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expert interview

This PhD Promotes DEI with a Focus on Finances

July 1, 2024 by Jill Hoffman

In this episode, Emily interviews Dr. Carolina Mendoza Cavazos, who holds a PhD in microbiology from the University of Wisconsin-Madison and currently works in industry. Carolina has long been interested in and open about personal finances, and she focused her DEI efforts while in graduate school around finances, including starting a money club and creating clear communications regarding pay and benefits. Carolina shares her insights into the kinds of financial issues graduate students face and how universities should back up their recruitment of diverse candidates with sufficient financial support and communication. Finally, Carolina and Emily discuss the financial goals and lifestyle upgrades Carolina has enjoyed since starting her job in industry.

Links mentioned in the Episode

  • Dr. Carolina Mendoza Cavazos’ Website: Finances with Carolina  
  • Dr. Carolina Mendoza Cavazos’ Twitter 
  • PF for PhDs Excel Spending Tracker
  • Host a PF for PhDs Seminar at Your Institution
  • Emily’s E-mail Address
  • PF for PhDs Subscribe to Mailing List 
  • PF for PhDs Podcast Hub 
PhD Promotes Diversity, Equity, and Inclusion with a Focus on Finances

Teaser

Carolina (00:00): Basically like who, who can afford to go to graduate school and how the people that have made it to graduate school, how can we support them during? There’s a lot of focus on the DEI efforts within recruiting. I also think that if there is not a support system for the students that are coming in and staying, I think that is a disservice to the minorities that you recruited. While it’s really great to get a fellowship, if the school can get to brag about the funding that you have, the schools should also support you through the issues that may arise due to that funding.

Introduction

Emily (00:55): Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

Emily (01:24): This is Season 18, Episode 3, and today my guest is Dr. Carolina Mendoza Cavazos, who holds a PhD in microbiology from the University of Wisconsin-Madison and currently works in industry. Carolina has long been interested in and open about personal finances, and she focused her DEI efforts while in graduate school around finances, including starting a money club and creating clear communications regarding pay and benefits. Carolina shares her insights into the kinds of financial issues graduate students face and how universities should back up their recruitment of diverse candidates with sufficient financial support and communication. Finally, Carolina and I discuss the financial goals and lifestyle upgrades she has enjoyed since starting her job in industry.

Emily (02:10): When I teach budgeting, I emphasize that it actually consists of two components, budgeting aka telling your money what to do and tracking aka checking that your money did what you told it to do. While I love and use automated tracking software, in my opinion nothing beats manual tracking, which naturally keeps you accountable to yourself for your spending. In fact, last year I made a custom expense tracking spreadsheet for my own use. If you would like to try out manual expense tracking, feel free to take my spreadsheet and use it as is or build it out however you like. I built in a couple of budgeting principles that I like to follow and teach to PhDs. There’s a companion video available explaining those principles. If you’d like to grab the spreadsheet, it’s totally free, simply sign up through PFforPhDs.com/tracker/. You can find the show notes for this episode at PFforPhDs.com/s18e3/. Without further ado, here’s my interview with Dr. Carolina Mendoza Cavazos of Finances with Carolina.

Will You Please Introduce Yourself Further?

Emily (03:29): I am delighted to have joining me on the podcast today Dr. Carolina Mendoza Cavazos. She is a scientist working in the private sector. She finished her PhD about two years ago, and like me, Carolina is also really, really into personal finance and also she has a special focus on DEI, efforts related to personal finance. And Carolina has a website called FinancesWithCarolina.com, and I first came across her, it must have been several years ago on Twitter, and I’ve been keeping my eye on her for a while. We finally had reason to connect recently and set up this podcast interview, which I’m really excited about. So Carolina, would you please go ahead and introduce yourself further for the audience?

Carolina (04:04): Sure thing, Emily. Hi everyone, my name is Carolina and I obtained my PhD at the University of Wisconsin Madison. I’m currently a scientist in the r and d department at Promega, and um, I’m very excited to be here today.

Finances During Childhood, College, and Beyond

Emily (04:21): Yeah, let’s go back, um, even further because I want to hear about, uh, your background, especially with respect to finances starting kind of in your childhood. You can give us a brief overview of how things were, um, financially growing up and then through college and graduate school and I’m, I’m interested both in kind of materially what was going on and also how that affected your mindset through that period.

Carolina (04:41): My family and I moved to United States in 2011 and I finished my senior year of high school, then applied to college and I obtained my undergrad at California State University Fullerton. My dad is an accountant, so he talked about money quite often. I would say that being an immigrant, we did have certain like mindset that came with that and frugality was a really important one. I would say that from the both sides of my family, either one or two generations broke the cycle of poverty and I grew up in a family with two college educated parents and we were able to migrate here to the United States, um, due to a job opportunity for my mom. So that was kinda um, how we got here. I would say I was always interested in finances in general in college. The first time I got a paycheck was through a program called MARC Maximizing Access to Career Research and is a pipeline for like graduate school program. So that’s kind of where my budgeting journey started. I lived at home, uh, during college and receiving that paycheck was the first time that I was, you know, making all my budgeting spreadsheets and stuff like that.

Emily (05:58): Yeah. So let’s kind of turn to graduate school now. It actually seems like you were set up pretty well to understand maybe the finance of graduate school having been in that program, the MARC program during undergrad. Um, so tell us about like that transition and maybe the kinds of offers you got and whether you considered, you know, finances. It sounds like you probably would in your selection of which university to attend.

Carolina (06:17): I don’t think I looked at the stipend as carefully as I would today. I gravitated towards the Midwest because the Midwest had awesome microbiology and I knew I was gonna end up somewhere in the Midwest. Um, my last two top school choices, like were between UW Madison where I ended up attending and um, Wash U. So those were my two offers. And in general, stipend wise, they were pretty similar. However, UW Madison had a program similar to MARC called SciMed, shout out to SciMed, it’s called Science and Science and Medicine Scholars. And basically it was a community that I could plug into that I did not see at any other universities and I felt that that was, uh, a good fit for me. So that’s kind of why I decided to go to UW Madison.

Emily (07:16): So tell us a little bit more about how finances were going for you during graduate school. You said that you had, you know, uh, a frugal and a debt averse kind of background with your family. Um, you’re in the Midwest. Yeah. Was the stipend livable? Were you able to save? How are things going for you personally?

Carolina (07:33): Yeah, in terms of finances, I did move here to Madison with a partner at the time, now my husband and we, that’s kind of when we started not fully merging our finances, but we’re definitely operating as a household at the moment and basically we were like kind of equally splitting everything. So that was definitely helpful and I would say that the stipend was livable, however, having a partner was definitely helpful. And one interesting thing is that I was funded the whole time during graduate school, so the five years I had different grants, fellowships, things like that. So I was fortunate that I didn’t have to pay segregated fees or like the student fees for that. Um, I ended up working as an hourly for assignment and that was, um, a workaround in order to get retirement benefits like a 403B or something like that.

Carolina (08:35): I definitely think that my husband and I had like different mindsets about finances and it was interesting to kind of get into that. But I would say in graduate school I found your podcast through Hello PhD and I think the, the thing that really caught my attention was the use of, um, buckets for like high yield savings accounts. So I think that that was like one of the first things that I did in order to get the same service but like in a cheaper way. Like for example, like car insurance, I faced a lot of issues with funding transitions that ended up being, in my opinion, DEI issues in terms that I don’t know, I, I saw a lot of the times like the same pe- people in the program doing the same jobs and being funded differently would still face different issues. And in terms for advanced opportunity fellowships like for, um, minorities like me and things like that, I would say like that was like a double whammy of you might have a surprise tax bill and things like that. And like how, how do you deal with that? Do you, do you have your emergency fund set up? Do you rely on a network? Is there network that you can rely? Do you incur debt? And things like that. Issues that I encounter with my funding, I always wonder and through the grapevine have heard that other people that were funded had this issues. So I think that that was my first step to get into using personal finance and deed efforts during graduate school.

Financial Challenges During Grad School

Emily (10:15): Hmm. Yeah, I definitely wanna hear about more about that in a minute. Um, can you expand at all on the, the issues you were just talking about with like the funding? So like quarterly estimated tax bills. We talk about that a lot in the podcast, hopefully the listeners familiar with that. Um, anything else? Like, just tell me what, what the issues were that you either experienced or that you observed.

Carolina (10:35): Yes, so one of the issues right off the bat was taxes obviously. And um, I definitely had a tax bill that I wasn’t expecting and I wasn’t aware of the fellowship, um, quarterly estimated taxes on my first year or something like that, the Kiddie tax. Why not? One of the things that I would say is that access to benefits was a little different. So for example, there was no, someone in my lab and me, the other peop- the other person could contribute to an FSA account or they would be able to and eligible to open a 403B. Um, what else? Gaps in insurance or, um, what are they called? Potential gaps in insurance. For example, some of my friends that were in the NSF were getting COBRA letters when they were having their funding transitions because you might have lost insurance and they were not aware of this and it was just because some paperwork was delayed and things like that.

Carolina (11:46): Personally, I did a, an internship during my fourth year summer, somewhere between fourth and fifth, and I had to take a short leave of absence for that. I had to prepay my insurance and there was a lot of issues with that. Um, I, I think I was the first one to do this and the program that was receiving a stipend that, that was receiving a stipend and had to pause that in order to go into the private sector and get, um, private sector money. Usually if you were in your, I don’t know, a W2 route, I don’t know how they would have handled it, but there was miscommunication on that. Uh, one point I wasn’t sure if I was gonna have insurance over the summer and access to healthcare is definitely something that everybody should have. And, um, I had some health issues during graduate school, so that was a very scary time for me.

Carolina (12:45): And through the grapevine again when that happened, I started documenting if other people have faced this within the, the fellowships during, within the T32s and stuff like that. So when I was working as an hourly for assignment, some of my job was to write down what should you do if you are going to into a internship, what are the, um, I also implemented, I was part of the DEI committee in my program and I also proposed and implemented a funding transition form to pinpoint where is your money coming from in this semester? Where is your money gonna come from next time? Do these people know each other? Should we introduce everybody? Do they know that you’re coming or that you’re leaving the, the fellowship training grant, et cetera. And I found a lot of people that were having trouble with this things and it wasn’t just me. So I think that there is, there, there is a very powerful thing in community and I was trying to find the people that were having these issues and try to play safety nets for when people did face them because they’re bound to happen sometimes. They knew what to do, who to contact and things like that.

Emily (14:10): So helpful. I mean, it’s amazing that you, you know, worked along with your peers to put that resource together, um, through SciMed. It sounds like it was kind of part of your job, but to the extent, yes, you were doing it and it wasn’t part of your job, uh, amazing community service, but probably should have been taken up by the university. Um, obviously they’re the ones providing these benefits or facilitating the benefits, so like, yeah, they should be taking charge and making sure the transitions are seamless. I think about some this sometimes with respect to the tax questions of, you know, calculating, filing quarterly estimated tax or dealing with stuff during tax season. Um, like I know it’s really normal in the US for your employer to be very hands off about taxes. Like yeah, we’ll do withholding, that’s it, that’s the extent of what we’ll handle. But like universities aren’t even doing that much in most cases for fellowship recipients. And I do think they should be a little bit more proactive and, and thank you so much to the ones that work with me and are proactive about this, but be proactive about at least communicating right when the students, um, about what’s gonna happen. And it sounds like not, not only in the tax realm, but it extends with all these other benefits like you were just talking about. So I’m really glad you kind of gave us that overview. Um, so it sounds like you were working with, you know, SciMed and also talking with your peers. Can you tell me a little bit more about kind of what you learned or observed about how your peers were handling this stuff financially? Not just with, with respect to the benefits issues that we just spoke about, but maybe more generally what they needed to know or what they needed to apply, um, in their personal finances during graduate school?

The Birth of the Money Club

Carolina (15:36): Yeah, I, I think a lot of my peers were either, I don’t know, like I would say like there was like two categories. People that were in the category of like, you know what, I don’t wanna think about it. I am, I’m gonna take a pause on this while I’m in graduate school and once I figure out what my career path is gonna be, I’m gonna pick it up. And there was a small subset, small but mighty that was interested on talking about this and was sort of like, I think the taxes are the foot in the door for everybody that they’re just want to learn a little bit more of how to handle those. But once they’re in and then you just start chatting and like, where do you put your tax money before the thing is due? How are you, um, self withholding and things like that. I think that was kind of like the natural birth of the, the, the money club that we developed. And I really can’t remember if that was part of the SciMed job or eventually we kind intertwined it or something like that. The SciMed job was basically really help your community, how can you do this? Obviously there was like events and food ordering or flyer making and stuff like that, but I, at one point I was trying to explore student services as a career, so I think that that was my in, um, with that position. And then it turned into a way for me to look at this DEI issues and try to create resources for the people that were within the fellowship where in the fellowship were gonna come into the fellowship and things like that.

Emily (17:22): I totally agree with you that the taxes are the way to most, uh, you know, getting most people’s attention into personal finances. Yeah. Uh, where did it go after that? You know, you already mentioned using targeted savings or sinking funds as a helpful sort of addendum to your budgeting. Did you all talk about that or what other topics did ended up being of interest to this group?

Carolina (17:42): One of the topics definitely people were interested in investing. I think that that was one of the other ones that we’re kind of popular and, um, I don’t know, mystified a little bit and people wanted to ask around. I think, I think the money club really started getting around going like in 2021 after the summer of 2020, um, when George Floyd was murdered the entire a a group in the program started writing a letter to our admins and our professors and things like that in which we were quote unquote demanding changes in our program and whatever. So I was involved in that effort and I do remember putting some personal finance stuff in there and, um, I think when the whole program read it and they knew that there was like some of the things that I was requesting, like for example, um, I had recommended you to, to our program. I don’t know if they ended up hiring you or not. Basically like in the program then I, I became known as the person that talked about money and then people that wanted to talk about money found me. And, um, the other topics that I would say not so much as investing, but I kinda wrapped it around with investing was retirement and some of the benefits that the university was offering for students that did have access to those. The majority of my program was not like brought partners or anything like that. I, I don’t remember, but sometimes there was students that had in their budget a, a way to invest and they just wanted to start.

Emily (19:22): Absolutely. For me, I always say taxes and investing are my two favorite topics to discuss. And it’s lucky because those are the two top, um, most popular topics that get requested, which is really fun for me. Um, it’s so interesting too being in an environment where some people have access to that 403B, um, and even the other, well you mentioned FSA not an HSA, um, through the university, but perhaps other benefits that’d be relevant, you know, for investing. Um, and obviously if you’re on fellowship or, and if you’re not an employee, you’re not gonna have access to that, but it sounds like a subset of people would, and you and you also had access to <crosstalk>.

Carolina (19:55): So I found a loophole

Emily (19:57): Yeah. To be, um, a proper W2 employee at least for a few hours enough to give you that benefit.

Carolina (20:03): And I made it automatic that all a hundred percent of my hours with SciMed would go to the 403B.

Emily (20:10): Well, that’s kind of cool that they let you do that. I know sometimes employers that have like a restriction like no more than 50% of your paycheck or 25 or something, but obviously since it was just part-time for you, if that makes sense. Um, yeah. Anything else you wanna tell us about the money club?

Carolina (20:25): I think people just need safe spaces to talk about money, and I think it’s one of the cases that if you create it, people will come. I, I personally feel that a lot of people wanted to start working on their finances and they just didn’t have the language, the space, sometimes the resources or like the, the uh, uh, closed mindset of, well, I’m not making enough money so I, how can I work on this? And I think that’s my main, one of the things that I try to help people with is that your personal finance, like, and starting to work in your personal finance, it doesn’t have to be this ginormous thing that you have to put thousands of dollars into it. I think it’s small actions that just kind of add up and, um, my whole spiel is that I, I would like to create systems that you later edit when you get a different job and there’s a lot of things that you can do in order to work in your personal finance that don’t cost money or they can be a $2 thing and, and it’s more of like flexing that muscle as a lot of people say in the community. I think it’s true.

Emily (21:51): I totally agree. Um, and I, going back to kind of what you said earlier about, you know, the, you sort of encounter two kinds of people, like some people who wanted to engage, but some people just wanna say, you know, I’m not making that much money, it’s not the right time to be working my finances. I will pick this up later. And they are overlooking that benefit of, as you said, flexing the muscle of learning a few skills, of getting a little bit of extra knowledge, um, whether that can be applied during grad school or whether it’s just gonna be something that’s practiced a bit or set aside for later. Um, all of that does help you set up for financial success in your next post PhD career when you have that higher salary coming in. And of course it will be easier in some sense when you have, when you’re making more money, but if you’ve never practiced budgeting, if you’ve never really thought about what’s important to you in your spending, if you’ve never opened an IRA before, well that’s stuff you’re gonna have to learn, um, when the stakes are a little bit higher later on. So of course you know that I’m a proponent of working on that stuff during graduate school, you know, if at all possible, and as you said, it doesn’t have to, you don’t have to be able to save necessarily to have a savings rate to do positive things, um, in your personal finance, there’s lots of cost neutral things that you could do. Um, and hopefully you can get to a point where you’re able to save.

Commercial

Emily (23:05): Emily here for a brief interlude. Would you like to learn directly from me on a personal finance topic, such as taxes, goal-setting, investing, frugality, increasing income, or student loans, each tailored specifically for graduate students and postdocs? I offer seminars and workshops on these topics and more in a variety of formats, and I’m now booking for the 2024-2025 academic year. If you would like to bring my content to your institution, would you please recommend me as a speaker or facilitator to your university, graduate school, graduate student association, or postdoc office? My seminars are usually slated as professional development or personal wellness. Orientations or very close to the start of the academic year would be a perfect time for tax education or general personal finance content. Ask the potential host to go to PFforPhDs.com/financial-education/ or simply email me at [email protected] to start the process. I really appreciate these recommendations, which are the best way for me to start a conversation with a potential host. The paid work I do with universities and institutions enables me to keep producing this podcast and all my other free resources. Thank you in advance if you decide to issue a recommendation! Now back to our interview.

DEI and Personal Finance

Emily (24:32): I wanna get back to this point about how you, um, use the topic of personal finance within your own DEI efforts. And it’s something you’ve mentioned a few different aspects of it until now, but I just wanted you to just make it really explicit, like how do you view this and how do you work in this area?

Carolina (24:47): So I think DEI efforts are sometimes in some spaces, and this is not particularly about my university or my program or anything like that, but they get a little bit performative and they can get into, uh, check a box. We have a DEI committee and that’s it. That’s it. So I was involved in the DEI committee since this founding at, um, my program after the letter that I mentioned that we wrote. So through that there was two representatives for the students in this committee and we’ll bring issues forward regarding whatever our, our peers had brought up. And a lot of those ones sometimes were personal finance related, for example, there was one time that our paycheck schedule changed from a monthly to a biweekly time and a lot of the students were like, how am I gonna make rent if the biweekly paycheck is happening and then that I’m receiving that in this amount of time. I don’t have a safety net to just make that payment at the beginning of the, of the month if this happens. Um, so trying to make explicit what type of resources are available in the university for, uh, emergency hardship and stuff like that. That was one thing I definitely always advocated for more clarity on funding transitions as well as the fellowship letter. For example, I know that that one or my specific university came in March while your W2 came in January. So we had a case in which a student basically submitted their tax return after they got a W2 and they then they got the fellowship letter and they had to amend it. So basically being more transparent and proactive about the types of issues that funded students might face having I, I know one of my, um, one of the other representatives really advocated for having the, the number of the stipend for our incoming students instead of just kind being this nebulous number that you kind of hear there when you’re already in the interview.

Carolina (27:24): During the time that I was there, another person, not myself, but they got my full support, was really trying to start the conversation of a livable wage. So what is that? Like, how do we compare to other programs? And um, she did a tremendous effort, um, in order to look at the cost of living and how is that going and how, you know, it might not be our stipend might not be keeping up with this, what are we gonna do about that? So I would say that I definitely advocated for transparency in my, um, dei position from the program for the university. And I basically started spreading the information and just kinda reporting back to the committee and say like, this is what I did and I had my, my PI’s full support. I was very fortunate that she had my back. And um, there was instances in which I think if my PI was not supportive, like maybe they could have been like some issues and um, in terms of just like, hey, I think that what we’re doing is wrong, not wrong, but like not having the stipend number really there.

Emily (28:46): Yeah. Sort of obfuscating. Yeah.

Carolina (28:49): Yeah, I didn’t like that as much. My main issue was the medical coverage and I, I did as much as I could in order to create as much documentation and as much process safety nets for people to not receive that letter, um, of the COBRA Fellowship, um, not have to pay out of pocket for necessary prescriptions. If you have a lacking coverage, you cannot even make an a, a doctor’s appointment. It’s not like you can make it for later when you have coverage, they’re just not gonna talk to you. I had a back injury during graduate school and um, other chronic conditions that access to healthcare was, is necessary for everyone, but for me was particularly scary not to, and just the threat of not having it, it’s sometimes it was just that the, some deadline was occurring and like you’d really never had a lack of care. But just having that big thing in your brain that you might not have it, I think you, that takes you away from science and then you’re worrying about that instead of your experiment.

Emily (30:04): That’s exactly what I was thinking when you were going through, um, that response is that if we want to keep graduate students and postdocs, um, focused on their research, focused on progressing in their programs, successful in their academics, academia has to materially support them properly so they aren’t one distracted by the things like the benefit issues and all the, all the one things that we’ve talked about so far. Um, but then also by financial stress overall, um, having to be super, super frugal or having to make very extreme sacrifices in what your expenses are. Or on the flip side, you know, maybe spending a lot of time side hustling because your stipend is just not sufficient. And as a DEI issue, I mean if we want <laugh> more diversity in academia, um, and more people being successful across the board, we have to support them in a way that we’re assuming that they’re not gonna have to depend on family members or partners or other people who might or might not be able to contribute financially to them. Um, and frankly, a lot of people, you know, now have caregiving responsibilities. They have to contribute to the finances, other families too. And so again, you can’t even assume it’s just like a single person and all we have to do is provide for your basic living expenses and that should be enough for you because even these small bumps in the road, like you’ve been talking about these small emergencies or something medical comes up or I have to take an unexpected flight, these irregular expenses that you mentioned earlier, um, that can completely throw off your budget if you’re living with very little margin very close to the edge in the first place. So the way that I see it, we just have to fund graduate students, um, more than the baseline, right? Like not even the living wage. We gotta go beyond the living wage because you, to really be financially secure, you have to have a savings rate because these things will ease emergencies, these things will come up and it’s so much easier to recover from them and get back to being focused on your program and on your work, um, when you have the finances there and you don’t have to scramble and be stressed about it. So <laugh> that’s my part of the soapbox there. Um, yeah, anything more that you’d like to say about your, like the way that you do these DEI efforts?

Carolina (32:13): What, what I, I currently try to do and what I tried to do during graduate school was really providing the information that some people might not have. Basically like who, who can afford to go to graduate school and how the people that have made it to graduate school, how can we support them during, I believe that there are, there’s a lot of focus on the DEI efforts within recruiting and being like, yes, come to our university and having admissions numbers. And I think that that is very important. I also think that if there is not a support system for the students that are coming in and staying, I think that is a disservice to the minorities that you recruited. So while it’s really great to get a fellowship and it’s really good to be a funded student and that opens the doors for you to go into a lab that you might not have access before or gives you more research freedom and things like that, I think that if, if the school can get to brag about the funding that you have, the schools should also support you through the issues that may arise due to that funding.

Emily (33:48): Very good point. Thank you so much for adding that. Let’s turn our attention back to you in your post PhD life with your proper job, with your proper, uh, salary, which sounds amazing. So how are you pursuing financial goals these days and how are you doing with your, um, spending and just like, what’s going on in your finances now?

Post-PhD Finances

Carolina (34:08): Well, the private industry pays very well and as we know, our equation for our budgeting income is one of the biggest, um, in there. So I would say that for the first six months that I was at my full-time employment, I didn’t give myself a raise and I threw everything into retirement. So I think I started in the end of August, so I tried to get as close as the max as I could for the employee sponsored 401k and um, that, that was really great because, um, we were used to living in a given stipend and we didn’t really change much during those six months. Then after that I would say that my husband and I made a list of things that we wanted to upgrade in our house and one of them was a new bed <laugh>, one of them was a new fridge and, you know, things that we were like, it’s large expenses and is, I don’t know, it just felt like it was definitely a, a pivotal moment in an income that we could just buy this and not really like budget for it or something like that. And I, I think we bought the fridge for like a bonus or something <laugh> my sign up bonus or something like that. And I would say right now, because in graduate school I faced some medical issues, I would say that I really became a quote unquote vaulist that I was really trying to find what adds value to my life and the things that I really care about. And I think when people get sick or something like that, they really turn inward and, and start thinking of like, what is important in life. And I really started seeing like, okay, what in my budget reflects my values? What doesn’t and how can we reconcile those? So for example, family is very important to me and my husband, so I am happy that travel is a big category in my budget and we, we ran the numbers for the last year and I think like that was like our third category that we spend money on because our families are not here, so we have to travel to see them and we are pursuing fire. I think right now we don’t have responsibilities that are really sinking funds at the moment. So, um, I think I’m, we’re just kinda understanding what this new income can do and where can we put it into the long term retirement plans. And I’m also focusing on trying to live the life that I, I want. And I feel like during graduate school sometimes people really throw themselves into work and they’re like, they’re passionate about their stuff and they kind of like sometimes like don’t have like outside things. I definitely was guilty of that. So I’m trying to course correct and really focus on things that bring me joy in my every day today and spend on those ones I wouldn’t say previously, but definitely spend on, on the things that bring me joy and the things that I don’t care about, like my cell phone plan to definitely cut it as much as I can.

Emily (38:00): I just hope that, um, the listeners who are still in graduate school and are looking forward to the transition that you, um, have com- have, um, completed, can remember this example when they’re in your shoes because in, in my view, you have executed this like just perfectly <laugh>, um, which is kind of a combination of live like a grad student, like okay, don’t make any major changes right away. You, it sounds like you didn’t have to move or anything. So like there was some stability and it was, uh, easier in a sense to continue on with your previous level of spending, but in combination with that sort of as a default, okay, we’re not gonna, we’re gonna default to not changing anything, but then as you said, be so intentional about thinking through where you do want to spend more or where you wanna save more, um, to reach your financial goals and your lifestyle goals and everything and just add money to those buckets and to those places, um, and really get, as you said, like introspective about what’s important to you and apply that to your budget and reconcile them as best you can. Um, I just think it’s a wonderful, wonderful example, especially for someone who, who doesn’t right immediately after graduate school because the moving process brings in like more variables and more opportunities for like chaos in your budget when you have those kinds of transitions. That was the one that I went through personally. But yeah, I just think it’s so wonderful and awesome job. Of course, given the background that we heard, we knew that you were gonna do an awesome job with this, but it’s just amazing to like hear some more details about that.

