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This Grad Student’s Side Business Pays Twice What Her Assistantship Does

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In this episode, Emily interviews Natilie Williams, a PhD candidate in communication at the University of Missouri, keynote speaker, and author. Natilie established her business prior to starting her PhD and was up front about it with the director of graduate studies from the beginning, which has been to her benefit. At times, her business has brought in double or more what her assistantship pays, which has been vital for her financial health and security during graduate school. Natilie manages her time and schedule fastidiously using a planner to excel in her graduate program and business.

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S12E2 image for This Grad Student's Side Business Pays Twice What Her Assistantship Does

Teaser

00:00 Natilie: I was able to, once you added in book sales, you added in speaking, yeah, I was able, at some point, I made maybe like two and a half times my assistantship, almost three, by being able to do these things and elevate my speaking career. Expand it, so not just speaking, but then also a book.

Introduction

00:25 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 12, Episode 2, and today my guest is Natilie Williams, a PhD candidate in communication at the University of Missouri, keynote speaker, and author. Natilie established her business prior to starting her PhD and was upfront about it with the director of graduate studies from the beginning, which has benefitted her. At times, her business has brought in double or more what her assistantship pays, which has been vital for her financial health and security during graduate school. Don’t miss Natilie’s description of how she manages her time and schedule to excel in her graduate program and business.

01:35 Emily: I have a gift for you if you’re not yet subscribed to the Personal Finance for PhDs mailing list. At the end of every interview, I ask my guest to give their best financial advice for another early-career PhD. 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. The document is even organized by topic so you can easily see which type of advice is most popular. I invite you to join the mailing list to receive access to this document through PFforPhDs.com/advice/. I hope this quick, powerful resource will help you up-level your finances this summer! You can find the show notes for this episode at PFforPhDs.com/s12e2/. Without further ado, here’s my interview with Natilie Williams.

Will You Please Introduce Yourself Further?

02:38 Emily: I am delighted to have joining me on the podcast today, Natilie Williams. She is both a PhD student and a professional public speaker and author. And so I’m really excited to learn how she’s managing her business as well as her career as a graduate student. So Natilie, welcome to the podcast. Thank you so much for volunteering! And would you please tell the listeners a little bit more about yourself?

02:58 Natilie: Absolutely. Thank you so much for having me. I’m super excited. I am a fourth-year doctoral candidate. I’ll actually graduate in just two months, so I’m very excited about that. So, I’ll graduate in two months. I am at the University of Missouri in Columbia, where I am finishing up my PhD in Communication with a focus in Identity and Diversity, and also maintain an assistantship there. I actually recently accepted a professor position in the Midwest. And so I’m really excited about that. And I also have the privilege and the honor to serve as a keynote speaker across the country on student leadership, collegiate success, and academic and professional development. And then that wasn’t enough for me. I also wrote and published a book called Innerview (I N N ER): Lessons in Leadership. And so, really excited about the book. And so, it looks at how we can use moments of reflection in order to enhance ourselves as leaders.

04:00 Emily: Wow. I can already tell, I wish we had another interview to do all these other topics on like, and actually hear from you and your, you know, the main topics that you speak about because that sounds absolutely fascinating. We’re going to keep it more focused on like you as a graduate student and having this business and how you’re doing both of those things at the same time. Hopefully get some good gold nuggets for the listeners who also have businesses that they want to run as well as being graduate students or PhDs. But congratulations on your faculty position! That’s really, really exciting. And yeah.

04:29 Natilie: Thank you.

Getting Into Public Speaking

04:29 Emily: So, that’s awesome. Let’s kind of back up a little bit. And how did you start speaking professionally? Did this come like before graduate school or since you started graduate school? How did you come to that?

04:40 Natilie: Absolutely. So I started speaking professionally about three months after I received my master’s degree. So I had a really mind-blowing experience. I did my master’s thesis on a TV show called A Different World, which was a spinoff of The Cosby show. And it was a very much so like a staple in like the Black community. Like that show ended May of 1993 and it is still talked about now. People still dress up as the characters for Halloween. And so I did my thesis on that show, and I got surprised by The Steve Harvey show with actually meeting the cast because they did a reunion. I talked about my thesis and it was just like this big national, even international thing.

05:20 Natilie: And so where I went for undergrad, Central Michigan University was like, “Hey, we have this freshman orientation leadership program and we want you to come and serve as a keynote speaker. And we want you to talk about your old leadership experience you had on campus as an undergrad. And we know that you just had that really cool experience with A Different World. Do you think you could tie that in as well?” And so, I did it. I keynoted in front of about 300 plus people. And at the end of that keynote, I had lines and lines and lines of students waiting to talk to me afterwards. And that was the moment where I realized it was more than just me being good at speaking, but it was truly a part of my purpose. And then I eventually learned, maybe months after that, the business side of speaking and was able to start it as a business and turn it into a very much so awesome, successful career path.

06:13 Emily: And so, I understand from our prior conversation that you had some years in the workforce between when you finished your master’s and when you started your PhD. So that’s kind of when you were learning, as you said, the business of speaking and growing that part of it. Is that right?

