarterly from copy-editing a music magazine focused on Texas. She is the only person in her household.

Bailey’s PhD stipend does not include summer funding. She budgets savings over the academic year in order to meet her expenses over the summer.

3:25 Q2: What are your five largest expenses each month?

Bailey’s largest expenses are rent at $600 per month, car payment at $200 per month, health insurance and fees at $400 per month, food at $150 to $200 per month, and car insurance at $112 per month.

4:14 #1 Expense: Rent

Bailey rents a two bedroom apartment for $600 per month. She says this rate is higher than other options available in Bowling Green. She looked at options for rent at rates of $350 to $450 per month, but these apartments were in poor quality or clearly undergraduate housing. Bailey used to own a house, so she approached her apartment search with those expectations.

Bailey’s apartment is in downtown Bowling Green. She walks to campus, so she doesn’t use her car or have a university parking pass. She drives to the grocery store, but she lives above a coffee shop. She thinks she is in the perfect location. She lives by herself in the two-bedroom apartment, so she sleeps in the smaller bedroom and uses the extra bedroom as her office and library.

6:18 #2 Expense: Car Payment

Bailey pays $200 per month for her car. She has a 2017 vehicle that she bought new. She traded in her older Toyota Corolla when she bought her new car. Due to unfortunate family circumstances, Bailey received money from inheritance and estate closure. She used this money for her car payments. She has stayed ahead of interest and has gotten ahead on payments.

8:06 #3 Expense: Health Insurance and Fees

Bailey pays health and insurance and fees in lump sums a couple times a year. The amount works out to about $400 per month. She uses her credit card to make the payment at the start of each semester, but she pays it off immediately. Her credit card pays back 1.5% so she received a small kickback. Generally, she doesn’t keep a balance on her credit card so she avoids interest payments.

She made her first health insurance and fees payment before she received any of her graduate school stipend. Because she formerly worked as a marketing analyst for global HR and payroll company, she had enough savings available to make this payment when she started graduate school. She chose to go to graduate school because she was much happier in a classroom than behind a desk in a corporate office.

10:25 #4 Expense: Food

Bailey pays $150 to $200 per month for food, which includes groceries and dining out. She plans and prepares meals ahead of time. She cooks two or three times a week and freezes leftovers. She takes food with her to campus.

She has a limited set of go-to recipes. One of her favorites is chile garlic tofu. She says the meal is filling and takes half an hour to prepare. She gets four meals from one block of tofu. She eats lots of eggs, pasta, and rice-based meals. Her vegetarian cooking has increased since she started PhD program.

Bailey learned meal preparation from trial and error in the first few months of graduate school. She figured out which meals took too long or she didn’t like enough to have leftover. She used the Budget Bites website to find recipes. She cooks on the free nights of her week, because she knows which nights she’ll want to eat dinner as soon as she gets home. Bailey is on campus from 8am to 6pm most of the week. The latest she gets home is 7pm or 8pm. She takes lunch and a small snack with her to campus, and she eats dinner at home.

14:51 #5 Expense: Car Insurance

When Bailey purchased her new car, her car insurance rate increased from $85 per month to $130 per month. She has a plug-in for diagnostics of her driving habit, which lowered her insurance rate to $112 per month. She only regularly drives to and from the grocery store, which is a 10 minute drive. She also drives to her mom’s house, which is 30 minutes away and all highway driving.

Bailey says graduate students can get by without a car in Bowling Green. In her PhD cohort, at least one person doesn’t have a car. Busses run regularly to and from campus. Grocery stores deliver for a fee. Local activities are accessible to pedestrians. Bowling Green does not have cabs, Uber, or Lyft. It is pretty rural. Bailey needs a car to leave town to see her family.

18:10 Can you tell us about your side hustles?

Bailey has two separate side hustles. For one, Bailey copy edits a magazine about the country music scene in Texas. She missed doing copy-editing work, so she posted on Twitter that she was looking for an opportunity. Someone from the magazine responded to her and said they’d pay her to copy edit. Bailey has had this side hustle for three years. She receives $150 every few months and she has learned a lot about a topic that is unfamiliar to her.