Financial Mindsets, Skills, and Habits That Help With Post-PhD Life

Emily (39:22): Were there any skills or mindsets that you developed during graduate school with respect to your finances that you found useful in this post PhD, uh, life that you haven’t already brought up?

Carolina (39:34): I think making things automatic was something that I am still doing and I’m glad that I started before and I think like going back to the beginning about the savings accounts and we, we had a lot of transactions being automatic and right now I feel like we’re just kind of coasting. Like it, it’s something that we, we have developed already and I think that I’m never gonna pay my car insurance by month. I think that that is something that, um, I started doing in grad school because it was cheaper and now we, we just kind of continue with that. I think the frugal mindset of, of graduate students and like finding fun things to do for free, that is something that I have continued. Just yesterday I went to the library because they had a craft cafe and I made a craft and I had a blast and, and it cost $0. So I, I think a graduate student is good at finding those things around and taking the opportunity to, you know, have fun with a free activity when you, when your stipend is not as large, you sometimes like you really try to find the things that you care about and spend money on those. Like for example, I have a friend that he was willing to bike in and he bought a rather expensive bike, but it brought him a lot of joy and that was something that he did during graduate school and biking was his like stress reliever. So that was very worth it for him. And I think finding the things that are worth it for you, I think graduate school is a great time because you are sort of like tied on the money side and then sort of like continue those things and cut merci- mercifully, um, in the rest.

Finances with Carolina

Emily (41:37): Mm-Hmm <affirmative>, that’s Ramit Sethi <laugh>. I know that quote. Yeah. Um, well it was so great. It was so wonderful talking with you Carolina. Can you tell the listeners more about Finances with Carolina and what you do through your business?

Carolina (41:48): Sure. This business started out of the money club and I, I wanted to have a space in which I can help graduate students that are facing similar challenges to the ones that I faced or that my peers faced. And I would say that right now I do a lot of coaching calls in which students fill out a questionnaire that I have for them and that covers things, uh, as I mentioned, what brings you joy in your life and uh, I’m not gonna ask them to cut in their budget if that thing brings them joy <laugh> and, um, we go all over debt repayment and, um, trying to set up those high yield savings account, what are irregular expenses that they are gonna face. Retirement a lot of people are interested in that. And I would say personally from my community, I think finding someone that went through graduate school is just helpful that they can relate to you. I think that that is something that you and I bring to our communities that we, we know what it was like and we know what the problems might have been and, and heard about certain solutions or know someone that might have gone into that. So I would say the network that we, that I developed during graduate school, I have been using that for my clients as well. If someone is, and, and right now I would say coaching like just once on ones are my main focus and the way that I try to get funded is basically making the program, uh, cover those so the grad student doesn’t have to pay. Yeah, anything from budgeting to debt repayment. And I really like the one-on-one conversation. I I don’t think that’s scalable, but uh, I’m having a lot of fun with that. So, and I do like having an impact on someone’s life directly. So I think that’s why I am, I’m keeping it on the one-on-ones at the moment and I do have one digital product in which I have put like just kind of like stuff together in which, what the most common questions are and things like that. And I understand that not everybody likes the, the chatty, um, the chattiness that comes with like one-on-one coaching. So that’s, um, why I developed that one. In the future I hope to develop one that is not focused on graduate students and just in general because now I have been finding at work that some people that I did not find them in graduate school and they’re now starting their careers and they’re in their first full-time job with benefits and things like that, they’re a little bit lost. So that is another digital product that I wanna develop but is not ready yet. <laugh>.

Emily (44:38): Yeah, sounds like you’re repeating, repeating what you did during graduate school. You’re, you’re just a person that is open about money that people can feel comfortable talking to you and you find other people who are interested and you find other people who need your help at every single stage. So that’s just wonderful. And tell the listeners where they can find you.

Carolina (44:55): Yes, listeners can find me at financeswithcarolina.com and in there there’s uh, there’s a link to the digital product that I talked about. Um, there’s a link to the coaching services and things like that. So if you find me relatable and you wanna chat about money, schedule something <laugh>.

Best Financial Advice for Another Early-Career PhD

Emily (45:16): Beautiful. Okay, let’s finish up with the last question that I ask of all my guests, which is, what is your best financial advice for another early career PhD? And that could be something that we’ve already touched on in the interview or it could be something completely new.

Carolina (45:29): My best financial advice. The, it’s, it’s a marathon, not a sprint. And I think that if you start flexing the muscle of working on your personal finances with small changes that are sustainable in realistic for you, you’re more likely to stick to those goals. I would also say that in order to keep that momentum going and that inspiration that you sometimes need on, on personal finance, I really would like to encourage the listeners to find content creators that speak with relative, like speak to you in experiences that you relate to in experiences that you might have aspirational in things. And, and overall really find the content that is gonna keep you motivated. And the content is the same, it’s just the delivery, it’s the, the, the experiences that the people that are delivering the content, the network of those people. So overall, find someone that does inspire you and keep you motivated and slow and steady.

Emily (46:46): All right. Name your top few content creators that you love to follow for, for yourself personally.

Carolina (46:52): Yes. Um, well of course your podcast. I think that was one of the ones that Hello PhD. You you did a cross interview with them and that’s how I find you and I was just mesmerized of all the things that I could do with my stipend <laugh>. Um, so that’s one definitely related to graduate school in terms of minorities, I I really like the podcast Brown ambition. There’s two ladies in there and they have everything about career questions, entrepreneurship, money stuff and how that relates to one another. They’re in different stages of their careers and lives and just very interesting to see where they’re coming from and where they’re going. Uh, popcorn Finance is another one that is very nice and um, it has a lot of investing. I love their investing series. I referred everyone to that one because they have a lot of content of like, what is an ETF, what is an index fund, what is a lot of what is and and when you start reading all these things,

Emily (48:01): I didn’t know about that series. I’m gonna check that out.

Carolina (48:03): It’s really good. Um, journey to Launch is another one, that I follow, she definitely has like really cool interviews and just a lot of inspirational stories. Afford anything by Paula Pant. Yeah, those, those ones are the ones that like I probably listen like yesterday or today.

Emily (48:27): Yeah, every single one of those podcasts is also on my feed except for Popcorn Finance. I’ve only listened on and off to Popcorn Finance, but the rest of ’em, I’m a regular listener. I love all of them, especially, um, Afford Anything is like taking the podcast medium to like the next level with like journalism, um, around finances, which is so amazing. Paula Pant doing an amazing job. Um, okay. Well Carolina, thank you so much for giving this interview. It’s been really insightful and it’s been lovely talking with you. Um, thank you so much for agreeing to come on.

Carolina (48:55): Of course.

Outtro

Emily (49:06): Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! Nothing you hear on this podcast should be taken as financial, tax, or legal advice for any individual. The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by Dr. Lourdes Bobbio and show notes creation by Dr. Jill Hoffman.

Addressing Fellowship Tax Pain Points through Education, Resources, and Advocacy

April 1, 2024 by Jill Hoffman 1 Comment

In this episode, Emily interviews Jack Mao, the founder of Tax Fellows, a nonprofit organization that prepares pro bono tax returns for Stanford students. Tax Fellows primarily serves first-generation, low-income undergraduate and graduate students, and has a special focus on the tax implications of receiving scholarships and fellowships, such as the Kiddie Tax and estimated tax payments. Jack shares the advocacy approach he’s taking to reform the Kiddie Tax at the federal level and lists ideas for how graduate students across the US can bring more attention and resources to resolve their tax pain points.

Links mentioned in the Episode

  • PF for PhDs Tax Workshops (Individual Purchase)
  • PF for PhDs Tax Workshops (Sponsored) 
  • Emily’s E-mail Address
  • IRS Volunteer Income Tax Assistance (VITA) Program
  • Jack Mao’s TaxFellows Program
  • PF for PhDs Tax Center for PhDs-in-Training 
  • PF for PhDs Subscribe to Mailing List
  • PF for PhDs Podcast Hub
Addressing Fellowship Tax Pain Points through Education, Resources, and Advocacy

Teaser

Jack (00:00): Where students aren’t being told to expect significant tax liability on their stipend checks and like making sure that they save money for taxes. There’s no, you know, mechanisms like withholdings where the schools will pay the taxes on the students’ behalf. And so the students just kinda have to like figure it out and learn the hard way during their first tax season. And I feel like, you know, that’s not really the way to go. That there definitely needs to be a lot more resources across all the universities in the country to really help educate these students on their tax liability and really help support them through it as well.

Introduction

Emily (00:54): Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

Emily (01:24): This is Season 17, Episode 7, and today my guest is Jack Mao, the founder of Tax Fellows, a nonprofit organization that prepares pro bono tax returns for Stanford students. Tax Fellows primarily serves first-generation, low-income undergraduate and graduate students, and has a special focus on the tax implications of receiving scholarships and fellowships, such as the Kiddie Tax and estimated tax payments. Jack shares the advocacy approach he’s taking to reform the Kiddie Tax at the federal level and lists ideas for how graduate students across the US can bring more attention and resources to resolve their tax pain points.

Emily (02:04): The tax year 2023 version of my tax return preparation workshop, How to Complete Your PhD Trainee Tax Return (and Understand It, Too!), is now available! This pre-recorded educational workshop explains how to identify, calculate, and report your higher education-related income and expenses on your federal tax return. You’ll hear me reference this workshop once or twice during the interview. Whether you are a graduate student, postdoc, or postbac, domestic or international, there is a version of this workshop designed just for you. Go to PFforPhDs.com/taxreturnworkshop/ to read more details and purchase the workshop. By the way, it’s never too early to start laying the groundwork for university sponsorship. If taxes are a pain point for you, please let the administration at your university know that you would like them to provide additional resources either during next tax season or near the beginning of the academic year, as Jack suggests near the end of the interview. I can license one or both of my asynchronous workshops or deliver a live seminar. Please cc me ([email protected]) if you decide to recommend me! You can find the show notes for this episode at PFforPhDs.com/s17e7/. Without further ado, here’s my interview with Jack Mao of Tax Fellows.

Will You Please Introduce Yourself Further?

Emily (03:40): I have a really special guest joining me on the podcast today. His name is Jack Mao and I’m going to let him introduce himself to you further in just a second. I just wanna say how we got connected, which is that I have been working with Stanford this past tax season to provide my tax workshop to their graduate students and postdocs, and Jack started an organization at Stanford called Tax Fellows. The more serves on the undergraduate side, but definitely some overlapping, um, interests in populations between our two. And so because of our mutual collaborators at Stanford, we got to talking and just had an absolutely fascinating conversation and I knew that I had to bring him onto the podcast. So Jack, we’re gonna get into your whole background, but just really briefly, can you tell us who you are and what you’re up to right now?

Jack (04:23): Sure. Uh, thank you so much for having me on the podcast here, Emily. Um, my name’s Jack. I am, I was a Stanford student, uh, until recently. And, um, I’ve been also a credentialed tax professional, uh, federally credentialed for the past, uh, couple years, but in the industry for about six years so far. Um, and yeah, it serves a lot of, um, you know, college students, that’s kind of my strong suits and so it was natural for me to just kind of start Tax Fellows, uh, in partnership with the IRS and few Stanford offices to help out other college students with their taxes.

Emily (04:58): Yeah, and this is a really unique organization. I haven’t found one like it at any other universities I’ve collaborated with. So I wanna hear more about that. But first I wanna get a little more background on you, Jack, and sort of how as an undergraduate student you became interested in income tax and ultimately, you know, that led you to starting Tax Fellows.

Jack (05:16): Sure, sure. So, um, my background is actually in computer science and so totally different than, you know, tax, um, and accounting. But, um, it was back in high school I was, um, so I come from a low-income background and I was trying to start a small business to help out with family finances. Um, and at the time I just had, you know, my McDonald’s paychecks to pay for everything, which wasn’t really enough to, you know, pay for, uh, you know, accountants or, uh, lawyer’s advice. So what I did was, yeah, it’s a good CS major or do just Google everything. Uh, would not recommend unless you plan on switching ma- uh, you know, majors in industries, um, or careers. But, um, yeah, um, Google, everything. Really loved. Uh, just the way the taxes works, you know, I hate paying taxes, but it’s just, you know, it allows you to have a lot of creativity and flexibility and kind of, uh, finding ways to get around taxes you don’t really want to pay, uh, at times. Uh, and so that was really fun. I really want, uh, go more into it and to decide to volunteer with the IRAs VITA program, um, that works with nonprofits, uh, to provide free tax services to income taxpayers. So been, uh, in that program ever since, uh, and still am in that program, uh, through Tax Fellows today.

Volunteer Income Tax Assistance (VITA) Program & TaxFellows

Emily (06:37): So can you explain a little bit more what the connection is between the VITA Program and Tax Fellows? Is it exactly the same? Is there, is there more to it?

Jack (06:45): Sure. So, um, originally we started out just as a VITA site. And so Tax Fellows is a 501(c)(3) nonprofit, it’s a standalone nonprofit, um, that’s separate from Stanford, but we partner with the IRS, where the IRS helps us provide some training, some overhead and, you know, oversight, um, and helps us source a lot of our volunteers as well. Um, but now, now that Tax Fellows, um, has finished their first year and joined to our second tax season, uh, we have been expanding our programs a little bit, um, to also provide a additional pro bono, um, program called Tax Advisors, where we have our credential tax professionals, um, on a team prepare more complicated tax returns for undergrad students with kiddie tax, uh, obligations, uh, just because that is something that is outside the scope of VITA program. Um, and so we couldn’t prepare those in the past. So we kind of are in a way, um, half pro, uh, VITA sites and half a kind of a pro-bono tax in a sense. Um, and so, uh, but you know, we do have a pretty good partnership with the IRS and a few, uh, good stakeholders in the area.

Emily (07:59): And just for the listeners who aren’t familiar with VITA, maybe they’ve never been to, you know, access to services that are available to them at their university or their library in their city or whatever, can you explain like who that program is for?

Jack (08:10): Sure. So Tax Fellows, um, is, uh, or just VITA program in general, um, is for low income taxpayers, um, who might want some, you know, additional help with their taxes, um, but, you know, um, might not be able to afford say, a tax professional. Um, and so VITA sites, they are run by nonprofits at IRS, uh, partners with, uh, usually and, um, they’re staffed by volunteers, many of whom are credential professionals or retired professionals, but a lot of whom are also just newer, um, folks to the industry who want to get some more experience. That was kind of how I got my experience, um, with taxes and, uh, just kind of, uh, having the IRS, you know, train them, uh, on the volunteers on, you know, these basic tax topics so that they can, um, help prepare your tax returns for you, uh, at no charge. Um, these are all out of the volunteers, uh, generosity, um, of their time. And so, um, but it’s a really great program, um, with a lot of guardrails so that, you know, um, the quality control is usually pretty high. Um, and, um, yeah, yeah, definitely a really great program for anyone who makes under around $64,000 every year, um, and have fairly simple, uh, situations, uh, to get their taxes done, uh, really great and for free. So

Emily (09:39): I’m so glad you mentioned that number. ’cause in a lot of the country people are making less than that amount of money, so it really covers, yeah, a broad swath of people, especially my population graduate students, even some postdocs will fall under that, um, level of income. So they can almost always, if they have a VITA site available to ’em, access those services. And I’m really glad you just mentioned, you know, there’s, there’s guardrails there. Um, there’s only, you have to have a simple tax situation to really benefit. And that’s why you mentioned earlier that you started this tax advisors wing of tax fellows. Let’s talk a little bit more about some of these like confusing tax issues that may be common between like the first generation low income population that you serve, and then the funded graduate students and potentially postdocs population that, uh, that I serve.

The Kiddie Tax

Emily (10:22): So you, you mentioned the kiddie tax, um, let’s brief overview right now about what the kiddie tax is for anybody who has the, uh, misfortune of hearing about this for the first time.

Jack (10:32): Yeah. Yeah. So, um, kiddie tax originally, um, the inspiration behind that, uh, on the legislation side was, you know, a lot of these high net worth individuals, uh, your parents especially would, you know, have pretty high marginal tax rates. What they would do is, you know, have tax professionals who would kind of find all these little loopholes. And one of them is, you know, they could just pass along their investments to their children who are basically making no money, right? Uh, especially if they’re a minor. That way they could both save on taxes, Congress didn’t like that. Um, and so they implement kiddie tax where if, uh, the child is a minor, uh, or a full-time student who didn’t, uh, you know, earn, uh, from a job, uh, so earned income, um, more than half of their living expenses, then they’re considered basically, in a sense a soft dependent of their parents.

Jack (11:33): And so any unearned income that the child has now, uh, will be taxed at their parents’ highest tax rate. Um, and so, uh, that way, you know, the richer parents can’t just pass on their investments, uh, through their children because they’ll be tax rate basically. Um, unfortunately the way Congress defined kiddie tax, um, was very broad. And so it also encompasses, you know, college students who have, you know, taxable scholarship, financial aid, uh, you know, fellowships where, uh, you know, if they don’t have earned income from a job that’s more than half of their expenses, especially at, you know, Stanford where cost of tuition and like the, um, the room board are like an 80 to a hundred thousand dollars every year, uh, if not more. And so the student, not only do they have to like work a, you know, um, full-time job, you know, making more than 50 K to get outta it, uh, it is just a lot of qualifications and so too much complexity. Um, and that’s kind of, um, one of the biggest reasons why, um, we’re so popular at Stanford as while just helping students navigate, uh, through all this complexity.

Emily (12:52): Yeah, that makes sense. And this hits my population all the time. When you’re receiving a fellowship, one of the things about the calculation that goes into the kiddie tax is that your expenses include your education expenses and not just like your living expenses. So that scholarship that goes towards paying your tuition, the cost counts as part of your living expenses, but the scholarship that pays for it doesn’t count on like your side of the ledger of like providing half of your own support. Exactly. Exactly. So, right, so like they get hit with this fellowship, um, issue too. Now, what was interesting about the kiddie tax, I think I read into like the history of this and it seemed like there was like a creep going on. Like at first it was just minors, then it was up to age 19, then it was now it’s students, um, up, up, up until, you know, through age 23, under age 24.

Emily (13:34): And so over time it kind of like expanded and expanded. Um, but there was a reform a few years ago with the Tax Cuts and Jobs act that attempted to, um, make some changes to the kiddie tax. Mm-Hmm . And it really hit your population, that low income population because what they did was they, for a couple of years changed the definition so that, um, no longer were you taxed at your parents’ highest marginal tax rate, but you were taxed at the marginal tax rate for trusts, which simplified things certainly because you would just look at a table and see where you fell on that instead of having to, you know, link your tax return with your parents. But if your parents were low income to begin with, maybe that kiddie tax was not so big of a bite. Now, if your parents were high income, of course it was a big bite, but because it really, really increased those marginal tax rates on those low income populations, there was a big outcry. And after a couple of years, I think it got shifted back to the old model of go to your parents’ tax rate. So that was, yeah, just some interesting like shifts that happened with end time. But yeah. Yeah, the kiddie tax is a very unpleasant thing to find out about.

Commercial

Emily (14:33): Emily here for a brief interlude! Tax season is in full swing, and the best place to go for information tailored to you as a grad student, postdoc, or postbac, is PFforPhDs.com/tax/. From that page I have linked to all of my free tax resources, many of which I have updated for this tax year. On that page you will find podcast episodes, videos, and articles on all kinds of tax topics relevant to PhDs and PhDs-to-be. There are also opportunities to join the Personal Finance for PhDs mailing list to receive PDF summaries and spreadsheets that you can work with. Again, you can find all of these free resources linked from PFforPhDs.com/tax/. Now back to the interview.

Paying Estimated Taxes as a Graduate Student

Jack (15:38): Oh yeah. So, uh, especially for like first year grad students, uh, who have like a lot of taxable stipends ’cause they get like stipend checks, uh, usually and, you know, they would owe a pretty significant amount of taxes. Uh, and so to, to a point that they definitely need to pay estimated taxes, not only like to avoid the underpayment penalty, but also to, uh, just not be surprised at the tax bill end the year and try to like, try to recoup all the money, um, to pay, uh, substantial tax liability. And so, uh, we’ve been educating, um, grad students, um, as they come in, especially the first year grad students, uh, kind of how to pay estimate taxes. ‘Cause we also have California and they have like, their kind of special snowflake. They have like very, um, specific percentages, um, where it’s like 30%, 40%, 0%, 30% for like, the amount of estimated taxes that need to be paid.

Jack (16:31): Federal is like pretty straightforward. It’s just one fourth of the tax every quarter. Um, but just kind of educating students on like how to pay those, uh, payments, trying to figure out, um, how much to pay. Uh, and then kind of repercussions if they don’t, uh, pay as many taxes. ’cause you know, uh, students they could be busy and so, uh, you know, I’ll just kinda let them decide based on all the facts available, like whether um, it’s worth the effort of doing as many taxes. Usually it is, ’cause like usually if you don’t do it, um, for students that we have, um, served, their penalties are gonna be around a two, $300 range, uh, in this economy with, uh, the inflation. ’cause the penalties really based on just interest, um, and the interest rate that r assets for, you know, all, all their penalties and interests and, um, it’s just prorated across the year, uh, based on the, um, estimated tax payment you’re supposed to make, uh, from that date on, um, to the tax season. And so right now, uh, usually the past the rate was like 3% and so it wasn’t too bad, but right now the rates are in a 7% range. And so it’s definitely significant.

Emily (17:44): I found that as well that a lot of graduate students are aware of the estimated tax issue, but they just choose to not address it until tax season. And if they go into that with their eyes open, of course that’s their decision. But, uh, like you, I just try to lay out, okay, this is the trade off if you decide you’re going to neglect this.

Jack (18:01): Yeah. Yeah.

Emily (18:03): I think the real tough part is ra- facing that, you know, multi-thousand dollar tax bill that you exactly may not be prepared for.

Jack (18:10): Exactly. Because, you know, yeah. Students are also taxed on your part of the fellowship that goes to room board and room board in the Bay Area is pretty significant. Um, and so not only do students have to usually save for taxes on their stipend checks, you also have to like figure out, um, how much tax to save on housing, uh, stipends and some of the other stipends. And I feel like, you know, right now there’s not really a good way for the students in general, I feel like maybe it’s just more of a lack of re- uh, educational resources in the first place, um, where students aren’t being told, uh, to expect significant tax liability, um, on their stipend checks and like making sure that they save money for taxes. Um, there’s no, you know, mechanisms like withholdings where the schools will pay the taxes on the student’s behalf and so the students just kinda have to like figure it out, um, and learn the hard way , uh, during their first tax season. Um, and I feel like, you know, that’s not really the way to go. Uh, that there definitely needs to be a lot more resources, uh, for across all the universities, uh, in the country, uh, to really help educate these students on their tax liability and really help support them through it as well.

Emily (19:27): Yes. You know, I agree with you of course ’cause this is one of the main missions of my business, but, um, we’ll talk more about how people can sort of get more resources and get more education to their own peers, um, later on. But I just wanna add on that point. I mean, Stanford, obviously, you and I are both working with people at Stanford, so like Stanford’s obviously making a pretty, a relatively large effort in this area. Sure. Um, to get people informed about this. But I, it’s, um, I do not see this at this degree of resources being offered at many other places, which is to add, but I will tell you that there are a couple universities I went to one Duke, um, where they actually did offer income tax withholding on fellowships. I don’t know how or why it happened. I mean, the paychecks were being processed through payroll instead of through financial aid.

Emily (20:10): So there was a mechanism for doing it. Um, and it did generate a weird tax form. We got a 1099 miscellaneous instead of a, you know, 1098 t or whatever. Sure, sure. Yeah. Um, so it caused some downstream tax complications, but they did offer it. So that is something that I know is happening at some places and maybe it could happen at more places and it would certainly be easier on the students than having to engage with the estimated tax system. So Now that we’ve kind of talked about, like, you know, this example of the kiddie tax, how the kiddie taxes changed with time, um, how advocacy actually around after the pa after the passage of the Tax Cuts and Jobs act, when, you know, the tax rates were jacked up for these low income families, there was an outcry and it was reversed. I want you to give us a few examples, if you don’t mind, of Yeah. Some things that have changed within the tax law over time, uh, that relate to students, just so we can see some examples of like, this is not completely static, like these things do change.

Advocacy Around the Kiddie Tax, Taxable Scholarships, and Other Niche Financial Issues

Jack (21:02): Yeah, yeah. So, um, right now we’re actually trying to do some advocacy, uh, around the kiddie tax and the taxable scholarship arena just because, uh, it is, I’d say slightly outdated, uh, set of tax law. Um, you know, it was most recently updated back in, uh, the 1986, um, uh, tax changes. Uh, there, there were some major tax changes back then, uh, and never since, like since then, like I’d say like the, just the way scholarships and financial aid work, especially at like, you know, expensive private universities like Stanford, uh, and like the Ivy League, um, like it tuition has just gone up significantly where I don’t think it really makes sense anymore to put a lot of that tax burden on students. Um, and without any, like, you know, as you mentioned, like, uh, stu- you know, schools have to like put withholdings on a 1099 miscellaneous.

Jack (21:59): Um, so like, there’s not really like a, a mechanism say on a 1098 t or another like educational oriented form, um, to really help students, you know, save a little bit on their taxes, um, you know, having those taxes being taken out already. Uh, and so we’ve been, uh, trying to do some advocacy around their, uh, you know, the legislative side who’ve met with, um, the late Senator Feinstein’s office, uh, and representative Eshoo’s office, uh, who represents the district Stanford’s in, um, to kinda discuss about, um, you the struggles that students are going through with K tax and, uh, especially like undergrads as well, where they don’t get stipend checks really. Um, but even the in kind aid for, you know, room and board, you know, especially on top of like internship income, that is pretty significant. Uh, burden, you know, we typically see like about two, two, $3,000 of burden on in-kind aid, so money that the student never sees.

Jack (22:59): Um, and so they have to like work a, you know, good like on-campus job just to pay the tax on again, money that they never see. And so it, it’s a struggle. I mean, um, we’ve been, um, able to help the students save a little bit on taxes, you know, optimize, uh, with the parents, uh, so that we dumb it down to about, uh, a few hundred dollars, but even a few hundred dollars is pretty significant for these income students. And so we’ve been really help, um, working with in these, um, legislators, um, on, you know, ways that we can really change the tax around us. Um, and, you know, the judicial side as well, trying to poke holes and, um, kind of, uh, tax code surrounding, uh, these topics, uh, through tax court. Uh, and we might even, um, do some advisory, um, and meet with advisors through, uh, President Biden’s office, uh, very soon here. Yeah. Even on this, uh, university side as well, uh, you know, trying to get, you know, support fund going for, uh, you know, students to pay their tax liability, uh, especially in the first years where they might not expect such high liability, uh, and it would be, you know, challenging for them to pay those liability. Uh, but it’s been, it’s been tough working with Stanford, um, for now. Uh, but we’re still keeping at it and, and we’ll see kind how it goes, uh, over time. Yeah,

Emily (24:30): I think the kiddie tax is such a great example of an issue that’s right for change, just because, you know, the way you explained it earlier, which is the way that I understand this as well, is the original, um, conception of the kiddie tax was to make it less advantageous for high net worth parents to pass assets, income generating assets to their children. And that is not at all what is going on with scholarship and fellowship income. It’s, it’s perplexing to me how scholarship and fellowship income even got tied in with investment income in the first place. Yeah. Yeah. I, it’s, it’s completely baffling to me. Yeah.