06:27 Natilie: Absolutely. So with the master’s, I was working for a corporate organization part-time and then once I graduated, they actually hired me on full-time. And when they hired me on full-time, I worked there for about two and a half years. So during the time where I started my speaking career, I was working in corporate and I was actually teaching as an adjunct at night because I was still living in the same town where I got my master’s degree from where I also had had an assistantship that paid for my master’s degree. And they were like, Hey, we know you’re still here in town. You did really good work when you were teaching for us. You want to come do it at night? And so I was really able to use my corporate job to fund my speaking career to start funding the business, right? The website, the photoshoot, different things of that nature. And I had my adjunct position as well as some extra savings. And it got to a point where I was working corporate where I was like, I don’t want to do this anymore. I’m not a fan of this position. And I actually realized that I’m a geek. I love to read and write. I want to go back to school and get a PhD and still maintain and enhance my speaking career.

Speaking in the Collegiate Circuit

07:34 Emily: That’s a great thing actually about sort of side hustling or having your own business generally. It can be on the side of different full-time things. You can have transitions in your career and take your business with you as you go through this transition. So that is awesome. And so, your niche about speaking, you said you’re on the collegiate circuit. So do you speak mostly to college students? And you mentioned leadership earlier, like what are kind of the general topics that you speak about? And did it come from that initial engagement or how have you, you know, expanded since then?

08:04 Natilie: So yeah, it’s come from the initial engagement. It’s also come from my own collegiate experience that has really propelled me as a leader and have taken advantage of opportunities and so, and networking. So like mentorship, relationship building, leadership despite trauma, Greek leadership, Black and multicultural Greek leadership, first-year experience. So how do you even plan out your college career? Whereas you can take over the campus, what are some resources and opportunities that you should take advantage of as a college student? So studying abroad, pre-professional programs, networking with professors, and things of that sort. So those include some of the speaking topics, professional development, preparing yourself for your career path. What can you do in college to prepare you for post-graduation? So those are some of the speaking topics. And it’s on the collegiate circuit as well, but I also am starting to do more stuff with high schools and middle schools as well, including like that social and emotional learning component to leadership. So, it’s starting to expand greatly.

Time Management as a Grad Student and Business Owner

09:12 Emily: That’s awesome! Now I want to hear about you as a graduate student, and also as a business owner. And since you started the business back when you had a full-time job and another part-time job, you probably took some lessons from that in terms of time management and so forth. But I’d love to hear about how you’re applying them now as a graduate student. Like, how are you managing your time and your energy to make sure that you’re doing both these things well?

09:35 Natilie: Absolutely. So I believe it’s time management and also time prioritization and time stewardship. And so figuring out what’s important right now and how much time do I need to allocate to it. But for me, coming in as a graduate student, working on a PhD was really new to me because I had never done that before of course. And so my first thing was, I need to understand what’s the lay of the land. How much time do I need to dedicate to this because it was in-person and it was full-time? And so for me, I really had to figure out what I didn’t know. And I looked to upperclassmen to see how much time are you all spending on readings and coursework? What’s the writing load like? And so I actually sort of, kind of, when I first started the doctoral program, I took very few speaking engagements that first semester, because I was like, I need to focus on this program.

10:31 Natilie: And once I learned that I could balance my coursework and my speaking career, it was all she wrote after that. So it would get to a point where I knew my schedule perfectly. I knew when I had to teach. I knew when I didn’t have to teach. I knew how long it would take me to get to the nearest airport. So I was about two hours from the nearest airport and it would be sometimes I would literally get done with class as a doctoral student. I would have my suitcase packed in my car. I would drive two hours to the airport. I would fly out to go speak. That same day, when I got done off the stage speaking, I would fly right back, finish work as a doctoral student, maybe teach that morning as my assistantship, and I would do it all over again. So I really learned my schedule perfectly. And I would do my papers sometimes on the airplane, do my class readings in the back of the Uber as I was going to my hotel to speak. I would sometimes get to my hotel the night before, so I could do my coursework. And so I really got the timing down perfectly, and I always keep a planner with me. So I knew due dates for assignments as an instructor, and due dates for assignments as a graduate student as well.

Schedule Flexibility

11:47 Emily: I’m not that familiar with like your field. So like, what is the nature of the research that you’re doing? Like is a lot of thinking and writing and reading? Or do you have to like, be certain places aside from like the teaching component? Like, do you have to be certain places at certain times? Like how flexible is your schedule, I guess?

12:02 Natilie: Very flexible schedule. So, as a doctoral student, I study communication. Specifically, I’m more of an interpersonal and family communication scholar. Specifically, I look at what’s called voluntary care relationships. And so those are relationships that have no biological tie, but because we say they’re family, they’re family. So your best friend that you consider your sister friend or your childhood nextdoor neighbor that you may have considered your cousin growing up because you all have known each other for the past 20 years. Godparents and things like that. And so I look at that, but specifically within the context of Black families and Black people and the validation process of those relationships, the impact of them, and the benefits. And so, I’m also a qualitative scholar. So I spend the time interviewing people and things of that sort. So that’s my research interest. And when you’re doing the interviews, you can, you know, do them over the phone and things like that. So, I had a lot of flexibility except for the fact that my coursework was in person. So I just, I knew how much time I had to drive to the airport right after class. I knew how much time I had to board the airplane. So I really just really got it down to a science.