For another, Bailey uses Patreon, the crowdfunding platform for artists and creators. She receives $460 each month from Patreon. She got started after she defended her Master’s thesis and she quit her corporate job earlier than she had planned. She was working at a bookstore and she needed more income. Some of her friends had Patreon, so she was familiar with the platform. Bailey started by doing live readings of The Rhetorical Tradition, like live tweeting her readings with funny commentary. People got invested in her live readings and she transitioned the activity to Patreon. Reading The Rhetorical Tradition was a really long project. She planned in advance and read as much as possible during the summer so she wouldn’t need to read during her first graduate school semester. She planned to post about The Rhetorical Tradition on Monday and Friday, post photos of her mom’s three cats on Tuesday and Thursday, and post an essay style blog post on Wednesdays. She only writes one or two truly new posts per month. With her PhD work, she doesn’t have time to write four or five new posts a month. Recently she has started a new reading series that overlaps with her prelim list for her PhD. She is gaining familiarity with texts in her field, having interesting conversations with her patrons, and making some money.

Bailey has created a very niche platform. Starting a Patreon was a huge leap of faith. She used to be super active on Twitter with a group of 18,000 followers. She authored a book, which helped her gain an audience invested in her thoughts. She trusted that her audience would move with her from Twitter to Patreon. She front loaded the work during the summer, so during her first semester it was more like a passive income stream. Now it serves multiple purposes for her. She finds it fulfilling that her academic work is accessible to the public. Her work lately is archival, and through Patreon she can share what it’s like to work in an archive. Bailey finds joy in her patrons and appreciates that they pay for her to do this work.

26:35 How do your colleagues react to your side hustle? Do they take on side hustles?

Bailey says her colleagues know and are supportive. For example, Bailey did a public series on Patreon that was a reflection on teaching practices she learned at Bowling Green. Her program’s website’s homepage included a link to her series. Generally, PhD students are discouraged from outside work because they should focus on doctoral work, but her department gives no formal prohibition of outside work. Most other graduate students have some other work, though it may not be talked about.

During the summer, other PhD students in her department find jobs. Some find online teaching roles, and one is working in the garden center at Lowe’s Hardware Store. One is going to a writers retreat that comes with a stipend. PhD students with spouses don’t work or find part time work.

29:28 Q4: What are you currently doing to further your financial goals?

Bailey has a 401k from her corporate job that she will roll into a Roth IRA over the next few years. She has investments with Betterment that serve as her long-term emergency funds. She has a high earnings online savings account as her primary emergency fund. Her goal is to have three months of expenses saved, and she is $600 short of her goal. Generally, her goal is to have her retirement well planned. She wants to be in academia long term, but she can’t be certain about this path. She wants security and confidence during her job search. Having savings going into graduate school frees up opportunities.

During her first summer as a PhD student, Bailey is working on archival projects and taking a class. During the school year, Bailey has multiple things going on, like classes, teachers, committees, conference planning. Summer is really valuable to devote focused attention to a project. In subsequent summers, it is possible she will take teaching jobs.

34:30 Q4: What don’t you spend money on that might surprise people?

Bailey doesn’t have student loans. She paid all of her loans within two years after undergrad. She hasn’t taken out any loans for higher education. Because she went to a State school, had scholarship, and finished in three years, she had very manageable loans from her undergraduate education. She took a job after college right away.

She has stopped buying books, which is hard for her personally. Even if she buys used books, it adds up quickly. She tries to keep miscellaneous spending low every month. She used to buy $200 to $300 worth of books every month, now she just buys one book a month. She checks out a lot of books from the library, and she lives less than a block from local public library

She doesn’t spend a lot on hobbies. She likes to cross stitch. This is inexpensive and takes a long time. She can spend $20 on one project that entertains her for five months. She has hobbies that help her relax and are not difficult for her budget.

39:00 Q5: What are you happy with in your spending and what would you like to change?

Bailey’s rent is higher than she wants to pay and is more than what others pay. She negotiated for lower increase rate when she renewed her lease. She’s considering doing a spending fast over the summer because she has no stipend coming in. She wants to minimize the hit that her savings is taking. She can find entertainment in Bowling Green for free. For example, there is a huge arts community and a massive arts festival.