Jack (25:04): Well, I mean, even with leg- legislators, uh, you have with, uh, it’s been, uh, it’s been challenging for them to just, I guess like, um, everyone has, um, like especially legislators have, you know, lots of, uh, different priorities that they need to kind of first, um, solve. And so I guess we weren’t too high on the set priority list. Uh, I mean, hopefully they’re, that they’re working on it, but, um, it, it’s, it’s, you know, a lot of politics as well. And so it’s a, it’s gonna be a long game, but, um, we we’re pretty committed to, you know, doing long-term advocacy around this, um, gonna go at it, um, as long as this is a thing, uh, and, you know, just some interesting, uh, statistics as well. So, um, you know, yeah, can tax, like, as you mentioned, like it’s definitely for, you know, these high level worth parents, uh, and their children.

Jack (25:58): And so typically the median, uh, an average income that we see for, um, you know, students or just children who have to fill out the kiddie tax form 8615, the me-, uh, the average parents income is actually in a, uh, about $1 million, uh, taxable income. A lot of these low income students, their parents are not making a million dollars . Um, and so like, yeah, this is definitely unintended consequence of the way legislators wrote the tax. Uh, and even for taxable fel- um, scholarship fellowship in general, uh, it’s heavily under-reported, uh, only about $4 billion of taxable financial scholarship and fellowship are, is being recorded. Uh, and so it, it’s, you know, it’s an area of the tax field that, you know, Congress and IRS isn’t really making a lot of money, um, in, in the first place. Uh, and so, uh, you know, using those arguments, you know, we’re hoping to really push along the change a little quicker, uh, especially ahead of the upcoming, uh, sunset of the TCJA, uh, Trump, uh, the Tax Trust and Jobs Act, uh, back when President Trump passed it, uh, just to kind of see if we can push along, um, uh, as a rider on, uh, those big tax bills that are coming up soon on the Congress side.

Jack (27:24): So, so we’ll see. We we’re, we’re definitely, uh, steadfast our commitment, uh, to advocacy here.

Emily (27:30): And I mean, I’m, I’m so excited about this and I hope you keep , keep it up and everything, and I’m just, um, I’m really inspired by like the story of how the definition of taxable compensation change for the purposes of contributing to an individual retirement arrangement. Because that also seems like a very, very tiny niche issue, right? The, the Graduate Student Savings Act to, if anyone is not familiar, it used to be that fellowship income not reported on a W2, was not eligible to be contributed to an IRA. And this was proposed, you know, federally several times in terms of the Grad Student Savings Act to change this definition so that it could be, and it failed several times until it finally got rolled in with the Secure, the Secure Act in 2019, and it was passed. And like, again, it was a thing that mattered so much to like my population, um, and it was amazing that it passed.

Emily (28:17): But yeah, that’s a really, really niche issue. And hopefully, again, some of these other niche issues like the kiddie tax can be addressed too. I actually have one more example. Yeah. So the tuition and fees deduction, they tried to eliminate that over and over and over again, and it kept being like resurrected year after year. It’s finally gone now. But again, for the listeners who were not in graduate school, maybe a few years back, yeah, there are currently three higher education tax benefits, but there used to be four available. The fourth one was the tuition fees deduction. Yeah. And it was the least useful and valuable one, and it ended up, I mean, the reasoning why they kept a congress kept trying to sort of sunset that particular de deduction was that it ultimately just confused people more. And so people would take the tuition fees deduction Mm-Hmm. when really one of the credits, for example, might have been better for their tax liability overall. Mm-Hmm. . So my understanding was it was causing more confusion and they just eliminated it. And it, it kind of sounds bad to like, oh, eliminate a deduction that was available to you, but really there were better ones avail better credits available. Yeah. Yeah. So that was another, I just kept watching it year after year being like, okay, it’s finally gonna die. No, they brought it back again, finally. Now it is gone.

Jack (29:24): No. Yeah, yeah, yeah, it’s definitely confused. Uh, so the students I’ve served in the past as well, um, and like there’s just, I think there’s a lot of different ways Congress is, uh, trying to help with education expenses, uh, through tax code, but, uh, you know, I don’t think, you know, with the taxable financial aid, fellowship scholarship, uh, section, um, there’s definitely a lot more potential there, uh, for, uh, you know, change. And so we’re definitely, uh, um, hope that Congress can, you know, really take up our word. And there’s definitely a lot of other nonprofits like us, uh, that I’ve met with who are also advocating for same thing as well. Um, you know, typically we don’t really see audits rates that high, especially for students. But even then, you know, none of my clients have gone on in knock on wood, uh, yet.

Jack (30:16): And so, uh, but yeah, I’ve definitely heard from a lot of these other nonprofits, some of the students that we’ve been working with. You know, there’s one, uh, one of the organizations that was, uh, serving foster youths, uh, that I met with, and one of their foster youth got audited on their taxable financial aid fellowship, uh, scholarship. And the outcome is not pretty. Um, so, uh, it’s definitely, uh, one of the biggest and one of the most urgent issues that we’re trying to tackle. Um, not only on the legislative side, but also, uh, just kinda on university side as well. Just especially the, um, private institutions like Stanford and, uh, the Ivy League. They have a lot more resources that they can more easily deploy. Um, and, you know, that’s quicker than, you know, trying and, you know, make change on the, uh, policy side of things. But yeah. We’ll, we’ll see.

How Graduate Students Can Advocate for Tax Related Resources at their Universities

Emily (31:11): Do you have any ideas about how graduate students at other universities can, um, do any kind of advocacy work or just ask their university for anything that would help them sort of gain more resources or, um, education or anything that would help them on this, you know, in, in tax season to, to handle things a little bit better? So like, what can they, maybe not, of course, founding a whole organization like you did but some little things they could do at their university to get some more attention to these issues.

Jack (31:39): Yeah, that’s great. Um, I think, uh, you know, for example, let’s say your podcast and kind of your resources are great, you know, great starting point. Uh, you know, one of the partners that we’ve worked with at Mutual Partners here, uh, Mind Over Money, uh, they’ve, uh, spoke really highly of your resources. And so that’s definitely a great starting point and just kind of advocating for universities to, um, kind of, uh, provide resources and kind of distribute resources, um, across, uh, campus. But also I think like, you know, while not, you know, maybe not founding a whole, you know, uh, tax program from scratch, but, you know, if a university has a law program, uh, then definitely would recommend, you know, working with Senate faculty there, uh, to try to set up, uh, maybe in con- conjunction with United Way usually has, uh, VITA programs already set up. And so just kind of, uh, using existing infrastructure in support of, uh, VITA sites and just kind of start, you know, a small one. It could be a small one, just trying to start out, um, kind of helping other students through their taxes, um, and then trying to attract like, you know, tax professionals and lawyers to the organization.

Using Caution When Getting Tax Help as a Graduate Student

Emily (32:47): So I observed with the VITA site at Duke, um, sure. Sorry to speak against them, but, um, yeah, they were not preparing returns properly with the weird fellowship stuff that was going on at Duke. I see. So I would just say whether there is a VITA site or whether you wanna start one, make sure that they know the population that’s gonna come in and the questions that they’re going to have so that they can train their volunteers specifically towards the situations that they’re going to see Now, because of the weird way that Duke did things, like I actually understand why the mistakes that were made were made, and it might be easier at other places that don’t use the 1099 miscellaneous. Sure. Yeah. Um, but yeah, just to let them know like, Hey, I’m gonna tell all my friends to come in and like, make sure that your volunteers can do this Sure. Correctly and easily and quickly. Definitely.

Jack (33:29): Definitely. Yeah. I mean, we don’t really see a lot VITA sites and universities, uh, where we really should. But, um, even a lot of, uh, sites that I’ve seen, um, at universities, you know, I’ve kind of had a connection with Yale, um, and I wanna say, uh, UC, uh, Santa Cruz as well, uh, in California, uh, they, I I wanna say a lot of them only serve low income tax payers that are not students. Um, and like they don’t orient these services to students, which I think is a good approach, especially if they’re newer site starting out, uh, and not have a lot of those more experienced volunteers, uh, or professionals to kind of guide, you know, the volunteers. But yeah, you, you mentioned a really great point, uh, which is that like, you know, not all VITA sites and even tax professionals I’ve worked with in the past, you know, who have like decades of engineers, not all, you know, professionals or VITA sites, understand, um, kind all the ins and outs of the tax code that are relevant to students.

Jack (34:33): Uh, I’ve even had tax professionals think that, you know, taxable financial is not taxable , um, that was, that’s the you highest extreme I would say. But, uh, even just like optimizing, especially for a lot of undergrad students, optimizing, you know, the, um, you know, parts of the tax, you know, involving, you know, like tax credits, you know, deductions, you know, against their financial aid, uh, and along with their parents, you know, their parents who might be, you know, claiming for example, like the earned income tax credit, um, or the premium tax credit for health, uh, insurance or a lot of other tax credits and just like coordinate the, uh, tax credits that both the students and the parents are claiming, uh, to maximize those resources that that takes a lot of expertise, uh, to do correctly. Um, and so I definitely agree with you there.

Jack (35:25): Um, definitely do be careful, um, with, you know, starting VITA sites, uh, and with just tax professionals in general, just making sure that they actually have the expertise, um, and experience serving students, uh, in order to serve you, uh, you know, better and more accurately. And so I think our, our, uh, you know, tax fellows, um, uh, program, I’m very glad I’m able to, uh, you know, help students, uh, using their expertise. Um, and you know, we’ve been invited, uh, to train other volunteers at other VITA sites, uh, in these student tax considerations. And so, you know, if you’re thinking of starting VITA site, uh, please do reach out, uh, to us at Tax Fellows. Uh, happy to kind of, um, kinda walk you through the steps of starting VITA site, uh, and managing a VITA site, but also kinda allow of the student tax, uh, considerations that, uh, you should think about and kind of consider and, you know, we’ll do some more practice together, uh, on it too.

How Universities Can Support Graduate Students Around Taxes

Jack (36:20): But yeah, I think just in general, um, working with university administrators, uh, and the folks who, uh, you know, run orientation programs to add another orientation session might be just, you know, even if it’s just like one hour long, um, just to kind of prep students for what they should expect with taxes. You know, a lot of these like, you know, big picture, you know, policy changes, you know, like, uh, university like, just kinda like resource changes. Those take time. But I think you just adding another program to orientation, uh, for new students, that’s a really good first step that I think doesn’t take too much convincing to do and will be really effective, uh, to really help students, um, kind of foresee what they should expect at tax season, uh, so that they don’t have to, uh, you know, get surprised, you know, kind of play the game of Russian roulette and like try to, you know, guess and pray, you know, for the best I guess. Yeah.

Emily (37:31): Yeah. And I’ll just have to do a self plug because I have a session like that that’s ready to go. It’s perfect for orientations. It’s live, it’s awesome. Um, yeah, so those of you who are listening, if you, if you want me then please, you know, reach out to me, reach out to administrators at your university. But I would actually say just even back up from that, um, yeah, just talking about the issue of, or like the struggle that people that you’re having with your either preparing your tax return or dealing with your estimated tax or whatever it is, just telling the faculty and the administration that you have concerns about this and you want them to provide resources to you is very, very helpful. Um, because a lot of universities are super reticent to touch taxes with a 10 foot pole because of perceived liability issues on their end. Now it’s kind of funny because they, they do help international students to a great degree. They don’t usually offer the same kind of help for domestic students. Um, but if you tell them repeatedly and get a lot of people to tell them that you want more resources around this, then that’s, I think, the best they can figure out how they want to meet that need. But just letting them know that that need is there, that that concern is there is a wonderful first step.

Jack (38:34): Definitely. Definitely. Yeah.

Best Financial Advice for Another Early-Career PhD

Emily (38:36): Okay. So Jack, thank you so much for giving this interview. It’s been wonderful to speak with you. Yeah, thank you so much. And I want to end with our last question. Sure. Which is, what is your best financial advice for a funded graduate student or an early career PhD? And it can be something related to taxes if you want. It could be something that we’ve talked about during the interview, or it could be something completely different.

Jack (38:56): IRAs, I cannot emphasize enough how important and just like life changing that IRAs could be. Um, you know, there’s definitely, you know, for, you know, especially grad students, uh, PhD students, uh, you know, once you, you graduate, you, you might go into academia, but if you go into industry, uh, where you’re getting paid, you know, six figure salaries out-, out the door, it’s gonna be, you know, you could still contribute to say like a Roth IRA, but uh, it’s gonna be a bit more difficult and there’s like backdoor stuff to consider. But um, you know, now is the best time for a lot of, you know, grad students with their income level to contribute to Roth IRA while they still can, uh, easily. And you know, once the money is in, it’s a basically tax free, um, forever, uh, you could invest in, you know, stocks, you know, um, even occasionally startups, if that’s kind of your thing.

Jack (39:58): You know, I’m a little biased. I, I, I’m running a startup and like Stanford really good on startups, but, uh, you, that’s how you know folks like for example, Peter Thiel, um, have, you know, so much money that’s tax free is because he was able to contribute while he was, um, having lower uh, amounts of income in his early days. Uh, and then, you know, once the money’s in, there’s a lot of flexibility, uh, and ways to really help maximize your investments. Uh, while at the same time not having to kind of hinder the compounding growth of this investments with tax payments, yet I have to make, um, you know, on like dividends or interest or whatever. And so, yes, definitely Roth RAs is big and like, you know, lot students are also younger as well. And so the growth potential for those Roth IRAs across, you know, 46 years is gonna be huge. Uh, and so definitely do look into Roth IRAs as soon as you can contribute as much as you can, uh, ’cause you know, later down the line, uh, your future self will definitely thank you for it.

Emily (41:04): Absolutely could not agree more. My current self, thanks my grad student self were contributing to my Roth IRA back then. Not to put an even finer point on it, you know, as a graduate student you’re probably in the 12% federal marginal tax bracket and you may never see that one again. you maybe exactly, you know, above that for the rest of your career. So like exactly, that is the time to do it and it’s incredible and I love this advice because it’s both tax and overall financial, um, advice and it’s wonderful. And Jack, again, thank you so much for coming on the podcast.

Jack (41:34): Yeah, thank you so much for having me, Emily. It was great, uh, chatting with you.

Outtro

Emily (41:48): Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! Nothing you hear on this podcast should be taken as financial, tax, or legal advice for any individual. The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by Dr. Lourdes Bobbio and show notes creation by Dr. Jill Hoffman.

Can You Earn Money from Publishing a Scholarly Book?

March 4, 2024 by Emily Leave a Comment

In this episode, Emily interviews Dr. Laura Portwood-Stacer, a developmental editor with Manuscript Works specializing in authors publishing with scholarly presses. Laura has personally published two books with university presses and has a third under contract and has worked with hundreds of other authors. Laura describes why a prospective author would choose a scholarly press over a household-name publisher or self-publishing. Laura and Emily systematically discuss how publishers earn money, how authors earn money (directly and indirectly) from their books, and the costs of publication. While publishing with a scholarly press is primarily a labor of love, Laura gives ranges and examples of how much an author might earn from royalties and an advance, if any, depending on the type of book they publish.

Links mentioned in the Episode

  • PF for PhDs Tax Workshops (Individual Purchase)
  • PF for PhDs Tax Workshops (Sponsored) 
  • The Book Proposal Book, Dr. Laura Portwood-Stacer’s Book
  • Manuscript Works, Dr. Laura Portwood-Stacer’s Website
  • The Manuscript Works Newsletter, Dr. Laura Portwood-Stacer’s Newsletter
  • PF for PhDs Subscribe to Mailing List 
  • PF for PhDs Podcast Hub
Can You Earn Money from Publishing a Scholarly Book?

Teaser

Laura (00:00): But if you have research that is applicable in industry or policy, or places that have kind of other kinds of funding, you can command more money than you ever would make from the book itself, in speaker’s fees, or consulting fees or things like that. So, you can sort of think of the book as a strategic investment in your reputation and your platform that then would allow you to expand higher goals In other venues.

Introduction

Emily (00:34): Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

Emily (01:02): This is Season 17, Episode 5, and today my guest is Dr. Laura Portwood-Stacer, a developmental editor with Manuscript Works specializing in authors publishing with scholarly presses. Laura has personally published two books with university presses and has a third under contract and has worked with hundreds of other authors. Laura describes why a prospective author would choose a scholarly press over a household-name publisher or self-publishing. Laura and I systematically discuss how publishers earn money, how authors earn money (directly and indirectly) from their books, and the costs of publication. While publishing with a scholarly press is primarily a labor of love, Laura gives ranges and examples of how much an author might earn from royalties and an advance, if any, depending on the type of book they publish.

Emily (01:53): The tax year 2023 version of my tax return preparation workshop, How to Complete Your PhD Trainee Tax Return (and Understand It, Too!), is now available! This pre-recorded educational workshop explains how to identify, calculate, and report your higher education-related income and expenses on your federal tax return. Whether you are a graduate student, postdoc, or postbac, domestic or international, there is a version of this workshop designed just for you. I do license these workshops to universities, but in the case that yours declines your request for sponsorship, you can purchase the appropriate version as an individual. Go to PFforPhDs.com/taxreturnworkshop/ to read more details and purchase the workshop. You can find the show notes for this episode at PFforPhDs.com/s17e5/. Without further ado, here’s my interview with Dr. Laura Portwood-Stacer.

Will You Please Introduce Yourself Further?

Emily (02:58): I am delighted to have joining me on the podcast today, Dr. Laura Portwood-Stacer, who’s the owner of Manuscript Works. Laura and I kind of met on Twitter. She was recommended to me by another past podcast guest Dr. Katie Peplin. And Laura is a developmental editor of sorts. And so we’re gonna get into more of that line of work. And actually in preparation for this interview, I read her excellent book, the book proposal book, which is all about people publishing books with scholarly presses. So that is the subject for our interview today. Laura, would you please introduce yourself a little bit further for the audience?

Laura (03:30): Yeah, I’m so happy to be here. Um, so yes, my name is Laura Portwood-Stacer. For the past nine years, I have run a company called Manuscript Works, where I help authors, um, navigate the book publishing process, specifically scholarly authors. Um, building on my background as an academic, um, I got a PhD. I published my dissertation as a book. Um, and now I’ve moved on to helping others navigate that process, which can be very anxiety provoking and you know, there’s not a lot of guidance out there, so I’m trying to fill in that gap.

Scholarly Publishing, Trade Publishing, and Self-Publishing

Emily (04:02): Yeah, and so any listeners who want to go down this route, certainly again, I’m recommending the book proposal book. I found it very, very enlightening. Um, but we’re actually gonna be talking more today about the financial side of this because of course this is a personal finance, um, podcast. And because, um, that was left a little bit vague, I think, in your book, so I’m gonna see if you’re willing to share some, uh, more specific numbers or number ranges with us, um, as we’re going through the interview today. Um, so first of all, I just wanna help the listener understand the distinction between what we’re calling a scholarly press and then the publishing industry that they may be more familiar with, and then the self-publishing industry. So can you just tell us a little bit about how someone who thinks they would like to publish a book at some point, how they might know which is the right route for them to go?

Laura (04:47): Yeah, so I’ll say, uh, scholarly publishing is, um, sort of a narrow subset of the larger sort of traditional publishing industry, and it’s really focused on a certain segment of reader and a certain, um, distribution channel. So your readers, if you’re publishing with a scholarly press, your readers are going to be other scholars, um, people who are doing research, who are citing previous research in their own research, who are building on your research to write their own books or their own articles or, um, grants or whatever it is they’re doing. Um, and, and the distribution would be mostly directly to other scholars who might, you know, purchase from a publisher or purchase from an online retailer. Um, and institutional libraries, public libraries, um, uh, places that are sort of invested in furthering scholarly knowledge, right? So the focus is on scholarship, not necessarily on entertainment or, um, you know, personal improvement or the kind of things that you might pick up a book from Barnes and Noble for. Um, it’s really has sort of a professional scholarly bent to it. Um, whereas probably most of the publishers you’ve heard of that are household names that are not university presses. Um, they’re gonna be more focused on commercial books that people are, you know, just gonna wanna spend money on buy as gifts. They’re not necessarily serving that, um, intellectual purpose in the same way. There are some books that cross over from like scholarship to, um, a more broad audience. Um, and we can talk about where those kinds of books get published. Um, uh, but, but yeah, so that’s sort of the distinction between a trade publisher and a scholarly publisher. And a trade publisher, of course, is gonna be mostly selling in bookstore online retailers. They’re focus is not gonna be libraries or universities. Um, and then self-publishing is sort of a totally separate avenue. Um, and you know, I guess the difference there is that the, the distribution is kind of all up to you as as the publish as the writer. So you would need to find your readers. Um, you’re not sort of tapping into that built-in infrastructure of a scholarly publisher or a trade publisher.

Emily (07:19): I see. That makes total sense. And what really, I mean, maybe this is obvious to other people, but what impressed me with reading your book was like, oh, I’m really seeing how much work the publisher is putting into each one of these books that goes out. And of course, the audience that they have in mind, like you were saying earlier, and that is in the self-publishing realm, completely up to the author whether or not you’re going to invest in other people to help improve the work and and so forth. But that’s all part of the, the process when you go with, um, either a scholarly press or a trade press, right?

Laura (07:51): Yes. Yeah, and I’ll say that’s, you know, often there’s a perception among scholars that, you know, presses just profit off of our work and, and we provide this for free and we don’t make any money off of our books, so what are we getting out of it? But one of the big things you get out of it is that infrastructure that is already in place at the publisher where they know how to peer review the books, improve the content, um, produce the book so they look nice, then distribute it to the places that are most likely to buy it. All of that stuff is like, happens on the publisher’s end. Yeah.

Emily (08:23): Absolutely. Thank you so much for clarifying that. Okay. Now I wanna hear a little bit more about your books that you’ve published. Sure. What the process is kinda like, and then also what you do now for clients.

Laura’s Book Publishing Journeys

Laura (08:33): Yeah, so I have published two books to date. Um, I have a third under contract. Um, so my first book was a revision of my doctoral dissertation. Um, pretty typical straight straightforward process there. Um, I pitched it to a small independent publisher that got, um, absorbed by a larger commercial academic publisher. Um, so it was ultimately published with that larger publisher. Um, you know, it went through peer review. I did not receive an advance for that book. It has made minimal royalties, you know, a little bit over time, but not much. Um, but I wrote it for, you know, career reasons to just sort of get my research out there to make me more attractive on the job market. You know, kind of the typical reasons that a scholar would try to publish their dissertation. Um, my second book, which uh, was published, let’s see about eight years later, was the book proposal book, um, which is, um, it’s, you know, it’s a practical how to kind of book, uh, it’s, it is sort of research based in that it draws on my own sort of personal experience helping authors get their books published and write book proposals that impress the publishers they want to impress. Um, and you know, I did some research into the publishing industry to sort of inform that, the advice that’s in that book. Um, but, you know, it’s a different kind of, readership has a different kind of purpose. That book has been much more lucrative than the dissertation based book. Um, and we can talk about some of the reasons why, uh, if, if you want to get more into that. Um, and then my third book is currently under contract, so that means that I’ve written a proposal, I’ve pitched it to my publisher. Um, they have accepted it based on the strength of the proposal and on my previous, um, book with them. Um, and I have received part of an advance for it. I will receive the advance in installments, um, but I have not received any royalties for it yet because the manuscript has not been completed, uh, completely revised and approved and accepted for publication. So the book is not in production yet. We’re still a ways out from that.

Emily (10:48): Yeah, that’s fascinating. Um, I definitely wanna talk to you more about the financial aspects of this in a moment, but now I just wanna hear tiny bit more about how you serve your clients because I think it helps the listener to understand that you’ve not only had this personal experience, but you now have like the professional experience of helping, um, shepherd other people through this process.

Supporting Authors From Proposal to Publication

Laura (11:05): Yes. Yeah, so I mean, of course the personal experience is really helpful because I know the emotions that an author goes through. I have all those same anxieties, um, you know, about pitching my work to publishers and making a good impression and all of that. But I would say, um, the, the help I’m able to offer really comes from having been through this process with other people, um, in a wide variety of disciplines. Um, so I, uh, I basically help authors kind of distill what their book is supposed to be into a book proposal, help them write it in a way that is going to connect with publishers, that’s gonna speak to what publishers are looking for, which is not necessarily the same thing that academics are thinking about, um, when they’re thinking about their research. Um, and then, uh, you know, then I’ve, I’ve seen the process follow through where they actually get the contract and the, the offer and then get their book published. So, you know, I do online programs, so I’ve worked with hundreds of authors, um, who have been through this process. So getting to see sort of the different nuances and how it works at different publishers and, and all of that has been really helpful for getting that broad view of how it works.

The Financial Side of Publishing a Book

Emily (12:16): Awesome. So I wanna dive into a little bit more of the, the money aspects now, because that, of course your, your book is taking people step by step through the whole process. Um, but I want to just get some more details about like what people can expect if they <laugh> for financially if they decide to publish a book through this kind of press. I wanna start on how these books make money and how authors make money from them. So am I correct in assuming that money is made from these books by selling these books? Is that the direct way money is made by the publisher?

Laura (12:48): Yes.

Emily (12:48): Okay.

Laura (12:49): Yes.

Emily (12:50): Now, what do the authors get <laugh> after the publisher sells you books? You’ve mentioned advances, you’ve mentioned royalties. Can you define these a little bit further and talk about sort of the scope of what these contracts look like? ’cause some people get advances, some people don’t, maybe the royalties are different amounts for different authors. Like what’s the range here?