13:16 Emily: That’s amazing. I don’t <laugh>, I don’t think I’ve ever gotten near that degree of specificity with like my time blocking practice. But it’s because I have much fewer, I think, constraints on my life, especially prior to becoming like a parent. Like once you have like that the parenthood stuff going on, I know it’s like a thing that’s said like, you know, mothers become like the most efficient workers you’ve ever seen because they have like, so limited time to like, do their work and then they have to do these other things. So like, but even that, like, I’m not to the degree that you just described, like time blocking. So I really like admire that. It sounds like an amazing skill to have.

Speaking Engagements During COVID

13:53 Emily: And how, like, during this time that you’ve been a PhD student, you know, you mentioned that you took very few speaking engagements at first when you were kind of getting the lay of the land. But then how has your business grown over the past few years? And I’m especially wondering how things have changed with COVID, because you just mentioned you were doing in person speaking. I assume that at least changed for some amount of time for a while. So how have things been going, you know, since starting your PhD?

14:15 Natilie: So as soon as I got the understanding of my schedule and the timing, I hopped right back on that road and it, I just, I knew if I had class, if I didn’t have to teach or my own classes on a Thursday or a Friday, I knew Wednesday night I could go fly out and come right back. And so I started to just be intentional about the different conferences I would present at, in front of students. But then also too, with the decision-makers present, understanding how many decision-makers will be present during that networking piece. And that networking piece, allowing decision-makers to meet me, sit in on my sessions, get to learn more about the learning objectives with my presentations, whether it was a workshop or a keynote, that really allowed me the opportunity to continuously to grow on the speaking circuit.

15:02 Natilie: And with the topics that I speak about, leadership and student leadership on the collegiate market, it’s not as many young black women doing what I’m doing. And so, I’m standing out, right? And I’m doing very well with speaking as far as the mechanics of it. And I was able to and still am able to get my name out there. And so that allowed me to grow my speaking engagements. And you also mentioned about COVID. Well, when COVID hit, I was in my mind, I first thought that this was literally the end of my speaking career. And I said, well, you know what? I had a great run. I did a great job. If that’s it, I went out with a bang. And I actually saw my business boom, shortly after. Like months after. And my mind was blown. I’m like, wait a minute. But I realized that these schools were like, we still need people to encourage our students.

15:53 Natilie: We still need people to give our students the how to. It’s now a virtual space. And so I was able to sometimes do two engagements in one day I could do one in California, one in Florida virtually and not have to leave and not have to also invest in travel expenses. And so, 2021 was probably one of my most profitable speaking years yet. And I think this year is probably on top to beat that. It’s definitely on top to beat that. And so, yeah, I was completely blown away by it, completely blown away. And once I finished coursework for my PhD, it was <laugh>, it was all she wrote. I was able to do a lot more. So I didn’t have to be in the classroom as a student. I just had to teach. And so I was able to have even more free time to get out there and to maximize my opportunities to get in front of my target audience.

16:47 Emily: Yeah. I’m so glad that your business has grown through COVID as well. I’ve observed the same thing. My client base has expanded. It’s so much easier to set up speaking engagements without having to do all the logistics of the travel. And you know, my schedule’s a lot more open, as you were saying, because the travel’s not there. So I’m free to accept engagements that are closer in time together than they used to be. And it’s been strange because I had the same reaction like, oh I can’t travel anymore. I’ve got to pivot. <Laugh> like, what else can I do in this business aside from speaking, because I’m clearly not going to make money from speaking anymore. No, that was not at all the case. Once people kind of got their bearings, the bookings started coming in again. So it’s really been like amazing and I’m so grateful, and grateful that it’s happened the same way for you.

17:27 Natilie: Thank you!

Commercial

17:30 Emily: Emily here for a brief interlude. Would you like to learn directly from me on a personal finance topic, such as 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 2022-2023 academic year. If you would like to bring my content to your institution, would you please recommend me as a speaker to your university, graduate school, graduate student association, or postdoc office? My seminars are usually slated as professional development or personal wellness. Ask the potential host to go to PFforPhDs.com/speaking/ 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.

Business Income vs. Stipend

18:52 Emily: Let’s talk about money. So, you have an assistantship. I don’t know if you want to share how much you make through that. Feel free if you’re comfortable. But how does your, like the money that comes in through your business compare with like your stipend?