42:12 Q6: What is your best advice for someone new to your city who is budget-conscious?

Bailey recommends that someone new to Bowling Green shops around for a place to live. There a lot of good options. Graduate student housing is affordable and it is easy to find a roommate. She says to look for an apartment as early as possible. She started looking in July, which limited her options. She would have looked earlier if she knew.

She advises new PhD students in Bowling Green to plan on saving. She says make sure you have cushion before you get here. Graduate school is stressful enough without living paycheck to paycheck. You should get rid of debt completely if you can.

44:22 Q7: Would you like to make any other comments on what it takes to get by where you live on what you earn?

Bailey says it is definitely possible to live in Bowling Green frugally and have a good time. She says there is always stuff happening that’s free or inexpensive. Toledo is a twenty to thirty minute drive. It may not be possible to live on the stipend alone, but you don’t need much more. Bowling Green has a low cost of living and is a college town invested in the university community.

45:22 Conclusion

Travel and Savings Are This Frugal Grad Student’s Top Priorities

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This podcast episode is a budget breakdown with Latisha Franklin, a third-year graduate student in biochemistry and molecular biology at Penn State University. Latisha works to keep her housing and especially food spending low so that she can spend more on experiences, such as her yearly international vacation. She employs several powerful strategies in her frugality and budgeting to enable her saving, such as taking out cash for variable spending, prioritizing a “me” budget category, vegan meal prepping, and actually reading her email to find free food on campus. Emily and Latisha discuss how establishing a routine schedule lends itself well to developing frugal practices.

Links mentioned in episode

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frugal grad student travel saving

0:00 Introduction

1:14 Q1: Please Introduce Yourself

Latisha Franklin is a third-year graduate student in the Biochemistry and Molecular Biology program at Penn State University. She moved to State College, Pennsylvania, for graduate school from her hometown Mobile, Alabama.

Her stipend is $1,996 per month after taxes.

2:27 Q2: What are your five largest expenses each month?

Latisha’s top expense categories are rent, car insurance, food, bills, and “me,” in other words, money she can spend freely on herself. She shares that she budgets much of her income for her Roth IRA and savings.

3:57 #1 Expense: Rent

Latisha lived in a one-bedroom apartment with her dog at the time of the interview. However, she had plans to move. Her rent was $820 per month and the rent in her new place is $710 per month. Originally, she wanted to move to a new place with a roommate. When those plans fell through, her realtor helped her find the new apartment.

Her new apartment is attached to a house. She has access to a backyard for her dog, which was appealing to her. Her new apartment is closer to Penn State, a 5 minute drive and 20 minute walk from campus. The neighborhood is family-oriented. This is in contrast to her former neighborhood that had a good mix of graduate students, young families, and late-career adults.

Latisha thinks Penn State graduate students living alone pay about $900 or more for rent. She thinks that $700 is the low end of the range for rents. In her estimates, she is not taking into account possible lower rents in shared housing with roommates.

8:29 #2 Expense: Car Insurance

Latisha has a 2016 Hyundai Tuscon. She bought the car new in winter 2015 and paid it off completely within two years. She used savings she had been building since middle school to buy the car new. Her monthly insurance payment is $159.

10:22 #3 Expense: Food

Latisha spends $150 per month on food. She spends $20 each week for food that she’ll eat during the week, and $50 each month to buy items she’ll use throughout the month. Her strategy to keep food expenses low is to meal prep and cook in bulk.

During her first year, she found herself cooking every other day. Cooking was too time-intensive, so she read articles about meal prepping. Now, she uses Sundays as her meal prep and cooking day. She makes enough to last the week and portions food into six or seven containers.

Latisha didn’t have any dietary restrictions or considerations during her first year in graduate school. She has now removed meat and dairy from her diet. She uses many kinds of beans, rice, nuts, and fruit in her meals. She buys fruit from the farmers markets and from her share of community supported agriculture (CSA).

Her meals include muffins, which she eats every week, salads, soups, and pastas. Additionally, Latisha eats free meals on campus as often as three times a week. She takes ten minutes each day to read her university emails to find events with free food that also match her interest. She rarely eats take-out or at restaurants, and this expense is from her “me” category.