Laura (13:06): So yeah, so publishers, you know, even university presses, which are nonprofits, um, so, so they’re not necessarily trying to make a profit, um, but they are trying to stay open and they do rely on book sales to stay open. You know, I think there’s a misconception that they are just funded by their universities and some receive some funding from their universities, but that amount is of course shrinking, uh, with austerity and everything, um, you know, in university administration. So they really do rely on selling their books in order to stay open and keep performing their service to the scholarly community. Um, so, so that’s one reason why they are looking for books with a readership of hopefully hundreds of people, maybe thousands of people will wanna read each book that they put out. Um, so, and, and they are investing tens of thousands of dollars in producing each book. Um, and a lot of that goes toward the labor or the editorial labor, the production labor, um, but also materials, um, you know, everything that goes into making the book as a product. So, um, they are recouping that investment, um, in the form of the, the sales of the book. And in most cases they will share some of that, you know, recoup with the author in the form of royalties. Um, so the author would typically get of small percentage of whatever profit the book makes. So, so yeah, so they’re always sort of calculating, um, projecting profits and losses for each book. And based on that, they may think about, okay, what can we afford to share with the author and still break even on this book, or still even make a little bit of money that we could invest back into our press to help publish maybe some of the books that aren’t gonna sell as well. Um, and that’s where they’re figuring out, you know, how much money they’re gonna share with the author. And, and in advance is, um, the amount of money the, the publisher would give an author upfront before the book even starts selling copies. Um, and that is basically just an incentive to get the author to publish with that press. Um, so that is most likely to come into play when the press believes they have to compete for the book with other publishers. Um, and they’re also going to have to project pretty significant profits from the book, you know, so they’re not sinking even more into it without some prospect of getting it back out. Um, so, so advances, you know, scholarly publishers do sometimes offer advances again under those conditions where they think the book’s going to be profitable and they think they have to compete to land this author. Um, and the range of those advances varies a lot. It could be just in the low hundreds, more of like a token kind of thing. It could be a thousand dollars a and I’m speaking from experience of having worked with people who got advances for their dissertation books. Um, so it does happen. Um, but I would say the range has been from like a thousand, maybe 2,500, maybe $5,000. Um, that would be an advance that might be available. Not common, I would say, but available, um, depending on the project. Um, for, you know, people who are more established in their careers, they have a big name they could choose to publish with a trade press, but they have chosen a university press instead. Um, people who are writing a textbook or something that is likely to be widely adopted, not just read by a few hundred people but read by tens of thousands of college students, um, or, you know, scholars who are gonna use this book for some practical purpose. Um, that’s where you can get a higher advance maybe more in the five figures. Um, it’s not unheard of for a six figure advance to come from a university press, but that would be pretty rare. That would be them competing with a trade press that might be more used to dealing in those kinds of numbers. And they’re gonna expect that book to really pay off for them to help them keep the lights on for all the other books that they sell.

Emily (17:45): So, fascinating. Thank you for telling us those like orders of magnitude for the, the different types of books. That’s really, really helpful. Um, so let’s say, um, whether or not an advance was given, um, I think you said something like when the book sales exceed the costs that have been invested, then royalties are shared with the author. Is, is that correct that royalties don’t come from book number one, but only once costs have been recouped?

Laura (18:11): No.

Emily (18:11): Okay.

Laura (18:12): Um, not exactly. Um, so yeah, it’ll be written into the author’s contract, uh, and, and I’ve seen various types of offers. Uh, some university presses will say, okay, no royalties on the first 500 copies, say, um, ’cause they know they’re not gonna break even until they’ve sold 500 copies. Um, I would say that’s a less common than a royalty from copy one. Um, but you know, the press, it might not break even until later on, but they’ve factored in the fact that they are going to compensate the author something for sales of the book. Um, so, so yeah, it’s really hard to know what that break even point is, but, but publishers are like, you know, they have a lot of data points and they are really projecting out into the future optimistically hoping they’re gonna get to that break even point. Um, but the author will likely seal some money before that point. Probably won’t be a lot of money, but some money.

Emily (19:15): Okay. Let’s, I wanna get some orders of magnitude again. Sure. So let’s say for the example you gave earlier of like someone who’s trying to publish work arising from the dissertation that they wrote, um, that kind of book. How much money would they think they might make in the first year, let’s say? Are we talking two figures, three figures, four figures, five? Like where, what is the order of magnitude there in royalties?

Laura (19:41): Uh, uh, so it’s, um, it’s really hard to generalize, I’ll say. Um, but, so, uh, maybe some other numbers will kind of help this. So let’s say your book, um, retails for, I’m gonna say $20 just for simplicity’s sake, but most academic monographs are gonna be priced a bit higher than that. Um, but let’s say it’s $20, the way that the publisher calculates the royalty, you are likely going to see a dollar or less from each sale of that book. Um, let’s say there’s a, um, sometimes publishers have, um, a library version, a library edition that is, is actually priced at a hundred dollars. Um, ’cause they know only libraries are gonna buy it. They’re not trying to sell that to like your average academic reader, but they are gonna sell it to a library that’s gonna, you know, let dozens of people read it. Um, so they’re gonna sell that for a hundred dollars and the author might see $5. Again, it depends on the, the royalty structure that’s set up in the contract, but so you might see $5 from the sale of that book. So, you know, most academic monographs that begin as dissertations, they’re, you know, they’re gonna sell to a few hundred people realistically. Um, so, you know, let’s say a hundred libraries buy your book, that would be great. That’s a lot of libraries. Um, buying just, you know, a new monograph. Um, so let’s say like very optimistically, you’re getting $5 a copy that’s 500 bucks, right? Um, you know, let’s say 200 individuals buy your book, that was, you’re getting a a dollar a copy on there’s another 200 bucks, so that’s what, $700, right? And you’d be having a good year if you got $700 in your first year, um, you know, you’d be doing, you know, well for an academic monograph. So, uh, yeah, it’s not, not a lot of money.

Emily (22:02): Okay. I’m so glad we know like the order of magnitude, that’s exactly what I wanted. Uh, do you mind me asking, what about a book like yours that’s more, those this practical kind of guide? I know the, uh, what you wrote is part of a series from, uh, Princeton University Press, right? So like, can I have an example either of your book or, or similar books like that?

Laura (22:21): Yeah, yeah. So, um, and I do wanna say all of those numbers were just hypothetical and made up. So it’s not to say like the typical book sells makes $700 in royalties that I’m just, you know, putting it out there. Um, so yeah, so for a book like mine, which is sort of, um, positioned as, um, not, it’s not an academic monograph, you know, it’s not research based in that way. It’s going to be used by many more people than somebody who might just wanna read, um, a very specific, you know, narrow piece of research because it, you know, scientists could read it, humanity scholars, social science, people at all stages of their careers. You know, people who are, um, just finishing a dissertation and wanna publish their first book, people who wanna publish a second or third book, people who are mentoring those people, people who work at publishers, you know, so just have a much broader audience. So, um, the sales expectations for that are much higher, um, and have that it has played out that way, you know, compared to my dissertation book. Um, so I’m gonna try, I’m gonna try and think of, um, the numbers of sales. I think the first year it sold about 6,000 copies, I wanna say I don’t have the royalty statement right in front of me. Um, and the second year it, uh, I don’t think it sold quite that many, but it stayed up there. It was like four to 5,000 I wanna say. Um, and I’ve just gone into the third year, so I don’t have the, the numbers for that yet. So, so that’s a much higher number. And so that has led to, you know, higher royalties. It’s still not by any means the majority of my income. It’s still sort of supplemental income, but it is in the thousands of dollars as opposed to the hundreds.

Emily (24:16): Yes. Very, very good. Thank you so much for doing all this. Yeah. Like, um, order of magnitude and just like level setting and I, I really appreciate that

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24:25 Emily: Emily here for a brief interlude! Tax season is in full swing, and the best place to go for information tailored to you as a grad student, postdoc, or postbac, is PFforPhDs.com/tax/. From that page I have linked to all of my free tax resources, many of which I have updated for this tax year. On that page you will find podcast episodes, videos, and articles on all kinds of tax topics relevant to PhDs and PhDs-to-be. There are also opportunities to join the Personal Finance for PhDs mailing list to receive PDF summaries and spreadsheets that you can work with. Again, you can find all of these free resources linked from PFforPhDs.com/tax/. Now back to the interview.

Costs Associated with Publishing

Emily (25:16): I wanna talk more now about, um, not how the authors are making money, but the costs associated with publishing. You mentioned earlier that a publisher could be investing tens of thousands of dollars for each book that they’re putting out there. So can you tell us like, what, where are those costs coming from? Obviously I understand printing the book and so forth and there’s labor. What, what are the different maybe phases, uh, different types of people who have their hands on the book, what their different jobs are? And then I, I read in your book sometimes the publisher is gonna pay for these costs, but then also sometimes the author might pay some of the costs of, of this process. So can you kind of break that down as well?

Laura (25:52): Yeah, so, so the costs that the publisher is going to incur, you know, the, it’s the editorial labor, the editor that you’re emailing back and forth with the person who is, um, sending your manuscript to peer reviewers, wrangling those peer reviewers, then getting the reports. Then, um, you know, inside the publisher they’re making, um, presentations and pitches for your book that you might not even be aware of as the author, but the editor is doing all of that labor to get the publisher on board to say they wanna publish your book, all of that. Um, and that, that doesn’t even include like giving you feedback on the manuscript itself. Some acquisitions editors are able to do a little bit of that, um, but most don’t really have the time to give that kind of attention to the manuscript. Their, their role is more of a project manager, um, and, and an advocate for the project within the press. Um, so that happens within the press. Um, then, you know, there’s, uh, the, the production, so designing a cover, um, type setting the manuscript, so it looks like a book that can be printed on pages. There’s some design that goes into that as well. Um, most scholarly publishers do engage their own copy editors and proofreaders, um, where they would, you know, make sure the final version is like stylistically correct and grammatically and all of that. Um, uh, and then there’s the marketing and the publicity and, and all of that that goes to like making sure people know about the book and wanna buy the book. Um, and that’s not even getting into the, like the physical production of the book, which in my understanding is beyond the tens of thousands of dollars, the tens of thousands of dollars is just to get to that first proof electronically that they can then use to print the book and ship the copies and all of that. Um, so, so yeah, there’s a lot that’s going on there that is heavy on labor and so that just, um, incurs costs. Um, and of course none of that is what the author is also investing. So if you want deep feedback on your manuscript, that often doesn’t come from the publisher. It would come from a freelance developmental editor, um, somebody like myself, uh, or you know, my freelance colleagues. Um, and that money would come out of the author’s pocket usually. Um, and that could cost thousands of dollars, um, depending on sort of the level of feedback you’re looking for and how experienced of an editor you want and all of that. Um, there are also some costs associated with, um, the, you know, if you want images in your book, um, do you need to purchase the permission to reprint those images from whoever owns the rights? Um, if you want tables and diagrams, those have to be professionally drawn. Um, you might have a mockup, but then somebody’s going to have to draw that and make it look good enough to be in the book. So you might pay somebody to do that. Your publisher might hire someone to do that or have someone internal do that. They might pass that cost along to you. Um, since that’s sort of a choice you’ve made to include that in your book. Um, if you are citing, um, copyright protected material, you often need permission depending on how you’re using it. Um, that’s another thing the author is often expected to cover. Um, and then open access costs. Some publishers, you know, have, uh, infrastructure in place and they cover the cost of the open access. And when I say they cover the cost, they’re getting a grant or a subsidy or something to be able to do that. Um, um, but some will ask the author to pay a subvention, um, to, in order to make it possible to give the book away for free, essentially, thus, you know, reducing the revenue that might be expected from the book. Um, so, so i, I don’t know if that even covers everything that you asked about, but those are some of the costs that go into making a book and some of which are born by the author, some by the publisher.

Emily (30:07): Well, for example, in one of the later chapters of your book, you mentioned creating the index and you recommended yes, getting a professional to do that. That was something I was like, I never would’ve thought that was something that really would require like to do it. Well, it would require a professional. And so, and again, that’s a kind of cost I think you mentioned would probably be on the author most likely. Yes. So I was just kind wondering in general. Yeah, I mean you answered that very well. Thank you so much because it’s a little bit mind blowing just as a reader to understand all the different, um, people and elements that go into the production of a book.

Laura (30:39): Yeah, yeah. So the index thing, indexing thing is a great point. So yes, while presses often do cover a copy editor and a proof, not a proofreader, they’ll cover a copy editor. They will ask the author to proofread the proofs, the typeset proofs, and then the author might decide they wanna hire a professional proofreader or they might just do it themselves to make sure there’s no errors. Um, but the index is almost never covered by the publisher. It is something you can negotiate sometimes, again, if you have like an attractive project and they’re the publisher’s trying to get you to sign with them, um, sometimes they will cover it or um, charge it against your royalties. Um, but often you do, the author does need to provide the index, which again, you can DIY it and you get what you pay for kind of, um, or you can pay a professional indexer, which could cost a thousand dollars or more. Um, yeah, so it’s an investment the author makes in hoping it just makes her a better book product that people will use and cite and all those things we want for our books.

Emily (31:41): And I believe I also read in your book that sometimes this is what an advance is used for. Like the author might try to negotiate for an advance knowing that those are, there are cost coming down the line that they can use in advance to cover. It’s very different from the way I think of an advance, like in a, you know, larger household name publisher kind of situation. Um, and maybe that’s like just naive of me just not understanding much about the publication process. So I am getting the impression that we’re not making a living off of these books <laugh> maybe until you’ve published one every year for your entire career, maybe that layered by then you would have enough. Um, so given that, um, if authors are not really making that much money, you know, maybe hundreds or few thousands of dollars, um, per year directly from their books, how are they able to use those books to leverage into their careers, to earning more money, advancing their career in other ways? How does the books serve them in a, a less direct monetary way?

Laura (32:37): Yeah, I love this question because this is really what it’s about for scholarly books. It’s the book itself is an investment of labor, of time, of possibly money, um, that you’re hoping will pay off in some other arena, not necessarily directly through, you know, your royalties or in advance. And I do wanna say there’s a little sidebar, like commercial publishing is not that much more lucrative. Yes, we know about the celebrities who get the six figure advances or more, um, but most people who are writers who are just, you know, writing trade books also have another job. Like they’re not making their complete income off of writing their books. Much like academics who, you know, often if they’re writing academic books have an academic position, um, where they’re making some a salary, you know, that is their main source of income. And so the investment of writing an ac academic book is often for that job. It’s, you might need to write a book in order to um, you know, pass your three year review or go up for tenure. Um, a book might be an expectation in your field, so you’re not writing the book ’cause you’re gonna make money on the book, you’re writing the book because you hope you can keep your job, um, as a part of having published that book. Um, and you know, I’ve worked with authors who already have tenure but are wanna go up for full professor, which is a significant, um, raise, uh, in income, you know, in their salary and they can use the book toward that. So they see the investment of the book as paying off indirectly in that other way. Um, there’s also, um, you know, other sort of financial opportunities that could come from having written a book. So if you are invited to give talks based on your research, um, you know, giving talks at universities doesn’t always pay that much. It sort of depends on how in demand you are and, and how much funding those universities have to pay speakers. But if you have research that is applicable in industry or policy, um, or places that have kind of other kinds of funding, you can command more money than you ever would make from the book itself, um, in speaker’s fees, um, or consulting fees or things like that. So, um, you can sort of think of the book as a strategic investment in your reputation and your platform that then would allow you to command higher fees in other venues.

Emily (35:14): Yeah, I spoke with, uh, an author recently, actually, she was self-published, um, who described her book as like a business card, like going out into the world in front of her and opportunities come back to her because people are reading and using the book, right? So it’s not necessarily about that money that’s made directly. That’s nice, that helps. But as you said, there’s much more opportunity could be depending on, on the subject of the book on the backend through these other mechanisms. Um, but yeah, thank you for giving us that like wider picture of like why people would go through this process, which clearly is very time consuming and, and very full of labor and, and not, um, immediately seeing much ROI financially from it. Um, yeah, that’s great. Yeah.

Laura (35:55): Yeah. And I’ll say, uh, you know, many scholars, intellectuals, you know, they just have an intrinsic desire to share their knowledge and what they have found and what they’ve spent these years studying and discovering and concluding. Um, so I would say the majority of people I work with are, the money’s a bonus, you know, but what they’re really trying to do is just like, get the work out there. Um, and the book is the way they do that.

Emily (36:20): I’m wondering, do you ever work with people who are not academics? Like I sometimes hear people describe themselves as like independent scholars or something like that. Like are, would they still be a type of author who would publish with Yes. Scholarly process?

Laura (36:33): Yes, absolutely. I do work with many, um, independent scholars, people who have know, retired from academic careers or, um, just decided not to pursue one for whatever reason. Um, I would say, and those are the people who are sort of the most, I intrinsically motivated to share the work, um, because yeah, like what’s the gain for them? They’re not really getting paid to write the book, getting paid much. Um, and, and any payoff from it would come like later down the road. So, um, I, you know, I have many clients who are in that position. I will say it’s, it’s, you may have a bit less to invest in the book, you know, if you don’t have funding from a university, uh, you know, a research grant or something like that. Um, so, uh, yet you, everyone has to sort of make their own calculation of what it’s worth to them to invest in the book upfront.

Dr. Laura Portwood-Stacer’s Contact Information

Emily (37:29): I see. Well, Laura, this interview has been so insightful. I really appreciate you coming on the podcast and letting us know, um, all that you’ve learned and all that you’ve experienced through this publishing process. Would you please let people know how they can get in touch with you if they’d like to follow up?

Laura (37:44): Yeah, so I have a weekly newsletter, um, that’s probably the, the easiest place to find me. It’s the manuscript works newsletter. If you go to newsletter.manuscriptworks.com, um, you can get that, that shares lots of knowledge about scholarly book publishing and also some, you know, brief announcements of programs that I offer and um, ways that I support authors. Um, yeah, so that’s probably the best place to find me, but, uh, my more general home on the internet is just manuscriptworks.com.

Best Financial Advice for Another Early-Career PhD

Emily (38:14): Excellent. And I’d like to conclude with the question that I ask all of my guests, which is, what is your best financial advice for an early career PhD grad student, someone recently out of grad school or a postdoc? And that could be something that we’ve touched on in the course of this interview, or it could be something completely new

Laura (38:30): To understand the publishing ecosystem and where the money flows in and where it flows out and how much is gonna flow to you and be realistic about how that all works. Um, so I would not expect, I would not treat a book as, uh, a direct financial investment. You know, it may be a financial drain in many ways, but you think about the sort of broader context and, and what it might do for you.

Emily (38:54): Very good. I really think we’ve either done that in this interview or given people a really good head start on that process in the course of the interview. So Laura, again, thank you so much for your time. Thank you for agreeing to come on and um, I look forward to talking to you again soon.

Laura (39:06): Yeah, thank you so much for having me.

Outtro

Emily (39:13): Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! Nothing you hear on this podcast should be taken as financial, tax, or legal advice for any individual. The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by Dr. Lourdes Bobbio and show notes creation by Dr. Jill Hoffman.

Navigating Grad Student Finances While Undocumented

February 5, 2024 by Jill Hoffman Leave a Comment

In this episode, Emily interviews Dr. Ana Romero Morales, a counseling psychology PhD and a financial coach through Brewing Dinero. Ana specializes in undocumented people and mix-documentation families, having gone through undergrad and graduate school as an undocumented student herself. Emily and Ana deep-dive into how documentation status affects graduate school funding and the considerations prospective graduate students should have during application and admissions seasons. They also list underutilized resources available on campus to help all graduate students balance their budgets. Ana also cautions financial coaches and content creators about knowing the boundaries of their expertise and when clients and audiences should be referred for professional mental health counseling.

Links mentioned in the Episode

  • PF for PhDs Tax Workshops (Sponsored) 
  • PF for PhDs Tax Workshops (Individual Purchase)
  • Dr. Ana Romero Morales’ Instagram
  • PF for PhDs Subscribe to Mailing List
  • PF for PhDs Podcast Hub
Navigating Grad Student Finances While Undocumented

Teaser

Ana (00:00): And so I think that by the time I got to grad school, it was a different experience. Like I knew exactly how to talk about my situation, how to ask for money. By then, I knew that universities have money somewhere, somewhere there’s a pocket of money that they can dip into to help you.

Introduction

Emily (00:20): Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

Emily (00:49): This is Season 17, Episode 3, and today my guest is Dr. Ana Romero Morales, a counseling psychology PhD and a financial coach through Brewing Dinero. Ana specializes in undocumented people and mix-documentation families, having gone through undergrad and graduate school as an undocumented student herself. Ana and I deep-dive into how documentation status affects graduate school funding and the considerations prospective graduate students should have during application and admissions seasons. We also list underutilized resources available on campus to help all graduate students balance their budgets. Ana cautions financial coaches and content creators about knowing the boundaries of their expertise and when clients and audiences should be referred for professional mental health counseling.

Emily (01:41): The tax year 2023 version of my tax return preparation workshop, How to Complete Your PhD Trainee Tax Return (and Understand It, Too!), is now available! This pre-recorded educational workshop explains how to identify, calculate, and report your higher education-related income and expenses on your federal tax return. Whether you are a graduate student, postdoc, or postbac, domestic or international, there is a version of this workshop designed just for you. I do license these workshops to universities, but in the case that yours declines your request for sponsorship, you can purchase the appropriate version as an individual. Go to PFforPhDs.com/taxreturnworkshop/ to read more details and purchase the workshop. You can find the show notes for this episode at PFforPhDs.com/s17e3/. Without further ado, here’s my interview with Dr. Ana Romero Morales.

Will You Please Introduce Yourself Further?

Emily (02:48): I am delighted to have joining me on the podcast today, Dr. Ana Romero Morales. She has a PhD in counseling psychology and also works serving in the financial area as well as a side hustle. And her brand is called Brewing Dinero. I actually met Ana at FinCon this past October in 2023, and we ran into each other just about at the very tail end of the conference, the last event the last night, and I just knew we had to talk further the podcast. So that is what we’re bringing to you today. And Ana, thank you so much for joining me. Will you please introduce yourself a little bit further for the audience?

Ana (03:21): Thank you so much. Yes, I’m very happy that as I was running to the bathrooms to, you know, catch myself before I peed myself, that we got a chance to, to meet one another. As you said I have a PhD in counseling psychology and my biggest area of focus is working with undocumented and mixed status families. And similarly in my side hustle, I actually started Brewing Dinero with the goal of increasing bilingual financial education specific to the first generation undocumented and mixed status communities. So definitely that’s my, my population of passion.

Ethical Boundaries: Personal Finance and Mental Health

Emily (04:05): Excellent. I know that’s gonna resonate with like so many of the listeners. Some of them may be undocumented, but a lot of them are gonna be first generation for sure. So I’m really glad to have you on for this interview. And so I was really curious because of your background in psychology and understanding mental health, I was wondering how you react or how you respond when you see financial people like me delving into like talking about money mindset or like this other kind of like mental or emotional areas of money. Like how do you, how do you think that we’re doing with that? Or how do you react or how would you how would you present it if you were doing it?

Ana (04:43): Yeah, so I think it’s true what, what they say. And when I was studying in college and trying to figure out what I wanted to do with my life, that like psychology is in everything. And I think one of the great things about social media is that now we are able to reach a wider audience and talk about subjects that maybe back in the day you would only ever hear in the classroom or if you were someone who went to therapy, you would get exposed to to the language um and understanding of, of mental health. And even nowadays, there’s so many books with very catchy phrases that I remember my sister told me about and she and I was like, yes, this is all psychology, that it’s absolutely all psychology. And same thing in the financial world. I think it’s wonderful to see all of this financial content talking about money, mindset being positive and, and thinking positive about money and working through financial trauma and also at the same time as someone who went through many, many years of schooling and ethics and all of that sometimes I wonder also the other side of it, if anyone can call themselves a counselor or anyone can call themselves a trauma specialist. And I think about it from like an ethical standpoint of like, well, what if the people you’re working with truly have trauma or truly need something that you can’t provide? Which is understandable, right? Like if you have no educational background, I wouldn’t expect you to. But sometimes when people are uninformed about the difference between a psychologist, a therapist, a counselor and someone online, it gets very blurry and very messy. And so I think in some ways I’ve seen it done well where people are very much clear at the beginning like, I am a financial counselor, this is what I do. I talk about money and how it affects your life and how we can budget and pay off debt and all of that. And if there is any mental health concerns, here are resources or here’s where I can send you to to make sure that one, we’re we’re being thoughtful, that we’re being transparent, but also that we’re making sure that we’re not taking advantage of people who have maybe no knowledge of that. And so I think that’s my only thing. It’s wonderful in many ways. And also we have to be very mindful of the mental health implications that can have for, for the populations that we’re working with. Mm-Hmm.

Emily (07:22): And I’m thinking about this now, from the perspective of a consumer of this kind of information, you have to be mindful that when you see someone on social media or listen to a podcast like this, like the person is talking like one to many. And there are some issues that are gonna be better tackled by a professional, as you said, in a one-on-one setting. And so as a consumer, you just have to be aware like, is this something that can be solved by this person who has no awareness of who I am at all? Or do I really need to seek out a different resource here? Because there’s a lot more going on than just money stuff.

Ana (07:54): Yeah. And I think that’s hard, right? ’cause It’s like the responsibility isn’t on one versus the other, right? You, you wanna be a mindful, you know, informed consumer and you also wanna be the person who’s providing a service where you are also mindful in understanding of what you’re offering and being able to express that. ’cause I mean, it’s like even in therapy when I work with people, sometimes people hate the conversation of mindfulness and, and maybe for them it’s more therapeutic to go to church or to talk to their pastor or to go to the gym, right? And so there’s so many different avenues of how people find care. Same thing in the financial world, like maybe you don’t wanna talk to a financial advisor, maybe you do wanna work with a coach and they provide the thing that you need, which is wonderful. And then as the coach being aware of like, when is what I’m offering not enough for this person? Or do they, could it be harmful to them if they need something that greater than what I can offer?

Financial Trauma

Emily (08:59): What are some of those areas like you mentioned earlier, like financial trauma, like what are some areas where it might seem like it’s presenting as like a money issue, but it’s really something else that needs to be worked on in one of those professional one-to-one scenarios. Can you give us an example or two there?

Ana (09:18): Sure. for financial trauma, like I could, you know, I see a lot of people who work on maybe their debt, right? Or like, they are so triggered at, you know, the mail coming in with all these, you know, credit card companies or debt collection that are coming after you and you just can’t handle it, right? You’re avoiding it, it’s triggering, you’re losing sleep over it. And maybe you have a coach who’s walking you through that, okay, let’s work through it. Let’s go one at a time with each of the things that are being mailed to you. Let’s look at writing a letter to the debt collector, right? And so they’re walking you through those things and now you’re noticing like, great, my sleep is, is better, my stress levels are down. I’m not as anxious about it. I’ve learned some techniques on how to manage that anxiety um wonderful. That is very different where you’re going through that stuff and you’re like, well, no, I’m still having a lot of triggers, or I’m, I’m now deeply depressed. And like, it’s not just that I can’t open the envelopes, it’s that I’m also not eating and I’m also not going to work and I’m also not, you know, different aspects of your life are being impacted by whatever trauma you’re experiencing. And that is something where like, as the money person, sure I’m helping with the money part, but all the other things seem to require a much more intensive intervention by like a therapist or, or someone else. So, you know, like it’s knowing where that, where that boundary starts to shift.

The Financial and Educational Experiences of an Undocumented Student

Emily (10:58): Yeah. Awesome. Thank you so much for that like example. Okay, I want to go now to your special area of interest, undocumented, mixed, documented families and, you know, kind of your own personal journey in this area as well. So back when you were undocumented how, how did finances like strike you? I, I bet it was intimidating in a lot of different ways. And what were some resources that like you availed yourself of at the time and then may maybe also someones that you didn’t know that you could have accessed then, but you now tell people in your community, oh, don’t forget, you still have access to this even though you’re undocumented.