19:05 Natilie: Yeah, so with an assistantship so Hey, when I left corporate, I left corporate, I quit the job. I had saved up $15,000 over the timeframe that I had worked there. Especially when I knew I wanted to leave. I was like, well, I’m no fool. I need to, you know, I need to be able to live. And so I saved up $15,000 and then I got this assistantship. And this assistantship was paying me literally a third, one-third of what I made in corporate. And for me I’m like, I will figure it out. Like that’s one promise I’ve made to myself is that I will always be okay financially. Legally, financially, correct? And so yeah, so with the assistantship I was making like a third of what I made in corporate.

19:50 Natilie: And with speaking, I was able to, there were some times where I was literally making whatever my assistantship was, I could make double that with speaking. So I was literally making double my assistantship with speaking and still had my assistantship. And so for me that allowed me to realize like, okay, I can do both of these things well, and I’ve always been a saver and I knew that I would need, you know, I would need to live after I graduated. So I was able to prepare for life post-Graduation. And then also writing a book while I was in the doctoral program and releasing the book and also having book sales come in. So, I was able to, once you added in book sales, you added in speaking, yeah, I was able, at some point I made maybe like two and a half times my citizenship, almost three, by being able to do these things and elevate my speaking career. Expand it, so not just speaking, but then also a book. And so, yeah.

20:54 Emily: It sounds to me like, you know, going into your PhD program, it was never like a question that you would give up the speaking. Like, it’s part of your career now. But I’m just wondering like, had you come into graduate school and not had a side business, is your stipend even enough to live on? Like, are your peers living on it? Or do they all have like side stuff going on or taking out student loans or depending on family members? Or like what’s going on financially in your program, I guess?

Transparency with the Department

21:19 Natilie: Yeah. Most of them, they definitely, they hustle. When I say hustle, I don’t mean it in a bad way. But they’ll take another job. They’ll teach somewhere else. They will, some of them have maybe like a significant other, so they’re able like to split costs. But for the most part, we definitely, as part of our program, we look for other ways to bring in that additional income. And so for me, I came in as a speaker and I made sure that that was something I promised myself that I would not give up, but I wasn’t sure how the department was going to react or respond to it. Because I never wanted them to think that like I was not focused on the program. And I listened to one of your previous episodes where you were talking about that, where it’s frowned upon sometimes.

22:07 Natilie: And so, I came into the department and told the Director of Grad Studies for the department, like, Hey, I do speaking. And so there would be some Fridays where they would have, what’s called colloquium where like, it’s like a big research conversation. And I’m like, yo, I’ve got to go Denver to speak. I can’t make it to colloquium. And luckily the Director of Grad Studies was like, you know, I’m going to count you speaking as professional development since you already have your hand in your career. We’re not going to count it against you, that you aren’t at colloquium, right? Like you already have your hand in your career. We’re going to support that. And I was so happy that she was so generous because she could have been like, no, you need to be here. I can say for like some of the rest of the department more so like peers, I didn’t really let them know too much.

22:56 Natilie: I would just say like, oh, I have a leadership conference to go to. I didn’t mention to my peers that I was the keynote for the leadership conference. But once I saw that it was a comfortable space, I was able to let them know. And then once they saw that like I wrote a book and so they were like, oh, wait a minute, you really do this. Like you wrote a book like you are on a book tour, wait a minute. Like, you know, so once I felt comfortable, I didn’t mind sharing. But I had to be sure that it was a safe space because I was not going to allow anybody to sabotage this career that I had worked so hard for.

23:28 Emily: Yeah. I think this makes a ton of sense because when you have a business, a side business or whatever you might call it, that’s so like out there and public-facing, and especially it’s in higher ed <laugh> as well. Like, it’s something that’s probably impossible to conceal. Like sometimes with my podcast guests, they don’t want to let people know about it, and they can not let people know about it. They can do their side hustle on the weekends, in the evenings. It can be just a private thing. But I think it was really smart of you since you were already doing it when you came into graduate school just to be completely upfront and say, this is what’s happening. And I’m really glad too, that, you know, they worked with you on that. It also makes sense to me that what you’re doing is professional development enhancing your career. So, I’m really glad they gave you that, you know, a little bit of leeway on the attendance.

24:11 Natilie: It was difficult. Because it got to the point where like, I was so protective of my speaking career. Like I was not accepting my colleagues on social media because I didn’t want them to see that, like, you know, I’m speaking. Or if after class, as a student, I go hop on a flight to the airport and I post on social media that I’m on a flight and they’re like, oh, well, what is she doing there? Is she going to make it back in time to teach? And I would, but I never wanted people to question. I never wanted people even to have the opportunity to try and, you know, speak against or speak negatively or try to talk about what they didn’t have clarity on, you know, so. But now it’s all good.

Advice for Working on a Business in Grad School

24:47 Emily: Yeah. You proved yourself in your program and it came out that you were doing all of that with the business on the side, and being successful in both. So yeah, I’m really glad that you had that positive reaction. Is there anything else that you want to share with us about your business or your role as a graduate student before we wrap up?