18:54 #4 Expense: Bills

Latisha’s pays for electricity and wifi, because heat and water are included in her rent. Her parents pay for her cell phone bills. The electricity bill is $13 per month and wifi bill is $32 per month. To keep electricity costs down, Latisha makes the most of daylight for work. During the evening, she relaxes and minimizes her electricity use.

In her new apartment, she will have to pay for all utilities separately. She’ll have more bills, so she has planned to increase this budget category.

21:38 #5 Expense: “Me,” or Variable Spending

Latisha budgets about $20 a week, or strictly $100 a month, to spend as she wishes on herself. Typically, she uses this money to go to the movies, go out to dinner, or try something new. She bought herself a microscope because she enjoys using it to look at everyday items. Overall, she prefers “experiences, not stuff.”

Latisha’s strategy is to keep her “me” budget in cash. Using cash is strategy to keep variable spending in check. She mentions that credit cards didn’t suit her.

25:17 Q3: What are you currently doing to further your financial goals?

Latisha prioritizes savings. Since her teenage years, she kept savings for undetermined large purchases. For example, she bought her new car with her savings, even though she hadn’t intentionally planned the purchase.

She contributes $150 per month to a Roth IRA for retirement. She saves $50 per month in her savings account. This is about 10% of her net income. She is focused on building her Roth IRA

She started savings with a CD, about three years ago, without much knowledge of savings or investing. Her dad encouraged her to get a Roth IRA. Latisha read Emily’s emails and is now working on better managing her Roth IRA.

Latisha has set a goal to take one big trip a year. Here she discusses saving for her trip to Iceland. She has budgeted about $100 per month and has $1,200 saved at the time of the interview. She likes to travel and wants to get out and see the world while she has minimal responsibilities. Iceland is the first big trip that she has initiated on her own.

33:24 Q4: What don’t you spend money on that might surprise people?

Latisha spends very little on food. Many of her peers claim to not have the time to cook, so they get take out or eat out more often. She found the time on the weekends to prepare all her meals for the week, so she saves time during the week. Emily and Latisha agree that in reality, getting take out or going to eat can take just as much time as preparing your own meals. Prioritizing cooking your own meals is a great frugal strategy.

35:34 Q5: What are you happy with in your spending and what would you like to change?

Latisha is happy that most of her money goes to experiences, not things. She wants to add money to food, because she believes trying new kinds of foods is a good experience. Joining the CSA is one way she is trying new foods. She is interested in new fruits, like dragonfruit. Additionally, she is happy has “cushion money” so she is prepared for anything.

36:48 Q6: What is your best advice for someone new to your city who is budget-conscious?

Latisha recommends over estimating your budget so you have cushion money. This reduces stress and helps even out irregular expenses. One strategy that Latisha uses is to set up separate accounts for her money. For example, she moves her income out of her spending account into a reserve account. This restricts how much money is available for her to spend, but the money is still accessible if she really needs it.

Latisha also recommends personalizing your budget. She has had financial training that emphasizes certain income percentages for budget categories, but this advice doesn’t suit her lifestyle. She realized this when she went through the process of purchasing a home but ultimately could not get approval. During the process to buy a home, she found that financial advisors insisted that 50-60% of income is budgeted to living expenses. Though she was frustrated she couldn’t buy a home, she is glad she went through the process and would recommend the experience to other graduate students.

44:46 Q7: Would you like to make any other comments on what it takes to get by where you live on what you earn?

Latisha takes the bus for her commute. She does not use her car for every day commuting, just for irregular driving, like taking her dog to the groomer. Penn state has a graduate students bus ridership program that Latisha says is a $180 one time fee, then free riding for the entire year. Just a few rides each month would make the pass pay off. She says this is definitely worth it.

Latisha says her budget is possible because she manages her time carefully and sticks to a routine. Her budget is a result of her focused lifestyle. Emily and Latisha agree that budgeting is easier and more accessible when you recognize the patterns you have in place in your life.

48:30 Final Comments

Latisha and Emily hope listeners learned more about frugal strategies for living on a graduate stipend.

48:45 Conclusion