Ana (11:36): Yeah. So I found out I was undocumented when I was 17. I am first in my family to go to college, so I was listening to my friends and teachers saying like, make sure you apply to FAFSA. FAFSA is free money, financial aid. And I’m like, great, I’m gonna do that. And then the time came and I found out like, well actually I can’t apply because I don’t have a social security number. And back then in 2007, very different from now there were no resources. People didn’t talk about being undocumented. It was very much just like finances, like a very taboo subject. You don’t talk about it. And so I didn’t have the language at that point to express what I was experiencing and how to ask for help. And so I ended up going to the school that accepted me, didn’t ask me for any documentation like other schools did out of fear. And I felt like I was, you know, trying to keep my head above water for four years, just trying to figure out the financial aid system and coming to terms with like that they too did not know anything. Like I remember I got a research grant that I applied for with the help of a professor and I couldn’t get any of the money because they didn’t know how to give it to me without having documentation. I mean, I technically still used it ’cause they used it to pay for other things. So it was one of those things where like, I don’t know what I’m doing. The institution doesn’t know how to help me. And so I think I, I think just like other people who have like their financial experiences, like I just learned that like money exists, but it’s not there for me. And so I need to find other ways of making money, other ways of financing my education. And so I learned from other people who are undocumented. I’m like, how did you do this? And they’re like, oh, like, you get a scholarship or you talk to the professors in this way using this jargon to sort of get the point across without necessarily exposing yourself. And so I think that by the time I got to grad school, it was a different experience. Like I knew exactly how to talk about my situation, how to ask for money. By then I knew that universities have money somewhere, somewhere there’s a pocket of money that they can dip into to help you if they want to. So I think, you know, it, it’s a very difficult system just like any other one. But when you’re undocumented, there’s a lot more like, you know, personal things that also come into play. So now after going through a master’s program and then going through a PhD program, like now I’m very aware of how resources work, especially in the California system. So when I work with grad students who have come to me being like, I’m undocumented. I don’t know how I’m gonna pay for grad school. I’m like, all right, let’s sit down. Let’s look at scholarships, grants, fellowships that don’t require status, but also how do we talk to your department in a way that can help you maybe access money that’s, there might be somewhere that someone’s willing, willing to give you. So I think it’s been, it’s been a learning curve and policies are constantly changing. So I think that’s also something where I have to keep myself up to date with, with things both at a federal, at a state and at a local level.

Fellowships, Scholarships, and Employment for Undocumented and DACA Students

Emily (15:07): Well this is so fascinating to me ’cause you may be aware I’m a total like tax nerd and so talking about like different types of income sources is like really, really up my alley. So I really, I would love to drill down on this a little bit more. So what I’m hearing is that some fellowships and scholarships don’t require you to have documentation. Is that right?

Ana (15:25): Yes.

Emily (15:25): At both at the undergraduate and at the graduate level.

Ana (15:28): Mm-Hmm, .

Emily (15:30): What about employment?

Ana (15:33): Mm-Hmm.

Emily (15:33): And maybe this is different with like DACA versus maybe when you were first going through this. Can you explain about like, would someone is undocumented be able to get like a research assistantship at the graduate level?

Ana (15:44): Sure. So yes, if you are a DACA recipient, which means you are eligible to get a driver’s license and a social security number specific to work that is very different, right? That’s, I always tell people like, if you have DACA, you just gotta go about it like you’re a citizen where you don’t even have to disclose that you’re, you’re someone who has DACA. You just simply provide your social security number. You know, and so you’re fine. The, the one thing that gets tricky with DACA is that you are reapplying to that every two years. So like you as the person have to be on top of it of like, I gotta make sure I apply for the renewal of my DACA in time. So there’s no overlap between your DACA expires and now you, you know, have to tell your job you can’t work or grant or however that works in your department. So that’s one thing to consider. If you’re undocumented, you don’t have a social security number, but the IRS doesn’t care what your status is. They just want their taxes paid. So the IRS created the individual tax identification number, it’s ITIN for short. And that is what people can use to basically file their taxes every year because the IRS knows that people are working somehow whether that’s under the table or however you wanna call it, the IRS still wants their cut. And so I talk to students about using their ITIN to sort of see if the university or your professor advisor is willing to hire you as almost like a contractor, right? Maybe the grant allows for that to happen, right? I think it gets very nitty gritty ’cause every program is willing to do these things or not. Um so I think it, it’s very much an individual basis of whether, you know, if your professor’s like I have this pot of money, I have to, of course, you know, people above me need to know who’s it going to, how is it being filed? And so if you have a tax, your your ITIN, great, I contracted you to do this job for me and all I need is your ITIN number to be able to do that. So that’s always an option that I tell students to talk to their advisors to, to see if that’s one way. I know other people have been like, we have this extra money that we can use for whatever, I’m gonna give it to you as a stipend or a scholarship or a grant, right? It’s not something that you don’t have to pay back in order to have.

Emily (18:24): So it sounds like there’s a question mark there around will this person be able to be straight up W2 employed? That’s gonna depend on maybe the state, the university, different policies if they’re fully, fully undocumented. But maybe there’s this contractor like work around. I, I’m more, I’m more interested I guess I, I know the taxes have to be paid . I’m more interested on the, like how does the university handle this like side of things.

Ana (18:49): Yeah.

Emily (18:49): But I totally agree with you. I’ve seen that flexibility too of like, oh okay. Like for instance, when people ask for, when they negotiate for an increase in stipend, a lot of times their base stipend might be coming from a research assistantship and the university doesn’t have flexibility in the department or whatever, doesn’t have flexibility in how much they’re gonna pay there. But they might say, oh, we have this other pot of money that we have freedom to use in however we want. We’ll give you a little top up fellowship, you know, on top of that employee situation. And so I can totally see how funds could be, oh this student has a special situation, we have a little bit of flexibility on our side, we’re gonna work with them and get them the money that they need to be here. Even if it’s not the regular course of action we would do for other people.

Ana (19:29): Yeah. And I think, yeah, and it’s hard because I think now with policies changing from 2016, right? DACA is something that students who are entering the education system or who might wanna go to grad school, DACA may not be an option. And so I think it’s, it’s forced people to be creative and try to find different ways to help students. So yeah, it’s unfortunate ’cause if you’re undocumented you can’t be a W2 employee, right? ’cause the university can’t hire you in that category. But there’s so many other places or other ways that you can do it. I mean I know at the undergraduate level they have in California College Corps, which is like a program you apply to, you’re a volunteer for like nonprofits or schools or whatever, but you get paid for that service. And so you know where there’s a will, there’s a way, right? If people really want to help, they figure out other ways of doing it. And I know every state is different on how they are about those things. California has been doing it for quite a while. So I think they have more flexibility with that versus other states or other programs.

Commercial

Emily (20:39): Emily here for a brief interlude! Tax season is in full swing, and the best place to go for information tailored to you as a grad student, postdoc, or postbac, is PFforPhDs.com/tax/. From that page I have linked to all of my free tax resources, many of which I have updated for this tax year. On that page you will find podcast episodes, videos, and articles on all kinds of tax topics relevant to PhDs and PhDs-to-be. There are also opportunities to join the Personal Finance for PhDs mailing list to receive PDF summaries and spreadsheets that you can work with. Again, you can find all of these free resources linked from PFforPhDs.com/tax/. Now back to the interview.

Deciding Which Universities to Apply for as an Undocumented or DACA Student

Emily (21:31): Yeah, just one more follow-up question on that point. I don’t know if you, you probably sometimes work with like prospective graduate students, people who are choosing what schools to apply to deciding where they wanna attend. Do you, are you able to advise them at all about like, oh this state’s, like you said, California more experience in this area, they’re gonna be more familiar with your situation. Maybe definitely apply to a school or two there to give you some options. But do you give them guidance on like state level, you know, kind of decision making?

Ana (21:56): Yeah, I think one of the things I have found is that, you know, when I was in, when I was applying for grad school, a lot of people would be like, you need to go to the state, you know, in the middle of nowhere who have so much more extra funding who can give you the full ride. And I think that’s great, right? If that’s an option that you have. Wonderful. And also as someone who works with undocumented people or DACA recipients and who has, you know, gone through that phase, I’m like sometimes living in those states right there, there’s a sense of safety, there’s a sense of like there’s no community there. If the school’s not informed about DACA and things like that. Like is it worth it to you to have to be the person to educate and figure that out or stay in California or any other states, you know, where they do have a system already in place because grad school is already so hard and so draining that sometimes, you know, the money is important but also other aspects. And so I help people in that sense. Like I tr- I definitely when I applied to Boston, I had to be, I had to talk to financial aid, be like, you know, in-state tuition out-of-state tuition, do you guys have the DREAM Act? Which is the financial aid program for undocumented students. You know, I going through, especially if their website is not up to date with that information, right? You have to be the one to be in the position to educate other people. So it’s really going through all those multiple aspects of deciding on grad school, not just the, you know, the advisor that you want and and the degree that you want and area study, but all the other dimensions of your wellbeing as well.

Emily (23:43): Absolutely. So you would say this is something that has to come up once they’ve given me the go ahead, they’ve admitted you, then you bring up, hey, are you gonna be able to accommodate me in this way, in that way this is what my status is. Those conversations have to be had before decision day it sounds like.

Ana (23:58): Yeah, so definitely when I, you know, and everyone’s different, right? ’cause In California I feel like it’s, it’s a less taboo to talk about immigration status. But I know some people are not comfortable and so I’m like okay, you don’t have to put it in your letter, you don’t have to write it in your personal statement that you’re undocumented. But definitely when it comes time to talk about the financial aspect of your, of five t- plus years of being here at this university, like you want to know where they’re at with helping you. Maybe they don’t know much but they’re so willing to figure it out with you and help you. Great. Versus other universities who are like, yeah, no, we’re not gonna do anything with that. You can come here but we’re not able to give you any, you know, financial assistance. Then that’s a whole different conversation.

Student Loans for Undocumented and DACA Students

Emily (24:47): That makes sense. And one thing you haven’t mentioned so far is student loans. So I’m wondering, are student loans at the federal, let’s take federal and private separately. Is that not an option for people who are undocumented? Is it an option?

Ana (25:00): Yeah.

Emily (25:00): For people who are DACA recipients?

Ana (25:02): So from what I know, no, like, you know, federal student loans are not accessible. I think it’s only been a couple of years where like there are a lot of companies out there who provide private loans, which of course come with its own stuff, right? Higher interest rates, all of that stuff. I do know that at some universities, again California ’cause that’s where I’m mostly I went to schools. Some universities create their own loan system to give to undocumented or DACA recipient students. Not everywhere and not, I think at my school they had it at the undergraduate level, but they didn’t have it for grad students at that point. So no, like the, the loan situation tends to be more private based. You can definitely apply for the DREAM Act and I think it’s dependent on state’s, not nationwide. So it’s like fafsa but for undocumented students where you can apply and again that’s very state specific. ’cause If you went to school in California, you know you went through high school there, right? They have way more options for you as an in-state student versus someone else coming from a different state and coming to study in California.

Emily (26:27): I see. Yeah. I’m just, I’m trying to think about the safety uh net or the safety release valve that is student loans. Like for, especially for people who you know, maybe they’re first generation, they don’t have family that can help them out financially. If they get into a tough situation, where can they turn? Right? Okay, the stipend isn’t sufficient. What’s the next ? What’s the backup plan there? If it’s not your family, is it private student loans? You know, it’s just something you have to think through when you are looking at a stipend that is borderline enough to support you. You know, like where’s that, where’s that emergency fund gonna come from? Where’s, where’s that backup?

Ana (27:01): Yeah. And I think, you know, I think one of the great things is that even though you can’t access like federal student loans at the state level, there is a lot of money that is there that is sometimes untapped. Because again, if you’re undocumented and you don’t know and the people around you aren’t educating you on those things, how are you gonna know? But there is a lot of, at least at the state funded level, a lot of financial aid that can, that you can have access to. And you never know, right? Some universities have private scholarships, donors money that doesn’t have, you know, as many like rules about how they can use it. And I think that can also help your advisor, right? If your, if your advisor might have access to different pockets of money or know of organizations who can help, right? I think it’s just a matter of asking and and the other people willing to kind of do some of that work with you.

Resources for Undocumented and DACA Graduate Students

Emily (28:02): Well that was fascinating, thank you so much for that deep dive there. Were there any other like resources that you wanted to point out to pe- let’s say graduate students who are undocumented?

Ana (28:14): Yeah so I think especially when you’re in grad school, I know there’s often this like mantra of like your PhD should be fully covered and everything, which I totally agree. But I also tell people maybe your first year is covered and then the second year about figuring out where else you can get the money from and it’s just like undergrad scholarships. Like there’s money everywhere. I think it’s just about sitting and dedicating yourself to even applying to the $500 scholarship or the, you know, however much amount. But yeah, a lot of graduate student programs have their own like databases where they have scholarships, grants, fellowships. I highly always tell people like look through your databases. You never know what’s in there. And especially if you’re undocumented, usually they have filters where you can kind of put citizenship as not a requirement. Um so I can funnel it down at the same time I’ve had the experience where I look at scholarships or fellowships or grants and they don’t really say, or they say you’re a US resident, which could mean you are a US citizen or it can mean you’ve lived in the United States right? And have a US address. And so that’s enough to, that’s enough to apply. The same thing with bank accounts. Sometimes like they say like you have to be a US resident to open a high yield savings account. I always have to call and be like, what do you mean by that? Because that doesn’t tell me anything.

Emily (29:46): I think that’s great advice to always that that term resident is so difficult and it means different things in different context. So absolutely just asking that question ’cause you never wanna rule yourself out, right? At least ask and let them tell you. No,

Ana (29:56): Exactly. I will say, ’cause I was just remembering I think if you are undocumented or a DACA student, especially for student loan access, you can access a wider net. But I think with that you have to have someone who’s willing to co like be the co-signer. And the co-signer has to be a US citizen or permanent residence. So I always tell people that’s an option. But again, it’s a very delicate one. Like you have to have someone that you trust who’s willing to go to bat for you, who has a good credit score and has the income guidelines, right. And all the other stuff. But I even tell people like especially at the university level, go to financial aid, you never know what financial aid has to offer you as an undocumented or DACA recipient. They might know of someone, of someone of someone who found some way to get a student fully funded at a graduate level. I’ve heard of it. And so everyone’s situation is slightly different when it comes to status, but there might be something in there that can help.

Emily (31:05): Yeah, definitely. I think that’s the same kind of guidelines that are for international students. So like it’s not impossible to get a student loan, it’s just more difficult if you, your family’s not in the US you know, et cetera.

Ana (31:17): Yeah. So I mean if if they have a whole system for international students right there ha- there is definitely some for students who’ve been living here forever.

Emily (31:28): Yes. Okay. Let’s talk more now about university level resources that you’ve either used yourself or that you’ve just observed other grad students using that can help them. Let’s see. There’s the phrase like sometimes there’s more month than money, right? And so how can they get to the end of that month using some resources that the university provides?

Ana (31:49): Yes. I think one of the great things that I’m always reminded every time I’ve left the university, whether was a undergrad and then my master’s program and then now my PhD is yes. How much resources there are there that you can access that people don’t think about. So when I was in grad school, I swear there was food every day of the week somewhere on campus. It wasn’t systematically. I think nowadays I have apps where like students can literally look up where these places are. When I lived in the graduate student dorms, like I had my schedule on like Monday they have bagels in the dorms. Wednesdays they have coffee and bagels at the graduate student lounge. And in between was I would often go to the graduate student resource center to do homework there. I worked there for a while so I knew they had coffee, I knew they had snacks. We had a writer’s room where the whole point was for you to go and be in absolute silence working on your dissertation or your thesis. And they always had snacks and coffee available or tea. And so I think for me, sure it wasn’t a full meal, but it saved some money to go and be able to get these free snacks. ’cause I lived in a town that was very expensive in California. Food banks, I think grad, you know, I think grad students often feel guilty or feel like they can’t use the food bank because food bank, you know, they’re like, well I have my tuition paid for and maybe I’m getting you know, some extra stipend as a ta. But I’m like, that doesn’t, that isn’t enough. Like you still are probably not making enough. And so I always encourage students, I’m like, there’s no shame in going to the food bank at all. If anything, that’s where I got actual vegetables and produce and I would go to the food bank. So there, that’s one avenue. I used a lot of like the gym resources, like sure we all should get our heart rates up and work out, but like using the showers, using their amenities. Like you’re, I always tell people I’m like, you’re technically paying for this, right? Like you’re paying for tu- tuition fees and res life fees. I’m like, you’ve, you are paying into all these things that you have at university. Like use ’em to your benefit. So those were ones that I really, that I think most people don’t think about when they think about being a student of like all these different resources. I remember they would have these like events where they would pay you. Like if you came and wrote a part of your dissertation, they would pay you for that. At the end I was like, that’s amazing. You have to write your dissertation so why not get paid for it at the end. So yeah, just really look at what your graduate, you know, student admissions or the graduate student group resource would just have all these benefits that sometimes people didn’t use, right? Parents, they were childcare grants. I used to work for the non-traditional student resource center and we would literally put on events where we would provide free childcare and make it so it, the point was for parents to other parents to get together and get to know one another. But sometimes parents would be like, instead of going to Chili’s to hang out with other parents, I’m gonna go study or I’m gonna go run errands while I know my kid is being watched, you know, by staff at the university. So you know, there, there’s all these little things, right? If you need, if you have to take a test and you need someone to watch your kid, there are grants for that. So I think wherever you are in your life when you’re in grad school, there’s definitely resources that can be geared towards your needs.

Emily (35:37): And I would say there’s another kind of secondary benefit, well you kind of just mentioned it with like the parent example of when you’re going out to these seminars or hanging out in this lounge or whatever is like you’re meeting other graduate students. You’re getting each know them, you’re networking. Like if you’re just in your lab or your office like all day every day and you never go out of it like how many people are you gonna meet? That’s not really maximizing the professional development and also personal development aspects of your graduate student experience. So I would say just like get into all the listservs, like all the groups that are relevant to you that are of interest to you. If they have food at their events, it’s a bonus. But just like get out there and do things and and meet people. This is kind of, I’m speaking to myself a little bit ’cause this is one of my re- regrets from graduate school is just like keeping my head down a little bit too much when I should have been cultivating relationships, which is really one of your main takeaways out of graduate school is the people that you’ve been around during that time.

Ana (36:29): Yeah. And, and it’s very easy to be like, I’m a psychology student. I only know people in my department, which is like probably five or six people right in your year or years above you. And then yeah, you forget like, oh yeah, there’s an engineering school and there’s a law school and there’s all these other departments of students who are all going through this experience of grad school together. Which is why I loved working for graduate admissions and, and creating events for grad students. ’cause That was the one way I was like, wow, I get to meet and see other people from different places who talk about different things other than mental health. And so and those are have been great relationships where I can, you know, I follow them on social media and kind of see that the work they still, you know, are doing either still in their program or outside of their program.

Emily (37:21): One more benefit I wanted to mention is checking out your health insurance slash dental vision, whatever kind of insurances you get and making sure that you are maximizing all of those. Like maybe they have like some preventative, you know, health kind of bonuses or whatever. I remember I got paid for, like if I reported that I ate like a certain amount of vegetables, like every week I got paid like a dollar or two or something per week at the end of the year. It actually like literally was one of the ways that I got like vegetables into like a habit in my, in my diet. But I Do you have any examples like that of like insurance related benefits?

Ana (37:58): Oh my god. I had the best insurance while I was in grad school when I was a teaching assistant and working for the university. I had my health insurance covered and because of the town I lived in they had everything on campus. Like I’d go to the dentist on campus, the eye doctor on campus. I had all these like body aches and things that I’m pretty sure were stress related, but I went to pt, physical therapy they had massage, you know, like services. Yeah, I had the best healthcare for sure in grad school and it was pretty expensive, so it was nice not to pay for it. So yeah, I think that was a great benefit actually. They also would have someone on campus, I wanna say it’s CalFresh who literally would help students apply for food stamps and things like that. Which again, I’m like, no one thinks about that as a grad student. Sometimes like you hear about that from people who are like have families or you know, are working professionals and I’m like, well we are working too. Maybe we’re just not getting paid as much as other people. So those are all services that I think universities especially just do better about teaching their grad students of like, yeah, you guys probably aren’t making enough and you qualify for food stamps. Let’s help you apply for that so that you’re not surviving off, you know, free pizza or bagels every week and you actually get some like healthy fruits and vegetables.

Emily (39:31): Definitely. And that’s another like state by state one. Mm-Hmm. and it depends on your income type two. So like always investigate in your own state whether this is a benefit. But definitely if there is, if you’re in a state where someone like a halftime employee kind of graduate student would qualify for those kinds of benefits, having a representative on campus, having someone whose job it is to help you walk through that process, that’s an amazing resource and definitely should be offered on the university side if they’re, if they’re paying you so little that you qualify for those benefits sure, let’s help you get those benefits. Right,

Ana (40:00): Exactly. And also like mental health services, you know, gotta throw that in there as someone who provides services of like, you’re often, I think universities tend to again, focus on undergrads and you see a lot of promotion about it, you know, during orientation and things like that. But grad students got their own things too. Grad school is really hard. It can be very isolating in many ways. And so mental health services are free, right? Your tuition and all that pays for it. So I always tell students like, take advantage, like, you know, if you feel like you need to talk to someone or you need to work through something or you just need to like vent to someone who you know, is gonna keep everything confidential, like go see what you know, the mental health services that your school offers.

Emily (40:47): Yeah. Thank you for adding that. Well Ana, this, this interview is just like a treasure trove of information. I’m so glad that you agreed to come on. If someone in the audience is like, oh wow, you would be great to, for me to work with one-on-one, tell me how can they find you?

Ana (41:01): Yep. I am mostly on Instagram @BrewingDinero I am often on there checking out my messages. But yeah, if you’re ever interested in learning more, whether it’s specific to you or someone else’s undocumented position who are DACA recipients interested in grad school or just trying to learn more about what you have access to in the financial world, please feel free to reach out.

Best Financial Advice for Another Early-Career PhD

Emily (41:28): That’s awesome. Let’s end with the question I ask all my guests, which is, what is your best financial advice for another early career PhD? And it could be something that we’ve touched on already in the interview or it could be something completely new.

Ana (41:42): I am always about the mantra now of like, don’t wait until after grad school to start building wealth. I think often we’re in the books trying to get through, trying to write our dissertation and then finally we graduate and we’re like, now what? Now I gotta get a job and do all the adult things. And so I, I always try to tell people like, you know, it’s hard when you have so many competing things, but starting to build wealth early on I think is a great thing to start thinking of. Whether that’s investing very little, but it’s a start to something

Emily (42:19): Absolutely underline, co-sign. Totally. It’s what we’re all about here. I love it. Ana, thank you again so much for volunteering to come on the podcast. I’m so glad that I ran into you at FinCon.

Ana (42:29): Thank you so much.

Outtro

Emily (42:35): Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! Nothing you hear on this podcast should be taken as financial, tax, or legal advice for any individual. The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by Dr. Lourdes Bobbio and show notes creation by Dr. Jill Hoffman.

A Political Economist Explores How to Respond to the Financial Pressures on Graduate Students

January 22, 2024 by Jill Hoffman 1 Comment

In this episode, Emily interviews Michael Dedmon, a PhD candidate in Political Science at Syracuse University and the Director of Research at the National Endowment for Financial Education. Michael’s research focus is in political economy, particularly in how governments respond to economic crises like the Great Recession and the COVID-19 pandemic. Emily asks Michael to share his view of what is happening in academia today as both a graduate student and a person with relevant academic expertise. They discuss how the strong labor market, high inflation, the lack of affordable housing, and constrained state and federal budgets for education and research are putting so much financial pressure on individual graduate students. Michael also explores the avenues for advocacy that are available to graduate students, such as unionization.

Links mentioned in the Episode

  • PF for PhDs Tax Workshops (Sponsored) 
  • PF for PhDs Tax Workshops (Individual Purchase)
  • PF for PhDs Subscribe to Mailing List
  • PF for PhDs Podcast Hub
  • Michael Dedmon Twitter

Teaser

00:00 Michael: Unionization is just one of the ways, right? That graduate students can really sort of band together, right? Really use that solidarity with one another and with graduate students across universities. To really sort of fight for a situation that really helps them reduce their vulnerability, but then also build a good financial sort of basis as they go into their career in academia, which is kind of a separate conversation. But we know that the challenge is right to. To living a financially secure life as an academic, are extremely challenging. So if you sort of start right from a negative as a graduate student, it sets you up for a lot of problems down the road.

Introduction

00:43 Emily: Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs.

01:12 Emily: This is Season 17, Episode 2, and today my guest is Michael Dedmon, a PhD candidate in Political Science at Syracuse University and the Director of Research at the National Endowment for Financial Education. Michael’s research focus is in political economy, particularly in how governments respond to economic crises like the Great Recession and the COVID-19 pandemic. Michael shares his view of what is happening in academia today as both a graduate student and a person with relevant academic expertise. We discuss how the strong labor market, high inflation, the lack of affordable housing, and constrained state and federal budgets for education and research are putting so much financial pressure on individual graduate students. Michael also explores the avenues for advocacy that are available to graduate students, such as unionization.

02:02 Emily: The tax year 2023 version of my tax return preparation workshop, How to Complete Your PhD Trainee Tax Return (and Understand It, Too!), is now available! This pre-recorded educational workshop explains how to identify, calculate, and report your higher education-related income and expenses on your federal tax return. Whether you are a graduate student, postdoc, or postbac, domestic or international, there is a version of this workshop designed just for you. While I do sell these workshops to individuals, I prefer to license them to universities so that the graduate students, postdocs, and postbacs can access them for free. Would you please reach out to your graduate school, graduate student government, postdoc office, international house, fellowship coordinator, etc. to request that they sponsor this workshop for you and your peers? You can find more information about licensing these workshops at P F f o r P h D s dot com slash tax dash workshops. Please pass that page on to the potential sponsor. Thank you so, so much for doing so! You can find the show notes for this episode at PFforPhDs.com/s17e2/. Without further ado, here’s my interview with Michael Dedmon.

Will You Please Introduce Yourself Further?

03:27 Emily: I am delighted to have joining me on the podcast today, Michael Dedmon, he is both a PhD candidate, Syracuse university, and currently an employee with the National Endowment for Financial Education. And he and I met at a conference this past summer, the higher education financial wellness summit, where I was listening to him give a presentation. I said to myself that man has a PhD. And so I approached him afterwards and found out, I was almost right, he’s almost to the PhD,  Um, and yeah, so Michael, I know we’re going to have a fascinating conversation today. I’m really looking forward to it. Would you please introduce yourself a little bit further for the audience? 