25:03 Natilie: Absolutely. As a graduate student, if you come in with a business, you don’t necessarily have to lay it down by the wayside in order to focus on your doctoral studies. You can do both and you can do both well. I think it’s about coming into a department and figuring out how does this operate? And then also allowing yourself to have as much time as possible to work on your business and still be a person because doctoral programs are hard for no reason. But it’s possible to maintain both of those things. And if you are like, well, I’m a doctoral student and I want to start a business but I don’t know. Try and think about what skillset do you have that you can actually monetize, and that you can do it in a way in which you’ll have time to dedicate to it. Because you don’t want to start a business and you can’t serve your customers well. So I could not show up to my speaking engagements half-tired because I had a paper due last night that was 15, 20 pages, you know? So being able to still serve your customers in whatever capacity that you serve and try and figure out how you can monetize your skillset and do a ton of research, right? If you are interested in speaking, you can look up other speakers that may be doctoral students and figure out how did they do it. So, you never have to recreate the wheel.

How to Reach Natilie

26:22 Emily: How can the listeners find you if they want to learn more about your career or anything else?

26:27 Natilie: Absolutely. I would love for your listeners to follow me on social media and let me know that they found me from the podcast. And so, I can be found on Instagram @NatWillSpeak N A T W I L L S P E A K. And so that is @NatWillSpeak on Instagram, on Twitter, on Facebook. My website, www.natwillspeak.com. And I’m available if you know, they ever want just drop in and say, hi. And my book Innerview, I N N ER, Lessons in Leadership is available on my website, NatWillSpeak.com, and it’s also available on Amazon. And I really kind of lay out even more in the book of how I was able to start the speaking career and elevate it.

27:13 Emily: Yeah. Fascinating. I love that URL slash handle. Your name lent itself so well, that’s amazing.

27:18 Natilie: Thank you. <Laugh>.

Best Financial Advice for Another Early-Career PhD

27:20 Emily: So, the question that I ask all of my interviewees before we wrap up is what is your best financial advice for another early-career PhD? And it could be something that we’ve already touched on in the interview, or it could be something completely new.

27:33 Natilie: Know what you have coming in financially, know what you have going out paying bills. And you can do that for as in a budget. Budget, your money, so, you know, again, what you have due every month, what you have coming in, and that will really allow you to take more ownership of your finances to say, Hey, I realized that I have $800 leftover every month. I’m doing pretty good. I can start saving or investing. Or it may make you realize I need $800 more a month. I don’t have enough. Do I need to pick up another position? Do I need to try and apply for a fellowship or a scholarship or outside grants or things of that nature? So, I think that me budgeting, learning to budget my money, I budget down to the dollar. Not to the cents, but to the dollar, and me doing that, I was able to take ownership of my finances and know at all times where I stood. And checking bank accounts daily, making sure that, you know, what’s what, did this bill get taken out? So just knowing where I always stood financially gave me the knowledge to make the best-informed decisions financially as a doctoral student.

28:38 Emily: Well, Natilie, it’s been such a pleasure to meet you and thank you so much for sharing your experience and everything with the listeners! Thanks for coming on!

28:45 Natilie: Thank you so much! Thank you!

Outtro

28:52 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? I have 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.

This Muslim Graduate Student Found Halal Investing and Now Teaches It to Her Family and Friends

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In this episode, Emily interviews Joumana Altallal, a Muslim graduate student at the University of Michigan. Joumana began investigating personal finance in the summer before she started graduate school to prepare to manage her stipend. In just her first year on a stipend, she has saved a full emergency fund, established credit, and funded a Roth IRA. Joumana shares what she’s learned about Halal investing, a strain of socially responsible investing for Muslims that has become much more accessible in recent years with the rise of robo-investing. Joumana’s enthusiasm for personal finance and halal investing, in particular, has spilled into her relationships with her family and friends. At the end of the episode, she gives a wonderful articulation of the role her finances play in the world.

Links Mentioned in the Episode

Halal investing Muslim grad student

Teaser

00:00 Joumana: I think taking a halal approach to investing and saving money is always really grounding for me in that it acts as this constant reminder, that at the end of the day, my finances are meant to serve an ethical role in the world. So, they’re not just a fulfillment for my own needs and desires, but that they also function in this greater, sort of just way in the world.

Introduction

00:28 Emily: Welcome to the Personal Finance for PhDs podcast, a higher education in personal finance. I’m your host, Dr. Emily Roberts. This is season six, episode 13, and today my guest is Joumana Altallal, a Muslim graduate student at the University of Michigan. Joumana began investigating personal finance in the summer before she started graduate school to prepare to manage her stipend. In just her first year on a stipend, she has saved a full emergency fund, established credit, and funded a Roth IRA. Joumana shares what she’s learned about halal investing, a strain of socially responsible investing for Muslims that has become much more accessible in recent years with the rise of robo-investing. Joumana’s enthusiasm for personal finance and halal investing in particular has spilled into her relationships with her family and friends. You won’t want to miss her wonderful articulation of the role her finances play in the world. Without further ado, here’s my interview with Joumana Altallal.

Will You Please Introduce Yourself Further?