04:01 Michael: Absolutely. Well, first, thanks so much for having me. This is really a great opportunity that was totally unanticipated from that particular, uh, presentation. And I’m really thrilled to be here. Uh, well, I guess by way of introducing myself, uh, I’m from Colorado originally. That’s where I live. Currently. Um, I’m a 1st generation college student. Uh, and so by that extension, you know, also very much. So 1st generation PhD student, uh, I started off, uh, studying international relations at the American University of Paris. Uh, and then I studied in an MA in European politics at the European Institute at the London School of economics. Really, I had even gone into that MA level, really kind of wanting to focus on foreign affairs and international relations, but it was really kind of at that sort of stage where I really started to be pulled more in the direction of studying political economy after taking a few years off after the sort of starting with some early career research experience. I started pursuing a PhD in political science at Syracuse University. Where I’m currently a candidate, um, as a graduate student, you know, I got a couple of different, you know, sort of areas of research experience worked at a small research initiative focused mostly on international NGOs. And the Moynihan Institute of global affairs, uh, and then when I was more advanced in the PhD process, sort of started working in this field of financial security and financial education, uh, it started off at a smaller nonprofit in Brooklyn. Where I focused on identifying barriers to financial security for low and moderate income families, mostly in the New York City area and recently joined the National Endowment for financial education earlier this summer as the research director. And and I’m also an adjunct instructor in the political science department at the University of Colorado Colorado Springs. So, sort of maintain my academic connection in that regard. 

Research Interests: Financial Crises, Financial Security, and Financial Education

05:52 Emily: So listeners, what we’re going to do with this interview is take all this fascinating experience and expertise that Michael has and ask him to apply it to the PhD population instead of the populations that he’s been typically studying and working with. Um, and since he has that personal experience being part of that population, I think it’s going to end up being a great conversation. Okay. So you went, uh, over that, you know, your CV a little bit. Is there anything that you’d like to dive in further and tell us more about that’s going to be relevant to our conversation today?

06:21 Michael: Well, I could maybe. Sort of start by talking a little bit about what really brought me sort of out of the academic, you know, sort of world and into this sort of field of financial security and financial education. Um, you know, I could maybe start by talking a little bit about what informs sort of my personal research interests, I guess, uh. You know, starting maybe with my, even my dissertation project and my dissertation work, uh, which is broadly speaking, sort of focused on the politics of economic crisis, specifically the politics of how and when governments choose to intervene to support individuals, families. Businesses really anybody in response to difficult economic times. I’m especially interested in how policy makers and academic experts. And politicians make sense of economic crises, how that sort of, you know, the frames, uh. Narratives the stories, the interventions that they think are necessary, uh, maybe have changed over time, uh, and what the political sort of determination of those stories that they find compelling are, um, my project specifically sort of asked this question in relation to the 2008 financial crisis, uh, and the recent economic consequences of the COVID 19 pandemic. Uh, you know, in 2008, we saw a certain type of discourse around what caused that particular crisis, how government should respond and what types of policies were needed to protect certain groups or certain firms or certain banks or businesses and then ultimately to get the economy back on track and, uh. Really, it was kind of my interest in how governments, how we, as people, how society makes sense of these types of crises and how the really serious consequences that individuals and families, especially people that are already vulnerable, uh, how they experience those crises and how that informs our politics. That’s really kind of what drew me, I think, into this particular field, which I would say is, you know, sort of the field of research and policy and advocacy that’s really focused on trying to understand the barriers that people. Uh, face to living their best financial lives and experiencing economic security and financial well, being, uh, and it’s been a really fulfilling experience. I think, to try to apply my academic interests, uh, both in the sort of policy and advocacy space. And then now, and, and, uh, I would say more of a broader, you know, sort of research, uh area looking at how financial education is just one out of many different ways that we can address economic insecurity and barriers to financial well being.

Financial Journey as a First Generation College Student

08:48 Emily: Of course, I love that working in the field of financial education for a number of years now. It’s so apparent to me in the last few years that there’s so much policy work that needs to be done, um, for us to even get to a point where financial education can be effective and can, it can really help people. So, um, I love that message. Um, would you like to add anything more about your personal journey through this period. 

09:09 Michael: You know, I couldn’t agree more with you as well, just really about seeing financial education really is sort of existing within like an ecosystem, right? Of issues in the ecosystem of problems. Really? Uh, that our society sort of has, uh, is presenting to individuals and families to living their best financial lives. And I’ve definitely really experienced that in myself. Um, you Not just before, you know, being a PhD student and after being a PhD student, or at least, I guess, after being really focused on the coursework, but being a graduate student as well. Um, you know, for me, and my personal sort of finance journey is really informed in a lot of ways by being a 1st generation college student. Uh, you know, could even say seeing, I would say, I guess, the, the sort of financial and economic struggles that, uh, that my parents, I think, experienced not having attained that college education, uh, trying to figure out, I think, how they were going to find their place in a labor market that was. I guess, maybe presenting different kinds of barriers to them being successful. You know, I kind of come from a family, like a lot of 1st generation college students where, you know, the idea of going to college was presented a little bit as a non negotiable. Partly because of how my parents understood their own experience and their own struggles. Um, and then. You know, my academic research interests, uh, are really sort of informed by how I experienced the financial crisis sort of period and in the U.S. and in the advanced industrialized world specifically. I mean, I was still in college. It was junior. Uh, no, I was senior in college, I guess, in 2008. so I sort of graduated in the spring of 2009 into 1 of the worst labor markets, right? That there was, uh, And not really sure exactly sort of how I was going to make my way, like, apply the things I had learned and and really just sort of start my career. It’s part of the reason why I continued on right away by pursuing an M. A. because it seemed. No, like, a lot of us, it seems like an answer to that question of what I was going to spend my time doing when we were looking at such a difficult economic situation. So, even though I was studying something else, and, you know, at the time had kind of, I think I wrote my master’s thesis on the relationship between the European Union and Russia. Which, uh, funnily enough, at the time, a lot of people said it was a very boring topic. Of course, that’s not the case now. Um, but, uh, what really pulled me to toward political economy and trying to think about these issues of, of, uh, financial security and political economy in general is seeing the extent to which the financial crisis created so many difficulties, uh, for people to sort of find financial security after, after that event. And really just being fascinated with the, the political and policy conversation about How we made sense of something like that. How did we sort of understand the fact that the economy had, uh, experienced this shock? How did we make sense of trying to get the economy back to growth? And how did we make sense of the fact that that really didn’t happen right away in most of the advanced industrialized economies?

12:11 Michael: Uh, so that was really, and experiencing that myself, I guess I would say, right? Uh, even coming out with an MA facing a tough labor market, you know, I found myself struggling to pay rent, struggling to sort of figure out, I think, how to. To to get on the career ladder, uh, you know, working a retail job, you know, going back and forth, you know, to different interviews. I have this very, very clear memory of, um. Interviewing for a job, I think is like an office manager at a at a apartment complex and I kind of remember leaving my job at the gap. A little bit early and getting in the car and driving, you know, and then showing up at this apartment complex and interviewing with what had to have been like, 35 or 40 other people, all of us standing there and, you know, uh, you know, press shirts and ties, you know, for like, uh, an entry level office manager job. And I think that that’s, that’s the experience that a lot of people had really just kind of trying to figure out what their place is going to be in a labor market. That was really, really not recovering from the crisis anywhere near fast enough. Uh. Okay. So that was really, I think, uh, a really big inspiration for me to try to understand what’s the government’s role in responding to those types of crises. And why were the types of responses that we saw to the 2008 crisis not working? Right? And that wasn’t just in the United States that we were experiencing that. And that was countries across, you know, the United States and North America and Northern Europe, um, where my research sort of has taken me. But, uh, yeah, that was really just a really, really important part of my personal. You know, development that informed, I think, my future research interests and, and now it’s sort of become, uh, really central to my career. 

Comparing the 2008 Financial Crisis to the COVID Crisis

13:52 Emily: What a vivid story. And I’m also thinking now about, you know, you made a comparison earlier, just that you’ve been thinking about the 2008 and 2009 financial crisis versus the COVID crisis that we’re having now. And I’m thinking about, um, someone listening to this podcast who is a recent college graduate and maybe graduated in 2020 or 2021. And how is what, I don’t know, can you tell us a little bit about generally over at the population level, how what they’re facing is is different or similar to what you and me and other of our peers experienced during that earlier crisis?

14:28 Michael: That’s a really fantastic question. Um, in a lot of ways, I think it really highlights how different the situation and the sort of post uh, landscape is compared to 2008. Um, And I think that should really cause us to ask a lot of really difficult questions, right? About why it is that, you know, maybe you and me, other people in our sort of, you know, cohort, uh, had such a different experience. Because 1 of the things that you really see, and I think we’re seeing additional evidence of this really every day, especially in the United States with additional sort of economic statistics is that the labor market situation that you and I faced, right? When we graduated from college, you know, in the early 2000s. Was one in which the premium, the benefit that you got from having an, uh, you know, higher education was certainly still there. But, um, the barriers that we were facing to really getting on the career ladder were really, really extensive. Um, there’s a lot of scarring in the labor market, meaning all of the layoffs really that had happened or the long term unemployment that people had experienced in the immediate sort of period after the financial crisis took a really, really long time to recover in the United States. There’s a lot of different explanations at the time for why that was. Uh, right you had a lot of people that were focusing on saying, well, maybe the unemployment insurance that the government offered in response to the crisis was too generous, right? It was keeping people from from taking additional jobs. I think we can kind of look back and see, especially given the extent of unemployment insurance, I guess, uh, generosity in the 2020 COVID crisis. That is a really, really difficult explanation to take seriously. 

16:03 Michael: But anyway, there were a lot of different reasons why economists sort of trying to understand why the labor market was taking so long to recover and why it was so difficult, even for people with college educations to really get on the career ladder and get a job that was going to pay them a living wage so that they can pay rent and pay the other expenses they needed. One of the biggest differences is that in part, because, uh, the government took a much more active role in responding to the downturn, uh, that was sort of caused by the COVID 19 pandemic that the labor market did not experience that same type of slow return to normal. After 2020, in fact, you sort of saw the opposite, right? Businesses had trouble hiring folks. They had difficulty hiring people to fill the jobs, which, uh, had a really, really beneficial impact on wages. Also, just something was completely different from what happened in the after the 2008 financial crisis. You had a labor market situation, which was incentivizing businesses. To try to pull people into those jobs, so they were offering higher and higher wages, right? This is sort of where you saw, you know, people getting offered 15, 16, 17, even in some places to work, uh, you know, places like McDonald’s coming after a number of years where fast food workers were trying to organize and demand, right? A 15 minimum wage in those same jobs. And we’re experiencing a lot of barriers to making that a reality. So on the one hand. The government’s willingness to spend a lot of money in response to the 2020 pandemic to try to make sure that vulnerable people specifically, uh, didn’t lose their homes. Didn’t lose housing. Uh, didn’t get too far behind on making payments on their debt or their mortgages or other types of, uh, you know, that’s that they had. Really put the economy in a much stronger position to recover afterward and in terms of facing, you know, labor market opportunities is 1 of the best ways to see the positive impact of that response.

17:56 Michael: And so, I mean, I don’t know. I’m interested to kind of know what you think as well. Talking to so many folks who are sort of leaving the, the, the graduate school situation and thinking about their finances. But I would say that on the whole, I think people are facing a very different type of labor market now that are not experiencing the same type of restriction of opportunities. That we experienced after the 2008 crisis, that’s not to say that they don’t also face a lot of difficulties, right? In terms of. Making the most out of their careers, earning a living wage, feeling like they have what they need to live their best financial lives. But in terms of the. Barriers they’re facing in the labor market. It’s really not quite the same. 

18:36 Emily: Well, I was thinking about so I entered graduate school I should say I entered PhD training plans to go into a PhD program in 2007, which is when I graduated from college So it was just before so I was kind of safely ensconced in my PhD program by the time things really started going downhill in 2008 and I say safely because my lab happened to be well funded which obviously is a very real concern inside academia my lab in the area it was in, we had funding, my, my funding was secure during that time. I don’t have any statistics on this at all or even anecdotes, but I’m just wondering if, you know, comparatively the stronger labor market, as you were talking about, um, didn’t incentivize people to go into academia to start those graduate programs and start the PhD programs in the last few years in the way that, again, we experienced back in 2008, 2009, 2010. Um, Um, yeah, so I’m just kind of thinking about maybe the different pressures on people and when they can choose to go into a job that would be satisfactory to them, then maybe earning a decent amount of money and they think, Oh, I was sort of interested in going to graduate school, but I can put that off for a few years and I’m going to work this job for now. Um, I don’t have those numbers on whether or not enrollment has decreased in the last, you know, couple of years compared to 2019, for example. I don’t know if you have looked into this at all or have any thoughts about this. 

The Labor Markets Impact on University Enrollment

19:51 Michael: Yeah, that’s a really interesting point. I definitely can’t really. Speak very confidently, uh, at the graduate level, but especially because I’m teaching undergraduates right now, you know, the regional campus of a state school, I can definitely say, uh, that, you know, the University of Colorado system in particular is, uh. Definitely not experiencing the same type of enrollment surge that they saw after the 2008 crisis, especially at the undergraduate level, even campuses like ours here in Colorado Springs. I wouldn’t say, like, struggling with enrollment. But definitely having to ask some, some really difficult questions about what the future of, uh, right of enrollment is going to look like serving students best, helping them get the training they need for their future careers. But I think you’re exactly right that that those students are not feeling the same types of pressure and especially with the increase in wages that we. I would say that, you know, we at least saw in the 1st, few years after 2020, uh, the wage increases are sort of, uh, I would say, uh, leveling off now, partly because of the monetary policy response of the Federal Reserve and the increase in interest rates, which it was the goal, right? The goal was to sort of slow down that economic growth and see those wages, uh, not grow quite as fast. Um, but just the fact that wages were growing at all. After 2020 in the way that they were definitely presents people with a different set of opportunities. Um, and then I know this is something that you are very interested in and your podcast offers a lot of, uh, really important context, uh, around, but especially students that are looking at the trade offs between taking out debt to pay Right for their education, and then sort of considering that trade off in the context of what they can earn in the labor market. Uh, that’s becomes a little bit more difficult. Right of a choice. Um, and like you had said, if they can make the choice to put off right, getting additional credentials for a little bit, because of what they’re able to to do in their careers outside academia, uh, I definitely think that that set of choices is very different now for folks than it was in 2008, 2009, 2010.

21:57 Emily: I’m so curious and this is not a question for you, but I’m so curious to see how this new SAVE plan for federal student loans is going to impact people’s decision making around whether to enroll in school and how much debt to take out when there’s, um, you know, we’ve, we’ve eliminated with this repayment plan, the negative amortization that was so, so painful, um, for so many people on the back end of their degrees. And without that, I feel like the risk of taking out debt is much, much, much less now. Okay. The risk of the SAVE plan, we don’t know. Politically, we don’t know how long it’s gonna stick around for, but it’s, it’s here for the moment. So I’m just curious how people’s decisions are going to change around that.

Unionization Movements in the U.S.

22:33 Emily: But the next question for you, since we’ve started talking around, um, academia and versus the labor market and so forth. Um, I’m curious what your thoughts are around the unionization movements going around the U. S., around, that is to say, around graduate students, um, unionizing, and also how like stipend levels are, are being affected by this like strong labor market. I don’t know if you have any thoughts or data or speculation around that, just how academia itself and the graduate students going into academia and staying in academia are affected by these larger economic forces. 

23:09 Michael: Yeah, there’s so many, I mean, even just the way that you said that affected by the larger economic forces is such a great way of framing that issue because there’s so many different inputs, right? I think into, uh, the way that universities and the way that even departments are trying to figure out how they can do, uh, right by their graduate students, um, but also how they can attract, right? The best type of candidates that they, that they, uh, that they want. Um, I think that 1 of the ways that I think about this. Thanks. Of course, it’s just starting by thinking that graduate students on the whole experience of a lot of really specific vulnerabilities, right? Um, any type of event or situation that doesn’t conform to a more traditional sort of academic experience can also, like, really exacerbate those, um, coming into a, you know, a graduate program, something we both know. Well, there’s a lot of expectations, right? That are sort of carried over from. Decades and generations of the way that the graduate student experience is supposed to work. Specifically, right, like, figuring out how to live a decent life right on the graduate students stipend is who identified as kind of, like, the biggest thing that a lot of students have to face. Um, that includes trying to figure out how to pay rent, especially when, you know, rent inflation is out of control and most metro areas in the, in the U. S. including in places like Syracuse that traditionally speaking, right? Have had pretty depressed housing markets because of. Um, so. A lot of different dynamics of, uh, of, uh, economic vulnerability at the community level, right? That go back, you know, since the 1970s. Um, but as students are facing that, I think that that’s sort of combined with a lot of other, you know, sort of issues and concerns around equity and justice in general. Right seeing universities as being primary sites of contesting. A lot of those questions have really motivated a lot of graduate students to really participate in and unionization efforts to really try to not just have living wages, but also try to address other issues of fairness in the, in, in either their specific discipline or just in the, in the field more generally, um, you know, I can say from my own department, uh, we had a year’s long sort of unionization drive. Um, That kind of went in fits and starts and took a really kind of long pause and then I’m, I’m advanced enough of a student now to sort of be outside of the bargaining unit, but they just recently were able to, uh, to to to get that union recognized, uh, which is a huge achievement for them. And so at least still being part of the department and seeing how those conversations and negotiations are proceeding. You know, I already can look back and see how different that would have made my life right when I started in that program to know that there was a possibility of increasing the stipend on its own. But then a lot of other ancillary issues, right? Like. Uh, at what level is the department going to cover your health insurance premium? Uh, when I started in the department, uh, you know, I can’t remember now, but the percentage was really low, but even, you know, as as I became a more advanced graduate student, I could see that that was 1 of the ways the department was really trying to sort of reduce the, the cost right on students is by saying, well, if you are on a TA-ship, if you’re on an RA-ship, you know, we’re going to start covering that premium in full. Including in some cases for for other members of your family, which, you know, that’s a huge benefit that we identify with, like, a solid career job. Um, that maybe as a graduate student is kind of an afterthought. I guess also, of course, depending how old you are when you come into a program, um. But that makes a huge difference financially for folks, right? To not have to pay. You know, 1000, 2000 dollars and a yearly health insurance premium that, of course, you’re required to have. Uh, so unionization is just one of the ways, right? That graduate students can really sort of band together, right? Really use that solidarity with one another and with graduate students across universities. To really sort of fight for a situation that really helps them reduce their vulnerability, but then also build a good financial sort of basis as they go into their career in academia, which is kind of a separate conversation. But we know that the challenge is right to. To living a financially secure life as an academic, are extremely challenging. So if you sort of start right from a negative as a graduate student, it sets you up for a lot of problems down the road.

Commercial

27:35 Emily: Emily here for a brief interlude! Tax season is in full swing, and the best place to go for information tailored to you as a grad student, postdoc, or postbac, is PFforPhDs.com/tax/. From that page I have linked to all of my free tax resources, many of which I have updated for this tax year. On that page you will find podcast episodes, videos, and articles on all kinds of tax topics relevant to PhDs and PhDs-to-be. There are also opportunities to join the Personal Finance for PhDs mailing list to receive PDF summaries and spreadsheets that you can work with. Again, you can find all of these free resources linked from PFforPhDs.com/tax/. Now back to the interview.

Impact of State and National Politics on University Funding

28:27 Emily: I’m thinking now about. The comparatively strong labor market, surprisingly strong coming out of a crisis, um, perhaps competing with graduate school for talent, right? I’m thinking about the unionization movement, which is putting more pressure on universities to pay better wages and get better benefits and so forth. Um, but then more to your, I think, uh, research experience, I’m curious about the national and state level responses to these pressures, right? Because the funding for academia comes partly from the people participating in, like the tuition and so forth, but it also partly comes from the federal and state governments through grants and, and, uh, the state funding for public universities and so forth. And these, these pressures are, are coming against one another. And I feel in some sense, like graduate students and postdocs are the people, um, who get left behind. In these pressures, right? So can you talk about, like, sort of based on your research and how, um, you know, governments can intervene in crises, like what you see as potential, um, uh, pressure release in, in this, in this area? Uh, I hope that made sense to you. 

29:34 Michael: No, absolutely. No, and you’re so right. And, you know, again, there’s so many different levels that you can, you know, sort of analyze that on the one hand, you know, you sort of pointed to. The relationship between state level government and funding levels at state universities in particular, which affect stipends for graduate students and segments for postdocs directly the number of, you know, funding opportunities for graduate students to support their research, which helps reduce their time to degree, uh, you know, the number of services the university is able to offer, uh, to graduate students from, you know, um, Health, it’s not even just paying for health insurance premiums, but it’s just health services, you know, overall, um, going from that all the way to whether or not universities are able to provide child care support to students and to graduate students and even to faculty and other people who work at the university, you know, as you had said, like, all of that’s tied to the funding situation that the state university has. You know, and of course, that varies on a state by state basis, right? We see some states like the University of University of Wisconsin system. It’s really, really struggling with the sort of domestic politics of the of the state in general to to sort of figure out a funding model that really makes it to where they can support all of the good work that they’re doing across all their campuses. But Colorado struggles with that too, right? Trying to figure out how to really create a sustainable funding model for the state university system in the long term. So, that’s at 1 level that I really sort of see, as you had said, like, states being able to appropriately fund their state university systems. Interacts directly with graduate students and their sort of financial security and of course, like, how that impacts their, their long term career prospects. Um, but there’s also these other situations that really very also for graduate students to, um. That they’re existing, not only in a university community, but existing in a community that has all of these other dimensions, right? So the cost of housing, right? And a particular university community varies widely. And I think about this, even in a situation in Colorado, where you have the University of Colorado at Boulder, our sort of flagship research university is in one of the most you. If not the most right expensive, uh, sort of residential area on the front range and, uh, you know, I’ve never lived in Boulder, but I can’t imagine how challenging that is for the university to both attract graduate students and then for graduate students to figure out how to make the stipends that they’re receiving go as far as they can without having to choose to live 20, 30 minutes away right from from campus, which is. Not practical, right? Especially in the early years of your graduate student experience. Just even if we were to focus on, like, how much like, the cost of housing, right? Gets eaten up, uh, or eats up the sort of graduate student stipend. Um, that’s obviously something that universities can’t really do a ton about, right? That’s more of a role for, uh. For local governments or for state governments and can definitely see how the politics of that is really playing out in Colorado, an area where had a ton of influx of people since the pandemic that rent inflation is really, really high here. And we’re struggling, honestly, in a lot of ways to figure out how to how to control that.

Local Government and the Affordability and Availability of University Housing

32:38 Emily: I’m curious then, so I’ve noticed, um, there’s been struggles over, um, universities providing housing for, for undergraduates and graduate students, right? We’ve seen in, I can’t remember which UC is it, whether it’s Berkeley or another one, but um, struggles with local government in terms of permitting for additional, um, Student housing to be, uh, built. I know also at Vanderbilt, they opened up new, um, student housing a couple year or two ago, I think, and the students were very disappointed that the housing seemed closer to market rate and for a luxury apartment than like what was affordable for the students themselves. So the universities have some agency here, but they still have to play, as you said, with the local communities in terms of the permitting and everything. And, of course, the funding for those kinds of building projects. 

33:27 Michael: Yes, it’s interesting points, because you’re exactly right there, too, that, you know, the permitting issues, just the space, you know, sort of issues I think about different university communities that I’ve lived in between, you know, Syracuse. This is a completely different situation, right? Then, uh. As you had said, right, the, for, for Cal, like, in a city like Berkeley, or I lived briefly in Ithaca, you know, thinking about Cornell really struggling also with kind of figuring out where to even build right housing. If they, if they were able to for and making that available to graduate students and how the funding model works for that. So, that is a really great point. Maybe I, even in my sort of answer, letting universities off the hook a little bit too much. But in the same way, right there, like, you had said that there’s a lot of complex issues that. That they have to work with sort of the local community to figure out what is available to them. And I know that in Colorado, you know, this is relevant for us in the sense that we’re going through sort of a statewide conversation about permitting reform and there was, uh. You know, a bill that was passed by the Colorado state legislature to to really try to give local municipalities more power to change their zoning laws to build more affordable housing that ultimately was, uh. Was I believe vetoed by by by governor polis in part, because there was just so much opposition to it at the, the municipal level. So we’re going to try to sort of, I think, figure out how to proceed. But, uh, you know, we’re obviously not the only state that’s really struggling to sort of figure out the balance between Local control and state level control, uh, over, uh, zoning regulations, uh, to really try to incentivize, like, actually affordable housing or just more housing. Right? And, uh, so, yeah, lots of really complex layers there, but it has really, really, uh, serious impacts right on how graduate students figure out their, uh, their sort of budgets throughout their, uh, throughout their graduate student career.

35:17 Emily: And this is making me think about prospective graduate students, um, looking at, and I usually think about this actually, and this is not the full picture, right? I think about it as a snapshot in time. What’s the current cost of living in this particular city where I’m considering attending for my PhD, and what’s the stipend at this moment? But to be really comprehensive and fair, we have to look at the trends. Um, and whether, you know, states are struggling to, um, to really financially support the universities. And that means that the stipend raises not, might not be keeping up with inflation going forward. We need to look at housing and how that is trending and whether or not something like on campus housing is being provided or might be provided in the future. And just, I’m just thinking about a prospective graduate student, like, You know, for me, when I was applying to graduate school, like taking, you know, a day or two and visiting a campus where I might devote the next five, six, seven years of my life and, um, how much, uh, really should go into that decision on the financial side and how difficult it would be to collect all that information. for every single university you’re considering and really understand it. It’s such a, wow. It’s a really complex problem. 

Inflation and Financial Pressures During Graduate School

36:26 Michael: Yeah. You said it so well. And, uh, the time inconsistency situation is tough for graduate students because you’re exactly right. You’re coming in with sort of a quoted time to degree. You’re trying to plan your life out in that block. Um, and before you’re even talking about all the other changes that happen to you in your life, right. New relationships, you know, you have a kid. Other types of situations that happen to you and your family, you know, you live a whole lifetime really, especially at that age, right? Coming in and thinking about your 5 to 7 years before you’re finished. And then you have to make a decision about how you’re going to make the finances work. And you’re exactly right that. You know, the stipends don’t keep up and, you know, we are, we’re also living in a period where we have gotten used to, uh, cost of living inflation. Overall, not really being a huge pressure, right? Rent inflation. You know, the inflation of the cost of education cost of health care, you know, these things were always really difficult for for people that were early in their careers. But then you think about after the, the covid pandemic, and now we’re experiencing inflation on like a. A much more wide scale level, right? It’s like graduate students thinking about the cost of groceries going up, right? That’s not really something that if you went into graduate school in 2018, 2019, you really were thinking about. And, uh, I guess the only thing I’ll say for, for me is that this, I think highlights the importance, I think, of being able to really build that solidarity with other graduate students within a union. Because that’s where you really have the ability to to present that United front to your department of the university and say, look, these are the pressures, right? That we’re experiencing. This is the value that we’re offering to the department of the university through our work. And, uh, and we are going to work together, right? To come up with a solution that makes it to where we can have. A living wage, while we’re also sort of continuing to pursue our studies, um, and then linking that sort of struggle with other people in the economy. Right? I mean, these graduate students are joining, you know, the service employees in a national union. You know, some graduate programs are joining the United Auto Workers, right? I mean, they’re building solidarity. I think with other workers that are experiencing those same pressures. And it’s really inspiring. And I think it really is a really big part of the solution. I think at least from a graduate student perspective on getting to a point where can really make the finances, finances work. But your, your point about timing, I think it’s like, so it’s so true. Right. And so, so real on an individual level, especially. 

Shifting University Funding Models to Better Support Grad Students

38:45 Emily: I love your point about the, the power of the unionization movements and the unions that are already in place so much. I almost wish we could end the interview right there, but I have kind of like one more question, um, which is so with unions. You’re talking about advocacy at the very local level, and then of course we’re bridging to advocates and other, um, branches of that union. Uh, but I’m also thinking now about, you know, we just talked about funding from the state level. I’m also thinking about funding from the federal level, which in my field, like in the biomedical sciences, is what they do in academia, in graduate education, is so dependent on the National Institutes of Health and other federal agencies funding. And so I’m thinking about also, like, Okay, we want graduate students to be paid, not just a living wage, in my opinion, much more so they can do even more with their finances and actually have some financial security. More than the living wage. Also, other people in academia, you mentioned the pressures don’t end with graduate school. It extends into faculty and administrators as well. More funding is needed for the whole system. I think if we decide as a country and as a planet that we really value what’s going on in academia. Right? So I think the advocacy has to also be at the state and national level as well, um, to increase the budgets again, if we decide as a society that what we’re doing in academia is valuable. Because. If society does not decide to value it, then academia has to shrink because the pressures on these lowest levels, as I said, the financial pressures are just too much, too much to bear and you’re driving people away at this point. That’s how I see it. What do you think? 

40:14 Michael: Yeah. I couldn’t agree more. Um, I completely agree with you too, that it’s a national level question, right? And I think that this is at least from my perspective, one of the helpful insights that you get. From the political economy, sort of, you know, perspective coming within the political science discipline is that you see how these things interact with so many other things in our economy, right? Thinking about how we train people at the university level, what sort of skills we want them to have, who’s doing the training, right? Who’s gaining the skills to actually play that role of being those teachers. And that’s even before getting to the, to the other issues, you know, you know, a lot better than I do. I think coming in the biomedical field You know, who’s the ones who are investigating the types of advances that are going to help us solve the biggest issues that we’re facing, whether that has to do with, uh, you know, avoiding pandemics or responding to climate change or whatever it is. Right? And you’re exactly right that it’s a choice about whether or not we value that as a society and taking seriously what that looks like. And I think that both of us know quite well that, like, at the individual level, we’re not really just talking about having more access to funding for individual research, but that is a huge part of it. That empowers graduate students to be able to not only do their best work, but to be able to really focus on the work that motivates them. Right? Which gives them space for creativity for solving problems for asking questions. And it’s not to say that, like, you don’t gain a lot from teaching doing other research and that kind of stuff at the same time that you’re doing your own, but it is a lot of pressure. And a lot of the most successful, uh, you know, people emerging from graduate school are folks that didn’t really necessarily have to deal with those pressures in quite the same way. It’s 1 of the benefits of going right to 1 of the top programs is having access to more funding. And so you imagine what it would be like if. Everybody right going to graduate school has access to that same type of support, or at least. A lot more support and, uh, absolutely funding coming from the, you know, the National Science Foundation and other types of, uh, you know, federal sources of funding like that to really, really fund a wider range, right? Of research projects. And there’s also, you know, questions here related to what types of folks are getting, what types of funding and are we really supporting also marginalized voices in the academy that are really focusing on important questions, asking questions about. Yeah. You know, either the history, or the experience, or, uh, you know, of marginalized groups, uh, in our economy and in our society already. Right? Those are not necessarily the types of, uh, projects that get the. They’re the top choice for funding, um, because they’re more difficult questions to answer. So there’s, there’s a number of different benefits that we would experience at a societal level, um, from really embracing, uh, a university funding model That is actually oriented towards what we want to get out of universities, instead of just seeing them as sort of factories to train people with the skills to make them successful in the economy as important as that is. Right? 

43:05 Emily: I think about universities, both the product of a university that you just mentioned, people are the product, trained people, but also the research itself is a product. And graduate students do both of those things, right? They’re becoming those trained people and they’re also generating the research that is disseminated and helps on a much wider basis. But as you just said, if they can’t focus on the work that they’re there to do and then the skills they’re there to, um, to develop in themselves, like we’re really, we as academia, we’re really hamstringing ourselves by not supporting those trainees, um, financially and in other ways to the greatest extent they can so they can flourish. Um, I’ve been thinking recently about Maslow’s hierarchy of needs. So like at the top, like self actualization, like. That’s where we want academics to be operating. But if they don’t have the safety and the physiological needs levels met financially and again through other support systems, how, how can they be expected to be in that actual self actualization level, which is ostensibly what they’re there to do. Um, so it doesn’t really make a lot of sense, but as we have been talking about, there are so many different inputs to this system. That have to be, um, considered in the history of it. And gosh, well, I’ve enjoyed this conversation so much, Michael. Um, is there anything else that you would like to add at this point on How universities or state level or government or federal level governments could be better supporting their graduate students. 

44:31 Michael: I think that we have really covered, I think the wide range right of inputs. I really appreciate the conversation. I really appreciate your perspective and, uh, I think that you’re doing such great work. I think I’m trying to highlight how diverse right? This is the experience of, uh, financial life can be at the graduate student level. And, uh, Yeah, it’s just not really a story. I think that you think of immediately when you think of financial insecurity, but, of course, as we know, it’s, it’s, it’s a very, very pervasive feeling that a lot of us experience the graduate student level and it really resonates with me about how important the work that happens in universities is. Right? And I don’t even think that you really need to be overly romantic about it to think about the value those institutions have to public life and graduate students are a critical part of that. Uh, so I really have enjoyed this conversation and, uh, I don’t think I have anything additional to add.

Best Financial Advice for Another Early-Career PhD

45:24 Emily: Okay. Then we’ll just end with the final question that I ask all of my guests, which is what is your best financial advice for another early career PhD? We really haven’t gone in to that personal finance realm too much at all during this interview. So this is kind of your opportunity to enter that individual level and say what’s worked for you or what you think would work for other people at the graduate student level.

45:44 Michael: Yeah. I appreciate the time to sort of reflect, I think, on that, uh, on that question. And a lot of it is sort of connected to these key key elements that we’ve talked about so far in the conversation. I know that for me, 1 thing I didn’t think about enough about before I started was availability of funding, right? For my own research. And even looking at the availability of that funding, uh, what was it going to take to actually try to be competitive for it because of how limited it is, um, because it’s 1 of the key things, right? That we just were talking about this, but, like, relieving that pressure, um, of, uh, you needing to focus on the teaching and the work in order to make a living, right? To earn that stipend to sort of survive, um, the space then in your life gets shrunk, right? To focus on your own research, which it’s not even just about, like, you know, the, the personal fulfillment and self actualization as you were talking about, but it’s also about how long are you going to take to finish the degree? Right? I mean, I’m a graduate student. I’ll be candid about it. I mean, I’m, you know, in my 9th year, that’s definitely over the average sort of time to degree. A lot of that has to do with Trying to sort out sort of my own financial, you know, and my family’s financial situation at an individual level. I’m certainly not the only graduate student That’s tried to. To balance those 2 things with a limited availability of a funding to support me finishing my degree. So that’s something really just thinking about what types of opportunities are available to you and where you can get the best support for your own sort of research career if you have the choice, right? If you have the programs to choose from, if you have different types of opportunities available to you, just really thinking about that. And it’s hard when you’re just starting. Because you’re about classes, you’re thinking about where you’re gonna live. You’re thinking about, uh, you know, how you’re gonna read and pass your exams. It’s a lot of pressure, but taking some time to think about that earlier rather than later I think is really important. And then the last thing I’ll just end with to think resonates with the conversation we’ve had as a whole is trying to think about the various, you know, changes that are gonna happen to you in your life during that period of time. And how you can maybe try to anticipate some of them think about preparing, you know, for them, or just being mindful of how that might impact your financial situation. Uh, you know, changes in your in your family, right? Having, you know, a child, maybe experiencing a situation where you have to prioritize the care of a parent, um, these types of situations that can really come out of nowhere in life, you know, um, and I can say that Graduate students, I think are particularly vulnerable to these changes because the image of the graduate student is like a young person. That’s able to sort of stay up all night and eat ramen and read books. But that’s not every graduate students reality. Um, the onus is on you individually a lot of times, unfortunately, to really think about how to navigate that. And I know that for me, I think I wish I would have spent a little bit more time thinking about how my life was going to change over that period of time and how I could be better prepared for it.

48:51 Emily: That’s something I’ve definitely heard from other interviewees, um, something I also experienced to an extent while I was a graduate student. I mean, a PhD program is long. I took six years, you’re on nine now. Um, you can move through different life stages, as you said, during that period of time. And as we’ve been talking about, The economy can change underneath you. You can have a pandemic. If you started graduate school in 2018, 2019, you’re still in graduate school. Um, and so absolutely like as, as thinking of it as an individual decision, where am I going to go? How well are they going to support me there? You have to build in that. You’re going to need more support than you do at the moment, right? You can’t necessarily assume for five years, you’re going to be eating ramen and staying up all night, right? Your life is going to change and you, you have to think about those shocks. Um, but unfortunately Stipends being what they are, it’s very difficult to say, okay, I’m, I’m definitely going to go to the program that fits me best, the research interests, as well as supporting me above and beyond what my current needs and wants are, but factoring that into account, very, very, very difficult, but really, really good food for thought for anybody who is in that perspective stage.
49:56 Michael: Yeah, absolutely. Couldn’t agree more.

49:59 Emily: All right, Michael. Thank you so much for coming on the podcast. This has been a delight and I really appreciate you.

50:06 Michael: Thanks so much again, Emily. I really had a great time. Uh, really, really loved, I think, just being given the time to sort of reflect and think. about my own sort of financial life as a graduate student. And, uh, you’re doing such great work. And so I really love the opportunity to come on the podcast.

50:21 Emily: Thank you so much.

Outtro

50:28 Emily: Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! Nothing you hear on this podcast should be taken as financial, tax, or legal advice for any individual. The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by Dr. Lourdes Bobbio and show notes creation by Dr. Jill Hoffman.

Student Loan Deferment Shouldn’t Be Your Default

April 3, 2023 by Meryem Ok 1 Comment

In this episode, Emily interviews Meagan McGuire, a Certified Student Loan Professional and consultant with Student Loan Planner. Meagan goes over all the pertinent terms of the upcoming modified REPAYE plan, which is expected to join the other options for income-driven repayment plans in 2023. The relatively more generous terms of the modified REPAYE plan, such as the revised payment calculation and the interest subsidy, make it an attractive option not only for borrowers already in repayment but also for those currently eligible for deferment. That’s right! If you are a grad student, don’t default into deferring your student loans after the administrative forbearance ends! Instead, consider whether it’s worthwhile to enter repayment under modified REPAYE. You could potentially avoid all of the interest that would have accrued on your unsubsidized loans during grad school and/or reduce the number of years you have to pay on your loans post-PhD—all for free or a low cost. If you hold any federal student loans, do not skip this episode! Update 10/3/2023: The plan discussed in this interview is now called the SAVE plan.

Links Mentioned in the Episode

  • PF for PhDs Tax Workshops
  • PF for PhDs S14E7 Show Notes
  • PF for PhDs S7E13: How to Handle Your Student Loans During Grad School and Following (Expert Interview with Meagan Landress)
  • Student Loan Planner
  • Federal Student Aid
  • PF for PhDs Subscribe to Mailing List (Access Advice Document)
  • PF for PhDs Podcast Hub (Show Notes)
Image for S14E7: Student Loan Deferment Shouldn't Be Your Default

Teaser

00:00 Meagan: This new REPAYE plan makes deferment look very unattractive for a lot of reasons. There’s not a lot of advantage to deferment anymore. And even if you had a payment kick in, keep in mind it’s a very, it’s a portion of your income. And if you’re closer to, let’s say 35, you know, $35,000 for your stipend, that’d be closer to maybe almost $10, $20 a month.

Introduction

00:32 Emily: Welcome to the Personal Finance for PhDs Podcast: A Higher Education in Personal Finance. I’m your host, Dr. Emily Roberts, a financial educator specializing in early-career PhDs and founder of Personal Finance for PhDs. This podcast is for PhDs and PhDs-to-be who want to explore the hidden curriculum of finances to learn the best practices for money management, career advancement, and advocacy for yourself and others. This is Season 14, Episode 7, and today my guest is Meagan McGuire, a Certified Student Loan Professional and consultant with Student Loan Planner. Meagan goes over all the pertinent terms of the upcoming modified REPAYE plan, which is expected to join the other options for income-driven repayment plans in 2023. The relatively more generous terms of the modified REPAYE plan, such as the revised payment calculation and the interest subsidy, make it an attractive option not only for borrowers already in repayment but also for those currently eligible for deferment. That’s right! If you are a grad student, don’t default into deferring your student loans after the administrative forbearance ends! Instead, consider whether it’s worthwhile to enter repayment under modified REPAYE. You could potentially avoid all of the interest that would have accrued on your unsubsidized loans during grad school and/or reduce the number of years you have to pay on your loans post-PhD—all for free or a low cost. If you hold any federal student loans, do not skip this episode!

02:22 Emily: OK guys, if you’re listening to this in real time, it’s April. You have just weeks or days to finish up your tax return, if you haven’t already. I’m standing by, ready to help you the moment you say you want me to. I have four versions of my workshop on preparing your annual tax return available, covering postbacs, grad students, and postdocs, both US citizens/residents and nonresidents. The last live Q&A call for the citizen/resident versions of that workshop is on Thursday, April 13, 2023. I’m also answering questions for the nonresident version asynchronously, and the deadline to submit those is Tuesday, April 4, 2023, but I might be able to get to some after the deadline as well, we’ll see. I also offer a workshop on estimated tax, which you’ll probably want if you are currently on fellowship and were surprised with a large tax bill on your 2022 tax return. The quarter 1 Q&A call for that workshop is on Monday, April 17, 2023. You can find the links to purchase any of my tax workshops plus tons of free resources at PFforPhDs.com/tax/. You can find the show notes for this episode at PFforPhDs.com/s14e7/. Without further ado, here’s my interview with Meagan McGuire of Student Loan Planner.

Will You Please Introduce Yourself Further?

04:02 Emily: I am so excited to have on the podcast today, Meagan McGuire. She is a consultant with Student loan Planner, so we have an actual expert on the podcast with us which is a refreshing change of pace. And yeah, I’m just so excited that Meagan is here because she works for this amazing company called Student Loan Planner, which if you have federal student loans and you’re not already following them, get on their mailing list, get on their socials. They have great, great information. I’ve been heavily relying on them with all the excitement and student loan news recently. Meagan has actually been on the podcast before, back in season seven, episode 13. So if you haven’t yet listened to that you know, some of that information might be a little bit out date because things have been developing. So, we’re going to talk about the new modified REPAYE plan today, which is another one of the income-driven repayment plans. We’re going to explain all those terms in just a second, but that’s the subject for today. So, if you have federal student loans, do not tune out, do not hit pause. This is a crucial episode for you. So, Meagan, thank you so much for joining me. Will you please introduce yourself a little bit further?

05:04 Meagan: Of course, yeah. Thanks for having me again! I love nerding out about student loans. It’s also a very not fun topic. So we will <laugh> we will talk about it as you know, directly and informationally as possible to help you take a nugget of information from this conversation. But yeah, so I’m Meagan McGuire. Prior last name was Landress. I got married last year, so my last name is different now. But I’ve been with Student Loan Planner since 2019. I’ve been doing student loan planning for a while for my whole career, <laugh> pretty much. And I found that it, you know, student loan planning, in specific, like when it comes to financial planning is such a big piece of somebody’s financial plan. And it’s sometimes the first introduction to finance, which is not fun. And so, having an idea of what you should be doing with your student loans can help ease some of that, you know, anxiety or angst when it comes to thinking about money and finances in general. So, I’m happy to be here. Thanks for having me!

06:06 Emily: I love it. Thank you so much! And you have an actual professional designation, do you not?

06:10 Meagan: Yes. Oh yeah, I forgot to mention that. Yes, <laugh>, I’m what’s called a Certified Student Loan Professional or CSLP. It is a new-ish designation in the financial planning space. I got it back in 2019, very beginning of 2019, when I started with Student Loan Planner. But that just tells you that a professional has the financial planning background along with the specialized education in student loan planning.

06:37 Emily: Yeah, it’s so important. I know that people sometimes get really bad professional advice around what to do with their student loans and that’s why I love following Student Loan Planner. And there are other similar, you know, people who provide similar services. But having that designation is so important because as we’ve learned, there are so many fast moving changes and updates in the student loan world. And so, you really need someone who is up to date. Speaking of being up to date, we are recording this on March 3rd, 2023 <laugh>. So, very important between the time of our recording and the time of this release, maybe there’s been some major upheaval in the student loans world. We don’t know, just earlier this week, a couple student loans cases went before the Supreme Court, but of course we don’t have a decision yet. We’re still waiting on that and many things are waiting on that plan.

Repayment Plans

07:20 Emily: So, actually the subject for today is not the cancellation, which is very exciting on its own. But instead we’re talking about this new IDR plan, or modified IDR plan. So Meagan, I want you to take us back to the beginning with federal student loans because some people in my audience, you know, maybe current undergrads currently in grad school, they may have never had their loans go into repayment. So, they might not even know what the options are. What all these acronyms are? So, can you just tell us what are repayment plans? What are IDRs?

07:48 Meagan: Mm-Hmm. <Affirmative>. Yeah, for sure. So, there are kind of two different buckets of repayment plans or types of repayment plans you can consider when you’re entering repayment in the future. One bucket would be amateurized options, which are kind of like a normal loan, how that would operate where you get a term. So, 10 years, 20 years, could be as far out as 30 years. They take your balance, spread the payments out over that timeframe, and you pay off the whole balance within that timeframe. So, very standard, very normal definition, or you know, way of paying back debt. So, that’s one route. The other bucket are income-driven plans or IDR plans. That is the blanket term for the different income-driven options there are, because there are technically five different income-driven plans available, currently. And so, you know, depending on your situation, your marital status, your income, you know, it could lean you one direction or another when it comes to those income-driven plans. But so far there’s REvised Pay As You Earn as one, or REPAYE. Pay As You Earn, or P A Y E. There’s IBR, income-based repayment, new and old. So, technically those are two different plans. New IBR and old IBR. And income contingent repayment, or ICR. That’s the the laundry list of income-driven plans that are available currently. <Laugh>

09:20 Emily: And, correct me if I’m wrong, but the idea with the income-driven plans is that your payment is recalculated based on a recent income, maybe the previous tax year, for example. And it should, ideally, be lower than what you would have on the standard plan if you were going to opt for an IDR plan. So, you have this lower payment, but it scales with your income. So if your income goes up or down in the future, your payment may go up or down. And the purpose is not necessarily to pay off the loan in its entirety. So, what happens with IDR plans once you’ve been paying on them for a while?

09:51 Meagan: Yes, that’s a great question. So, unlike the amateurized options where it’s designed to pay off the loans during a certain time period, income-driven repayment plans, they are not designed to pay the loans off. They can, mathematically, if your payment is enough to do so over time, but it’s not designed for that. It’s designed to make a payment affordable based on the income that you’re bringing in. And let’s say you’re in a situation where mathematically your payments are never enough to pay off the balance. Well, those income-driven plans all come with a maximum repayment period of either 20 or 25 years. And if you’ve made payments for that 20 or 25 year threshold, whatever balance is left over at the end of that timeframe is then forgiven. So, it really helps people who are never really going to be able to get out from under their loans. No one is ever going to die with their debt <laugh>. They can get on that income-driven plan and go towards loan forgiveness. I hear that a lot where someone will say, “Ah, I’m going to be paying this until I die.” And I’m like, “Ah, check out those income-driven plans. Probably not.” <Laugh> you might be paying for a while but not forever. So, that is a safe haven for those that have large balances in comparison to their income.

11:13 Emily: I think you put that very well. It’s really designed to help people get out from massive student loan balances where their income is not really high enough to support a standard payment on that high debt balance. So, maybe your career plans changed, I don’t know what could have happened. Maybe your education plans changed, something has gone on where, yeah, your career income does not support this. And certainly for people in my audience who are graduate students, maybe they’ve gone through a lot of career shifts in the many, many years they’ve been in higher education. Or maybe they’ve accrued a lot of debt during that time.

Tax Bomb

11:47 Emily: One more question around sort of the technicalities of these IDR plans. Now, I understand that there is what was called a tax bomb at the end of some of these plans. Can you explain what that is?

11:58 Meagan: Yes. So, a tax bomb, that’s kind of the term we use for what happens after the loans are forgiven. So, when the loans are forgiven, there’s a debt that’s discharged. And the IRS sees any debt that is forgiven or canceled or discharged as a benefit to you. So, they tax that as income in the year that it’s forgiven. So, I know that sounds unfair <laugh> that is not fun. So, an example of this would be, let’s say you’re paying for 20 years. You still have a balance of $50,000 at the end of that 20-year timeframe. That is forgiven, yay. But then you hypothetically would be getting a 1099 for that $50,000 that was forgiven. And of course you didn’t pay income taxes on that because that wasn’t part of your income. It was something that was forgiven. So then you have to report that as if you did make it as income and pay income taxes on it. That sounds really scary. But mathematically, if your balance is a lot larger than your income, it can still make sense to go that direction even if the tax implication exists. When we do our planning with folks, we plan out how much we need to save per month to prepare for that. And oftentimes the savings amount that you have going towards that tax bomb and the monthly payment that you have going towards your loans is still a lot less compared to what it would look like if you were trying to pay it off traditionally.

13:28 Emily: Yeah. And I want to note that one of the reasons that student loans have become such a hot button issue, and one of the reasons why these IDR plans have in the past gotten a lot of criticism, is because of the negative amortization schedule. So some people, and what that means is that some people who, you know, you have these low payments available if your income is low enough or if you have enough kids or whatever the calculation is, their payment might be so low that it’s not even covering the interest that is accruing on that loan. And that means that the loan balance is ballooning and ballooning and ballooning over time. So, the plan that we’re going to talk about, I want to say too many spoilers, but it does address this. Okay, so one of these major, major issues with student loans is being addressed. And we’ll talk about that in just a few minutes. But before we get too far off of this basic “what’s going on with student loans” question, I want you to explain what public service loan forgiveness is and how it plays in with these other plans that we were just talking about.

14:23 Meagan: Yeah, so public service loan forgiveness or PSLF for short. It’s not a repayment plan, but it is a program that you can pursue while on an income-driven plan if you’re working full-time in a public service capacity. So this is for those that work in non-profit, work in government, you know, academia is a great example. If you’re working at a public university. You know, or private yeah, it could be private as long as they’re 501(c)(3) status. So public service loan forgiveness, if you make 120 qualifying payments, which means that you’re on an income-driven plan, you make 120 qualifying payments, which shakes out to 10 years if you’re completely consistent, and whatever balance is left over at that time is forgiven. And a really great part about that too is that it’s forgiven tax-free, unlike those income-driven forgiveness paths. So, PSLF can be a really great option for those whose career is in public service. It’s a much shorter timeline than the 20 or 25 years, and it doesn’t have the tax implication with it. So, it’s definitely a great program if it makes sense with your career path.

15:39 Emily: Yeah, and I know probably a lot of people in my audience, maybe more so than the general population, does have plans to work in academia or in government or for non-profits or for other kinds of qualifying employers after their graduate school is done. So, this definitely could factor into the plans for a lot of people. Especially if you do a postdoc, maybe that’ll take a few years at a university or in government and those years count if you’re making your payments, you’re enrolled in the program and so forth. One thing that I do want to note for current graduate students is that you have to be a full-time employee for the payments that you’re making under PSLF to count towards PSLF. So, graduate students are almost always considered halftime employees or less.

16:19 Emily: And so, even if you are an employee of a university during graduate school, even if you are in repayment, that time is not going to count for PSLF unless you’re a very, very unusual case. But if you’re a part-time employee, it’s not going to count towards PSLF, unfortunately. However, I know most people who are in graduate school are choosing deferment in any case, so they’re usually not making payments anyway.

Modified REPAYE

16:38 Emily: So, let’s get into kind of the meat of this new, modified, I don’t know what language you use. The new version of REPAYE. Okay.

16:45 Meagan: Yeah, <laugh>.

16:46 Emily: So, back in August, 2022, the president proposed a new IDR plan. Now that plan has kind of been modified over time, so it’s no longer a new IDR plan, but you explain what is this new-ish plan that we’re looking at?

16:59 Meagan: Yeah, new-ish. Yeah, that’s the right terminology. So, their plan originally was to come out with a whole new income-driven plan. But then a couple things I think happened that made them reconsider that. One is we already have five income-driven plans, so that wasn’t really going to simplify things. It was going to add one more thing to the equation to make things a little more complicated for decisions. And also the Department of Ed did not get an increase in their budget this year. So, they are operating off of the same budget that they’ve been operating off of with all of this stuff going on. So, they’re not going to have the capacity to be implementing a whole brand new plan. I think that is my assumption, <laugh>, why they started to instead of have a a new plan, they’re thinking about modifying an existing plan. And the existing plan that they’re thinking about modifying is REPAYE, revised pay as you earn. REPAYE is one of the cheapest income-driven plans, currently. There are some pros and cons to this plan currently, but some of the modified changes could be very attractive. Especially for those you know, starting out their career coming up who might have long training periods, which we could certainly get into.

18:20 Emily: So, when you were last on the podcast, we talked about very, very broadly, very generally, kind of a rule of thumb around what the ratio is of your student loan balance to your income once you go into repayment. So, for my audience, this is usually going to be post-PhD, perhaps post-postdoc. So, your career income at that point, and what those ratios might be in order for you to really want to consider an income-driven repayment plan versus just going down the standard repayment route. Now I think what’s going on with this modified REPAYE plan is that that rule of thumb has probably gone out the window. It may be completely different now. So, we’ll talk about that in a moment. But I just say this because I want the audience to stick with us because we’re going to be talking about some technical parts of the plan now. But really an IDR might be more attractive to you with this new version rather than in the past. So like, if you have any kind of student loans, I want you to stick with us through this next, like, pretty technical section. Okay, so this modified new-ish REPAYE plan. You said we think it’s going to look like this. How firm is this plan, and when is it going to go into effect, or we think it’s going to go into effect?