01:28 Emily: I’m delighted to have joining me on the podcast today, Joumana Altallal. She is a current graduate student and also a Muslim graduate student. So, we’re going to be talking about a particular version of socially responsible investing today, which is halal investing. So, Joumana, thank you so much for coming on the podcast today. And will you please introduce yourself a little bit further to the audience?

01:49 Joumana: Hi, Emily. Thanks for having me today. My name is Joumana Altallal. I’m a second-year master of fine arts student in poetry at the University of Michigan. My family and I immigrated to the U.S. In 2003 and were resettled in Charlottesville, Virginia. So, that’s actually where I grew up since I was about six years old. And I would say my journey with personal finance has definitely been informed by my identity as both a refugee and a Muslim.

02:17 Emily: Yeah. Thank you so much for that. And tell us where you are now and what you’re studying.

02:21 Joumana: Yeah, absolutely. So, I’m at the University of Michigan at the Helen Zell Writers’ Program. So, it’s a creative writing program that is two years with a fellowship year third year. I am a poet, so I’m spending all of my time in writing workshops

02:37 Emily: Sounds fantastic. And you and I actually met when I was speaking at the University of Michigan in 2019, I guess it was, right?

02:46 Joumana: Yeah.

Personal Finance Journey

02:46 Emily: Yeah. So, I met in person, actually, you came up to me with this question about this particular version of investing, and I said, “I have no idea about that. Will you please come on the podcast and teach me and my audience about this?” So, I’m really happy to have you on today to talk more about that. So, kind of first step, more like background stuff before we get to that particular topic. So, what have you been learning about personal finance and also applying since you started graduate school?

03:15 Joumana: Yeah, absolutely. So, I actually came to graduate school immediately from undergrad. So, I didn’t have much experience budgeting or tracking money in a sort of systematic way before. And although I’d been obviously working throughout high school and college, I was still primarily supported by my parents. So, my financial decisions were definitely limited in that scope. But my interest in personal finance kind of grew out of a hobby that I had. The summer before moving for grad school, I was kind of introduced to the financial independence and early retirement movement through Reddit forums of all places. And I found myself sort of accidentally spending a lot of time reading people’s posts and advice to each other. So, I think part of what’s so great about personal finance forums, I guess, is that they don’t really assume a starting place for anyone, which was really helpful for me. You can ask questions as a beginner or share advice on an experience that you just went through. So, as someone coming from like an immigrant background, I saw my parents really struggle with understanding what things like 401ks were even. And I believe a huge part of that is because workplaces don’t use accessible language to really explain what these investment opportunities are. So, a huge group of people end up being like absolutely excluded from personal finance conversations despite having a right to them.

Financial Independence, Retire Early (FIRE)

04:49 Emily: So, I love that you were sort of introduced to personal finance inspired by the FIRE movement, something I’ve also been kind of getting into recently. FIRE, Financial Independence and [Retire Early]. I’ve actually done a couple, a pair of interviews with a PhD who’s pursuing FIRE in season three of the podcast. So, if people want to check that out, we’ll link that from the show notes. And also some of my other guests have sort of incidentally mentioned being inspired by the movement as well. Would you say that you are pursuing FIRE or going to be pursuing FIRE, maybe once you’re done with graduate school? Or are you just like, “No, I’m just using some of the principles for like general personal finance stuff”?

05:27 Joumana: I think right now I’m using the general principles for personal finance. It feels a little scary to say that I’m pursuing FIRE as a 22-year-old grad student. But that is absolutely something that I would love to one day be a little more stringent in following.

05:45 Emily: Yeah. So, for listeners who aren’t yet familiar or haven’t listened to the other podcasts on the subject. I think the reason why, you know, Joumana and I do not say we’re part of the FIRE movement is probably because we do not have savings rates that top 50% of our income, which is not a requirement to be part of the movement, but definitely something that many people within the movement do. And that’s how you get that, you know, really fast acceleration towards retirement. So, very difficult to carry out that particular aspect of it on a grad student kind of salary, but you can definitely use the broader principles, start using the broader principles that also apply to personal finance. That was really something that came out of my previous interview with Dr. Gov Worker, is that he really sees the FIRE movement as like an entrance into just good personal finance practices. It’s just a particular way to like inspire people to follow through on the stuff that everybody talks about, you know, from decades ago. So, yeah. What have you actually, like maybe things you’ve put into practice within your finances since last summer?

Building Credit and Budgeting

06:44 Joumana: Yeah, absolutely. So, the summer before grad school, my sort of first step into the journey was opening a student credit card through Discover which is something that prior to that I’d never had. So, beginning to build my credit was really important to me. And then obviously knowing that I would be receiving a monthly stipend once I began my MFA, I knew I needed some sort of system to track my income and expenses. So, I know there are apps like Mint that do this automatically, but I actually rely on a sort of extensive Excel spreadsheet that allows me to type things in manually the particular template that I’ve been using for the past year and a half just comes from George Hayward’s YouTube channel. But any, and all can achieve the same thing really.

07:31 Emily: We’ll track that down and put that in the show notes as well.

Emergency Fund and Roth IRA

07:35 Joumana: And the most important step I think after that was really focusing on building an emergency fund that I knew could last me for at least two months, but now I’ve brought it up to six months. And that’s actually advice that my parents have always followed. So, it didn’t feel too strange to me to begin doing. And after that, opening a Roth and beginning to stash away a monthly amount into my savings.

What is Halal Investing?

08:01 Emily: Yeah. Those are a fantastic number of steps to be taking just in like your first year or so of graduate school, especially that six month of expenses emergency fund. Very, very impressive. You must be living well below your means there in Ann Arbor. So, for those of us who like me, had never heard of halal investing before you brought it up. Can you tell us some of the differences between halal investing and maybe, you know, what your average American might be doing for investing?

08:28 Joumana: Yeah, absolutely. So, to kind of backtrack a little bit, in Islam, the word halal just means permissible. So, halal investing is just a faith-based approach to investment management that’s both ethically and socially responsible. Halal investing really just tries to eliminate placing money in interest-based investments and highly leveraged company stocks or in securities of companies whose profit is typically earned from things like firearms, alcohol, or gambling, for instance. So, as you can tell, it’s not just as easy as opening a Roth through Vanguard, for instance, and beginning to save. However, doing the research has really helped me understand what it is I’m doing with my money and how the process works.

09:17 Emily: Yeah. So, maybe to explain like, just a little bit further for the listeners. So, what you’re basically saying is no bonds, right? Because bonds are a debt-based product. So, stocks are okay. But you mentioned that you can’t use companies that are very highly leveraged, so that requires some additional degree of research. So, it sounds like some company stock would be okay, some wouldn’t. And then nothing in these certain categories of “the sin stocks” as they might be referred to. Okay. So, that gives us a basis there. Does that also mean that you don’t use like interest-bearing checking or savings account? Is that correct?

09:55 Joumana: Yes. So, typically I actually won’t put my money into the savings portion of my bank account and I just have it all stashed in terms of the like six-month emergency fund, I just have it in my checking account. Because interest isn’t necessarily something that I’d want on my money, the same way that most people would.

10:18 Emily: Yeah. Gotcha. When I read up about the subject a tiny bit before our conversation, I read that many who are pursuing halal investing actually will end up not investing in stocks at all because of that additional degree of research that’s required. Can you expand on that a little bit?

Halal Investment Companies

10:37 Joumana: Yeah, absolutely. I think for the average person, it can seem a little bit overwhelming to have to do all of this research all of a sudden. But I do think that there are actually a lot more solutions now than there were even just a few years ago. So, there are actually investment companies like Wahed Invest, Amana Mutal Funds, or Azzad and others that kind of facilitate the process of halal investing so that it’s not all entirely on the Muslim investor who doesn’t necessarily always know where to go or where to put their money. So, the way this works is that these companies essentially screen investments and identify companies that meet ethical standards based on halal investing. So, they also do things like help you calculate your annual Zakat percentage, which is just an obligatory charitable payment that has to be made on your earnings every year. And really the good thing with using these companies is that they have tickers that you can use to still invest through places like Schwab or Vanguard. So, realistically your Roth could still be with Schwab like I have it. But these companies by using tickers, these companies just screen all of the investments that you could have and provide you with places that you could potentially invest in.

Compromise: Higher Expense Ratios for Greater Flexibility

12:05 Emily: Okay. So, let me see if I have this right. So, basically, as I said earlier, this is sort of a particular version of socially responsible investing. So, this is a similar process that other socially responsible investing funds would go through, right? There’s a higher degree of screening of the companies that are included according to whatever the principles are that the fund operates under. And so it sounds like these companies that you just mentioned, they have created mutual funds, is that right? That then you can invest in maybe directly through them, but also through, as you just said, you know, other companies just by buying that particular mutual fund. And something that often happens with other SRI funds is that, due to that increased basically degree of work that’s required, the expense ratio is a little bit higher than you might find if you were doing like a standard index bond. Is that correct for like the investment that you chose?

12:54 Joumana: Yes, that’s typically correct. Although I know that companies like Wahed Invest, for instance, rely kind of heavily on robo-investors. So, the percentage is probably a lot lower. But yes, there are some kind of compromises that you make in terms of these investments that you choose to follow.

13:17 Emily: Yeah. So, one of the principles, let’s say, of the FIRE movement that you might come across, and also personal finance more generally, is this ruthless pursuit of low expense ratios on investments. And what expense ratios are for the listener, it’s basically just an expression of the cost of owning a particular fund. It’s expressed as a percentage. So, you know, at Vanguard with ETFs or something, you might get an expense ratio down in the 0.05 or less percentage. So, five basis points or less. They could be as low as that.