19:24 Meagan: It has passed the 30-day commentary period. So, it was officially proposed. There was a 30-day commentary period where folks could make suggestions and now they’re reviewing those. We’re outside that 30 days. So I think the timing of this, I think we are going to hear more information on if what was proposed is actually going to be implemented. I think we’re going to hear about that in the next couple months. So, maybe by May, June. And maybe those rules will be locked and loaded for July, meaning maybe we can enroll in this by the end of the year or early 2024. That is my estimated timeline. Payments, as we know, are not currently enforced, like no one’s making income-driven payments or payments towards their federal student loans.

20:17 Meagan: And it’s all kind of, the start date is contingent on this Supreme Court case, as you had mentioned earlier at the beginning of the podcast episode, which is debating if that one-time cancellation can be done. Can Biden forgive $10,000 or the $20,000 of student loan debt for anybody under those income thresholds? We don’t know yet. And I think Congress and the Department of Ed is waiting to see how this is going to shake out so they can know if they need to make any modifications to this modified proposed repay plan. Or if they want to make it more generous or if they need to take stuff out. So, I think they’re kind of waiting on that, if that makes sense. But we could see this, you know, definitely within the next year, which I think is exciting.

21:05 Emily: Yeah. Okay, so we’re going to talk about the plan as of today’s date, and you know, if there are more changes that come down, you know, stick with Student Loan Planner. Follow them, follow me. I’ll try to make updates to this as well if any major updates are to be had. But we’ll talk about the proposal as it exists today. Okay, so who is eligible once this plan is in effect? Who would be eligible to enroll in it?

21:29 Meagan: So, anyone who has federal direct loans. So, if you, and direct loans, you can tell if you have these, if you log into your studentaid.gov account, you should see literally the word direct in your loan name. If you see something like Perkins Loan or FFEL, which stands for Family Federal Education Loan, those loans in particular are not going to be eligible for this new plan, but they can be if you consolidate them. So, that is an option if you needed to fix that. And that would only be relevant to anyone who had borrowed before 2010. These loans are not issued anymore. So, if you are newer to borrowing or started borrowing after 2010, don’t worry about it. You’re going to have the right loans. And private loans are excluded. This is just for federal student loans.

Payment Calculation

22:20 Emily: Okay, yes, thanks for that clarification. So, one of the things that is being modified about this REPAYE plan is how your payment is calculated. So, can you explain maybe both, but definitely the new way that the payment, if there’s any payment, what it would be?

22:36 Meagan: The current calculation, how they do this is they take your adjusted gross income, usually from your tax return. There’s like an IRS data retrieval tool that they have that they just pull it through from your most recently filed tax return. So, adjusted gross income, that’s not gross, that is your gross pay minus any pre-tax deductions. So, think you know, 403(b) contributions, 401(k) contributions, HSA, FSA, those things are taken out. So, we get our adjusted gross income, then they subtract 150% of the poverty line, which that’s about $20,000, $21,000 for one person, for a family size of one. So they take your AGI minus that 150% of the poverty line, and you get what’s called your discretionary income. And then that is what the payment itself is based off of. And REPAYE is based on 10% of that discretionary income number. The new way that they’re proposing this to be done is similar, still going off of adjusted gross income, but instead of 150% of the poverty line deduction, they want to take 225%.

23:51 Meagan: So, it is a big hike in how much would be part of your discretionary income. So, naturally, that would make anyone comparatively looking at the old REPAYE and the current REPAYE, it would make anyone have a slightly lower payment. It could be worth as little as maybe75 to a hundred dollars a month compared to the current REPAYE plan. It could be a lot more if your income is a lot more. It just depends. So not only that, so that’s one way that they’re going to calculate the payment a little bit less. But the other way that’s going to impact the actual calculation is the portion of your balance that’s for graduate loans would stay based off of that 10% of discretionary income. If you have a portion of your balance that was from undergrad, let’s say you have like $30,000 from undergrad, $70,000 from, you know, graduate school, that would mean 30% of your loan balance is undergrad.

24:52 Meagan: So, they plan on, or the proposal is for undergraduate loans, they would charge 5% of discretionary income. So, you’d have some weighted proportion of the two. 30% of your payment is based on 5% of discretionary income, and the other 70% would be based off of 10%. So, your percentage will certainly vary depending on what your actual weight is for the undergraduate loans. But all in, it does make the payment slightly cheaper for just about anybody. Maybe a lot less for some that have a lot of undergraduate loans. Maybe not, you know, that 5% may not come in if you never borrow it for undergraduate, but that’s currently how it’s proposed.

25:40 Emily: Okay, so let me restate, make sure that I understand.

25:43 Meagan: Yeah, I know that was a lot. <Laugh>.

25:44 Emily: So, of your adjusted gross income, your AGI, which is your gross income minus your above the line deductions, as you mentioned. Things like traditional retirement account contributions. So, you get your AGI, and then a certain amount of that is going to be not used in the calculation. So, it is 225% of the federal poverty line in the case of the new REPAYE plan. I think I looked at that, and for one person it’s about $30.5K. 30 and a half thousand dollars for one person. If you had children, if you had a bigger family, that number would be larger. So the amount that is excluded from your income, that’s not going to go into the calculation is going to be larger. And then whatever marginal amount of income you have above that calculated level, that’s what you’re going to be calculating the payment from.

26:31 Emily: So, it’s 5% from your undergraduate loans, 10% from graduate. If you have both, it’s going to be a weighted combination of the two to make the calculation. So, many people in my audience, I would think probably only have undergraduate loans. And so if they’re looking at that calculation, they’re going to be, you know, it’s 5%, but just of the discretionary income, just of that amount of income that’s exceeding this 225% of the federal poverty line. Okay, I think I restated that okay. Because this is a really important part of this is like, how is this payment calculated?

27:00 Meagan: Yeah. And just a quick note, if that kind of made your head hurt and it made you sick to your stomach thinking about those calculations, we do have a free calculator on our website, studentloanplanner.com, that you can go and plug in your income and it’ll do the math for you. So, there are resources, free resources out there that can help you with that <laugh>. So.

Commercial

27:21 Emily: Emily here for a brief interlude! Tax season is in full swing, and the best place to go for information tailored to you as a grad student, postdoc, or postbac is PFforPhDs.com/tax/. From that page I have linked to all of my tax resources, many of which I have updated for tax year 2022. On that page you will find free podcast episodes, videos, and articles on all kinds of tax topics relevant to PhDs. There are also opportunities to join the Personal Finance for PhDs mailing list to receive PDF summaries and spreadsheets that you can work with. The absolute most comprehensive and highest quality resources, however, are my asynchronous tax workshops. I’m offering four tax return preparation workshops for tax year 2022, one each for grad students who are U.S. citizens or residents, postdocs who are U.S. citizens or residents, postbacs who are U.S. citizens or residents, and grad students and postdocs who are nonresidents. Those tax return preparation workshops are in addition to my estimated tax workshop for grad student, postdoc, and postbac fellows who are U.S. citizens or residents.

28:37 Emily: My preferred method for enrolling you in one of these workshops is to find a sponsor at your university or institute. Typically, that sponsor is a graduate school, graduate student association, postdoc office, postdoc association, or an individual school or department. I would very much appreciate you recommending one or more of these workshops to a potential sponsor. If that doesn’t work out, I do sell these workshops to individuals, but I think it’s always worth trying to get it into your hands for free or a subsidized cost. Again, you can find all of these free and paid resources, including a page you can send to a potential workshop sponsor, linked from PFforPhDs.com/tax/. Now back to the interview.

New Interest Subsidy

29:24 Emily: Now, some other stuff is going on with the interest and how that is accruing and so forth. So, explain what’s going on in the new plan for the interest.

29:30 Meagan: Mm-Hmm. <affirmative>, yes, the interest subsidy. So, this is another really big deal with this new proposed plan. So, just as you had mentioned previously, one of the big, maybe downsides or just factors of being on an income-driven plan is, you know, if you’re on an income-driven plan, you’re going for payment affordability, you’re going towards loan forgiveness, most likely. So, your payment could very well not be enough to be covering even the interest that’s charged per month. And that would mean with a student loan debt your interest that’s not paid would be accruing on the balance. This is different than capitalization. So, it’s not actually being added to the balance and then interest is charged off of that new balance, thankfully. Student loans grow in a simple interest format. But it still accrues on your balance. So, that means your balance is growing as you’re going towards loan forgiveness, which really gives a lot of people some heartache because that’s not normally how debt works. <Laugh>.

30:38 Emily: And contributes to the tax bomb we were talking about earlier.

30:42 Meagan: Yes, exactly. So, that gets to the meat of this. So, this subsidy with the proposed new revised REPAYE plan, they plan to have a 100% interest subsidy, which means it would not allow the balance to grow at all, even if you know, it should have been based on the regular rules today. So, that’s really big. It’s big for a few reasons, not just for people who are going towards forgiveness. And this is an important note that I wanted to mention earlier. I just remembered now, these income-driven plans don’t have to be the forever plan for you. Like they don’t have to be the long-term plan, but you can use them as a tool, especially in the years where you’re not making a lot of money. And if this new REPAYE plan is approved as it’s proposed, it would be a huge benefit to you to be on this new REPAYE plan.

31:37 Meagan: Because even if your income’s really low, even if your payment is calculated to be zero a month, which is possible, as long as you’re in repayment on that new REPAYE plan, your balance cannot grow. That is different if you go into deferment, which is allowed if you’re in a training program. So, that’s something to definitely consider. And I know that was something we wanted to talk about here in a bit too, but the a hundred percent interest subsidy is a big deal cause it keeps the balance growth at bay. It can’t go higher than what it is, you know, at its current principle and interest today, which is great. And so, that helps reduce the future tax implication in the future and it can help maybe people with lower income now but plan on paying the loans off later to keep the balance as low as possible.

32:30 Emily: Yeah, thank you so much for saying that that way. Now when you’re saying a hundred percent interest subsidy, what I understand about this is that if you are making a payment, your payment goes against the interest that accrued that month first. If you’re making a larger payment than just the interest that’s accrued, then the principle comes down. If you’re making a payment that’s less than the interest that has accrued, you’re still making that payment, but then the government will be paying the other portion of the interest that’s accrued. Is that what you mean by 100%? So, it’s like it’s never going to grow, but that doesn’t mean you’re not paying interest.

33:06 Meagan: Yeah, that’s a good point.

33:06 Emily: You could be paying interest. It’s just not going to grow and grow and grow.

33:09 Meagan: Yes. Yeah, basically, you could look at it as an interest only loan where you’re just paying interest but the balance isn’t going to be going down, but it’s not going up. So that’s a good thing, <laugh>.

Undergrad Versus Grad Timeline

33:21 Emily: Yeah, absolutely. So, let’s compare this quickly to what many people in my audience may be familiar with because if they’re, let’s say currently in graduate school, their loans are probably in deferment. And if they had subsidized loans from their undergraduate degree, subsidized doesn’t mean that no interest ever accrued. It meant interest accrued and then the government paid it completely for you. So, it’s very similar to that. It’s just that it might not be paid completely if you are making some kind of payment as well, versus if you’re in deferment and you have unsubsidized loans, of course you’re not making payments, but that interest is still accruing, it’s not being subsidized at all. So, this modified REPAYE plan is kind of somewhere in between, right? Fully subsidized and fully unsubsidized loans. If we’re talking, you know, if we’re comparing to people who are in deferment, which this is not for people who are in deferment, this is for people who are in repayment.

34:09 Emily: We did just cover when you’re calculating the payment that undergraduate and graduate loans are treated differently. But I understand there’s also a difference in terms of the repayment term before forgiveness occurs. Can you clarify that?

34:22 Meagan: With the proposed plan, the undergraduate loans could be eligible for forgiveness after 20 years. Graduate loans would be on the 25-year timeline unless you’re on either pay as you earn, which is a different income-driven plan or new IBR. So, there is a 20-year timeline for graduate loans. It just will not be associated with the new REPAYE or the existing REPAYE. So, that’s something that goes into the planning when we decide, you know, is this new plan going to make sense? Or do we just rely on the existing plans for the shorter term?

Married Filing Jointly or Separately

34:58 Emily: I see. Gotcha. So, because your payment is based on your tax filing <laugh> forms, your AGI, how you file your taxes affects that payment. So, I understand that most people who are married, most Americans who are married file jointly, it kind of makes sense calculation-wise for most people. But student loans are one of those areas where it can throw a wrench in that, and some people do choose to file separately. So, what is going on with married filing jointly versus married filing separately? And how is the modified REPAYE plan treating that?

35:29 Meagan: Right. Yes, so you’re exactly right. Filing taxes as a married couple, normally you’re going to be filing jointly. There are a lot of tax advantages to filing jointly with a spouse. Main reasons to be filing separately would be if there are IRS debt situations with a spouse that you want to exclude from your situation, if you’re going through a separation or a divorce. Those are some big main reasons, but also student loans are becoming a large reason why people consider to file separately. And that is because when we’re on an income-driven plan, the payment is based off of your adjusted gross income that pulls from your tax return. So, if you’re filing taxes jointly, then the Department of Education is going to want to know what your household income is because you filed jointly with your spouse. So, even if it’s just your loans, the payment is going to be based off of the household income, which can be a problem for folks, especially, I mean for a number of reasons.

36:29 Meagan: It will make the payment higher if your spouse has income. It weirdly makes it seem like your spouse has to be contributing to your loans even if you went into a relationship with the understanding that it was your debt. So, it can create some issues there. And so there is a solution to this. Filing taxes married separately, depending on the plan, will allow you to exclude spousal income. So, that is a big advantage for a lot of people who are pursuing an income-driven plan or forgiveness because it keeps the payment just based off of their income. It keeps the payment lower, so it’s maximizing the forgiveness path. The current REPAYE plan as it is right now does not allow you to exclude spousal income regardless, which is kind of stinky. So, we’d have to revert to either PAYE, the pay as you earn plan, income-based repayment, either the new or the old IBR, or income-contingent repayment.

37:32 Meagan: Those other four income-driven plans allow you to keep the payment off of your own income as long as you’re filing taxes separately. REPAYE currently does not. Now, bear with me. The new revised REPAYE plan would then allow <laugh> this to actually be the case for REPAYE to exclude spousal income. So, that is a big deal because that’s been the one plan that, you know, has been an issue for folks where maybe they wanted to be on REPAYE for whatever reason, it was the cheaper payment option for them. But it requires you to include spousal income. The revised REPAYE plan that could be coming out is going to operate like PAYE, IBR, and ICR. So, that is a big advantage because it allows folks to have that benefit and, you know, have all the other benefits that come along with this new REPAYE plan.

Consider What’s Best for You

38:31 Emily: Yeah, thank you so much for that clarification. Is there anything else that we should know about the new proposed REPAYE plan?

38:40 Meagan: So, one just word of caution is I think if this plan does get approved, I hope it does, I think it could be a really great option for a lot of people, but I know it’s going to be positioned or it’s going to be talked about as if it is the best plan for anybody. That is not necessarily the case. So, what I mean by that is we talked about how it could make an income-driven payment a lot less. It could allow you to exclude spousal income. It could have a 100% interest subsidy. So, there are a lot of benefits to it. But one big downside is if you have graduate school loans, it is a 25-year timeline to forgiveness. That is five extra years of repayment compared to the existing pay as you earn plan and the new IBR plan.

39:34 Meagan: So, that’s something that really needs to be weighed because if they come out with this new plan, they do plan on phasing out pay as you earn, which is the 20-year timeline. They still would have new IBR, but to be eligible for that plan you couldn’t have borrowed before July of 2014. So, it’s limited to newer borrowers. So, if you’re someone who borrowed before 2014 and you value maybe being done with your loans or being done with forgiveness in 20 years instead of 25, then the new modified REPAYE plan, even though it’s cheaper, like maybe a little bit cheaper per month, that may not outweigh the extra five years of repayment. So, that’s something to just be aware of is it may not be the best plan for everybody. So, it still warrants some careful consideration.

40:28 Emily: Yes. Thank you so much for adding that. And I’ve grown a new appreciation for your profession from listening closely to the Student Loan Planner podcast over the last handful of months because there are so many more complexities that I, even as sort of a person in the financial space, but not really, you know, following student loans really closely. There are so many more complexities that I was not aware of. And so I say for anybody for whom your student loan repayment is a very high stakes decision. A lot of money involved, a lot of income, a lot of debt, I really think going for a plan from you all or from a similar organization is going to pay off. Like for some people, I know there have been examples on the podcast where people were not aware of some of the forgiveness options available to them, and they are forgiven hundreds of thousands of dollars that they would not have otherwise been able to do. Now, if you have $10,000 of student loans, this is not necessarily a high stakes decision for you, but really if it is a high stakes decision for you, it’s worth getting a professional to advise you on this. So, that’s my little plug for you all for Student Loan Planner, mid-podcast.

41:33 Meagan: Thank you.

Changes to Rule of Thumb

41:33 Emily: So, having gone through the, you know, many of the terms of this modified REPAYE plan, is there someone for whom this makes a lot of sense? How has the rule of thumb that we discussed earlier been updated with this new plan as an option?

41:47 Meagan: Mm-Hmm. <affirmative>? Yep. If you’re someone who’s working towards PSLF, this rule of thumb will be different for you. So, keep that in mind. There are greater chances of you being eligible for PSLF, it making sense to go towards PSLF, even with smaller balances. So, this would be more of a rule of thumb for those that are not doing PSLF but are interested in the longer-term forgiveness. Previously, our rule of thumb was if your balance was two times your income, then forgiveness is definitely going to mathematically make more sense than trying to pay the loans off. Then we had the COVID forbearance happen, and 0% interest for a long time and we started to get a little more conservative with that number and saying maybe it’s like one and a half times your income because the federal student loan system is kind of interesting right now. We don’t know what’s going to happen <laugh>, they have a lot of flexibility to, you know, make student loan repayment better.

42:48 Meagan: And now, with this new revised REPAYE plan proposal, we’re starting to think that it could be, if your balance is around the same as your income, especially if you have a large household, if you have, you know, a couple kids and you’re married, then pursuing longer-term forgiveness might actually make more sense even if your balance is about the same or just barely above your income. So, it’s worth checking out, don’t write it off until you run the numbers. And then you can weigh the pros and cons of going both routes, but certainly don’t write it off before you take a look at it if you’re kind of in those balance ranges.

43:27 Emily: Okay, so quick restatement is if your income, and now right now we’re talking about your career income, we’re not talking about your grad student stipend.

43:35 Meagan: Yeah, correct.

43:35 Emily: Not even necessarily your postdoc salary, but your career income is, let’s say in the first year that you have that quote unquote real job. If it is around or less than your student loan balance at that time, that’s when you should be taking a look at this plan and possibly some of the other plans as well, depending on those ratios. If your income far exceeds your loan balance, mm, probably the standard plan most likely is going to be good for you.

44:00 Meagan: Yeah.

Should Current Students Consider this Plan?

44:01 Emily: Okay. Now we’re going to get into what I think is the super, super interesting part of this interview. Because so far, we’ve been learning about this modified REPAYE program generally, but what nobody is talking about <laugh> is what should current students do? Should current students be considering this plan?

44:22 Emily: Nobody’s talking about this. So I want to know, and we have a few different ways of asking this question. So basically, what I’m talking about is for people for whom deferment is an option, should they instead, what are the advantages of perhaps enrolling in this new proposed REPAYE plan versus sticking in deferment? And so obviously there are going to be different considerations for different people. So, we’re going to talk through a few of these different scenarios. Let’s talk first about someone, let’s say either a single person or someone with a family, but their income is lower than that 225% of the federal poverty line that we talked about earlier. Now we’re not giving advice because this is a podcast <laugh>. What are the thoughts about someone who has that level of income?

45:03 Meagan: Yep. So, thoughts there are that if you were to enter the new revised REPAYE plan, your payment could be as little as $0 a month. So, and that that is a legitimate income-driven payment. It counts towards the forgiveness timeline. If you were full-time, you know, working 30 hours or more a week, that could be an eligibility for public service loan forgiveness as well. So, that’s good as far as getting you on track for loan forgiveness and kind of getting free credit in a way. But what’s also good to consider is if maybe you’re unsure about loan forgiveness, you’re not too sure if that’s going to be the path for you, this could still make sense to get on the new REPAYE plan because it’s going to have that 100% interest subsidy. So, instead of your balance growing while you’re, you know, finishing this time period, this training period, it will be staying at the existing balance that it is today.

46:04 Meagan: So, let’s say you decide five years from now, 10 years from now, you know, forgiveness wasn’t going to be the route. Well, if you were on REPAYE all through this training period, even with your income being really low, your payment being zero, you’re paying back what you owe today. You know, the current principle and interest versus paying back what has accrued on that balance. Because the unsubsidized loans will be accruing while you’re in deferment. And so that just means interest is growing on your balance. So that’s a significant reason to consider going into this this new REPAYE plan if compared to going into deferment.

46:46 Emily: Yeah. So, let’s tease out the different types of loans you might have now. If you had subsidized loans, let’s say a hundred percent of your loans were subsidized, the advantage of going into this particular repayment, as I understand, would be then that you, and again in this scenario, we’re not making a payment because the income is low. You’re not making a payment, but you are accruing months and years under this repayment plan. So if you do end up choosing to go an IDR route and going the whole forgiveness plan, you have many more years that you’ve been in repayment even though you’re making that $0 payment. And there’s no advantage either way with the interest because it was going to be subsidized anyway. Now, if you had unsubsidized loans, throwing that into the mix, if you choose deferment, those loans are accruing interest. But if you choose this modified REPAYE plan, and again, your income is below this threshold level, you’re paying zero, which means that effectively your loans have become a hundred percent subsidized during that period of time. It looks like a for sure advantage for someone who holds unsubsidized loans and somewhat of an advantage for someone even with subsidized loans.

47:52 Meagan: Mm-Hmm. <affirmative>. Yeah, there’s an advantage either way. And it, you know, this new REPAYE plan makes deferment look very unattractive for a lot of reasons. There’s not a lot of advantage to deferment anymore. And even if you had a payment kick in, keep in mind, it’s a portion of your income. So, you gave me a good example before we had started this on, you know, maybe at most someone’s getting a stipend of about $45,000.

48:23 Emily: That’s real high-end people. Really outside.

48:27 Meagan: <Laugh>. So, we’ll go with like the highest number, which will give us the worst-case scenario payment-wise for this new REPAYE. That would be about 90 bucks, a hundred bucks a month. So, not too bad. And if you’re closer to let’s say 35, you know, $35,000 for your stipend, that’d be closer to maybe almost $10, $20 a month. So like, there’s less of a reason now to go into deferment. Because usually the first kickback I’ll get for that is, well, you know, I cannot afford a payment. I think you can afford $10 a month <laugh>, if it’s going to save you this amount of interest later, I think you can afford $10 a month or zero. Everyone can afford $0 a month <laugh>.

49:12 Emily: Right. So, if you’re under that 225% of the federal poverty level, it’s like, okay, your payment was going to be zero anyway. Awesome. If you’re above it, as you said, generally speaking for grad students, it’s only going to be slightly above. And if we’re talking about undergrad loans, let alone, that’s only 5% of your discretionary income for the calculation. And so, it could be just a few dollars, as you said, a few dollars, $10, $20, $50 if you had a particularly high income a month. And so, really in that case you’re making these small payments, but what you’re gaining is the interest subsidy on the remaining amount of interest that’s accruing each month and those years of payment towards this IDR plan. Is that right?

49:48 Meagan: Mm-Hmm. <Affirmative>, yes.

49:50 Emily: So, you can think about it as paying this small cost for those particular benefits. Now if you didn’t think for whatever reason that that was an advantage for you, maybe your loans are all subsidized, for example, whatever the case may be. Maybe you don’t think that small payment is worthwhile, but it is something to at least think about and consider and not just default into deferment as we have done for so many years in the past. Thank you so much for stating that.

Can You Be in Repayment and Still Taking Out Loans?

50:14 Emily: And then let’s think also about someone who, because this question might come up. So what about graduate students who think that there’s a possibility that they may be taking student loans out at some point during their graduate degree? Either they know they’re going to for sure, or do they think, “Oh wow, this is a possibility if x, y, z happens, I may take out a loan.” Is it even possible to be in repayment and still taking out student loans? How does this work?

50:39 Meagan: It is not. Yes and no. So, it depends. It always depends. But if you’re taking out loans for your current graduate degree, those loans in particular that are associated with that graduate degree cannot go into repayment until post-graduation. Your undergraduate loans can be. They can go into repayment. They can take advantage of maybe this interest subsidy or the forgiveness clock getting started. But loans for your current degree cannot. So, that’s one maybe downside for those who are borrowing.

51:12 Emily: Okay. So, let me restate. So, let’s say we have a current graduate student. The loans that they took out for their undergraduate degree could go into repayment if they want them to, or they can choose the deferment route.

51:21 Meagan: Mm-Hmm. <affirmative>.

51:22 Meagan: Loans from a previous graduate degree, maybe a master’s program, same deal. But any loans that are being taken out for the PhD program, let’s say that they’re currently in, those have to stay in deferment for the time being, until that degree is done? Yeah.

51:37 Meagan: Correct. Mm-Hmm. <affirmative>. Yep. You got it.

51:39 Emily: Excellent. So we talked earlier, Meagan, about how, you know, this is still <laugh> a little bit tenuous and so forth. How likely is it do you think that this is going to come into effect as stated? Or do you think there are going to be edits that we’re looking at over the coming months?

51:55 Meagan: I don’t think there are going to be a lot of edits. I do think this is very probable. So, I do think that they’re going to be implementing this. If there are any proposed changes, I don’t think they’re going to be to these big ticket items that we’ve already discussed. I think they would be like really minute changes. But stay tuned. We will keep people posted <Laugh>.

52:15 Emily: Absolutely. Again, follow Student Loan Planner anywhere you like. Especially their newsletter, their podcast. Meagan, thank you so much for sharing your knowledge with us. I knew I could not get this information from anyone else, so I’m so glad that you were able to come on the podcast. Thank you so much!

52:31 Meagan: Of course. Thanks for having me and letting me nerd out as usual, <laugh>!

52:35 Emily: Excellent.

Outtro

52:41 Emily: Listeners, thank you for joining me for this episode! I have a gift for you! You know that final question I ask of all my guests regarding their best financial advice? My team has collected short summaries of all the answers ever given on the podcast into a document that is updated with each new episode release. You can gain access to it by registering for my mailing list at PFforPhDs.com/advice/. Would you like to access transcripts or videos of each episode? I link the show notes for each episode from PFforPhDs.com/podcast/. See you in the next episode, and remember: You don’t have to have a PhD to succeed with personal finance… but it helps! The music is “Stages of Awakening” by Podington Bear from the Free Music Archive and is shared under CC by NC. Podcast editing by Lourdes Bobbio and show notes creation by Meryem Ok.

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