13:52 Emily: And then higher expense ratios are like 1%. Like 1% would be like pretty high. And there are many, you know, in between. And usually, with robo-advisors, you would have the underlying expense of the actual fund that you buy. So, like maybe 0.1% or less, plus a fee that the robo-advisor would tax on top of that to basically be managing your investments for you. But it sounds like even within this, you know, halal investing, even among these options, there are various expense ratios that you could be sort of pursuing and choosing among. Yeah, I think it’s one of the downfalls of the FIRE movement that SRI, socially responsible investing, is not talked about that much. And it’s very important to certain people for various different reasons. And so it’s something that is definitely worth, you know, maybe sacrificing a little bit on the low expense ratio side of things to, of course, in your case, be able to invest according to your principles at all. And for other people just being able to invest according to their general values and what they want to be supporting in our economy and so forth.

Commercial

14:54 Emily: Emily here for a brief interlude. I bet you and your peers are hungry for financial information right now, especially if it’s tailored for your unique PhD experience. I offer seminars, webinars, and workshops on personal finance for early-career PhDs that can be billed as professional development or personal wellness programming. My events cover a wide range of personal finance topics, or take a deep dive into the financial topics that matter most to PhDs like taxes, investing career transitions, and frugality. If you’re interested in having me speak to your group or recommending me to a potential host, you can find more information and ways to contact me at pfforphds.com/speaking. We can absolutely find a way to get this great content to you and your peers, even while social distancing. Now, back to our interview.

Halal Investing is Growing and Increasingly Accessible

15:53 Emily: Anything else you want to add about the products or the solutions that are available for halal investing?

16:00 Joumana: I would say that they are definitely doing a better job of reaching out to the Muslim population now. So, I think there’s a growing movement really of young Muslim students, or even young Muslim workers who are really active in the investment community, which is always lovely to see.

16:21 Emily: Yeah, absolutely. It seems like, you know, as you said, robo-advisors are now being involved and robo-advisors are a relatively recent phenomenon in the last five or 10 years. So maybe, you know, the last generation when they were looking into investing they probably saw that, well, the burden was completely on them, right? To do all this research that we were just talking about and that can be, you know, prohibitive, right?

16:44 Emily: For even going that route at all. Like for instance, before mutual funds came on the scene, everyone was like calling up their brokers, buying more of this stock or selling more of that stock. Like that’s a lot of work to be putting in. And we’re so fortunate now to be living in a time when, you know, index funds are available to us. When these highly curated mutual funds are available to us that are, you know, relatively not that expensive. And as you just said, you know, there’s been more and more attention being brought to this. And so, these particular funds exist for your community and that’s really great to hear and very encouraging.

17:17 Joumana: Yeah, absolutely.

17:19 Emily: One other thing that I read about in this article was that, for some Muslims, again, who were avoiding stock investing entirely and of course, bond investing as well they basically had their money just in cash and real estate. Was that the case maybe in generations past?

17:36 Joumana: Yeah, absolutely. I actually still think that it’s overwhelmingly the case for most folks who identify as Muslim in the U.S. And I think so much of that is just the lack of really accessible information about the kinds of investments that are available for adherence of the Muslim faith. And I think most Muslims, especially of an older generation, have this lack of trust in banks or in investment companies generally for various totally rational reasons. But I also think so much of it is just a lack of understanding of what actually your money is doing and how you can still adhere to a principle of halal investing while having your money in places like Schwab or Vanguard, for instance, or in a 401k or a Roth, whatever that may be.

Helping Family and Friends with Halal Investing

18:32 Emily: And have you been, now that you’ve been learning this stuff from Reddit and other places, have you been kind of turning around and spreading that message like to your parents or other family members or other people in your community?

18:42 Joumana: Yeah, absolutely. Once I started learning about it, I would honestly annoy my parents all the time by being like, “Hey, let’s talk about this now, let’s talk about this.” So, I actually ended up helping my mom, once she left the job that she had been working in for about 15 years, to roll over her 401k there into an IRA, actually. And that was sort of a defining moment in my journey throughout personal finance is being able to actually like implement and apply the things that I’ve been learning. Especially when it came to someone like my mom, who I felt like was always on that journey alongside me somehow. So, I’ve definitely been bringing it over to my family. And then in terms of friends, I’ve actually been reaching out to a lot of my Muslim friends and being like, “Hey, let’s have like meetups where we talk about our finances, let’s talk about like our stipends or how we’re dealing with just being in grad school and even just budgeting if we’re not ready to talk about investing really.” So, it’s definitely been a way for me to kind of understand what other people are doing in terms of their grad stipends or the ways that they’re organizing and negotiating the budgets that they have for themselves.

20:08 Emily: That sounds amazing. Has this group gotten much traction?

20:13 Joumana: Yeah, absolutely. So, a lot of the people that I speak to are actually in totally different places. So, we’ll FaceTime occasionally and just kind of touch base about what we’re doing on any like new information that we’ve learned in terms of halal investing, any kinds of opportunities that have opened up. So, it’s definitely something that I’ve been really happy about keeping up with. And it’s definitely been just an absolutely amazing learning opportunity for me as well. Now that I can take it from those Reddit forums into the real world.

20:49 Emily: Yeah. It sounds like you’ve created, I think in the entrepreneurship community, we call this a mastermind, right? A group of people, same people who regularly meet and talk about a certain topic and sort of hold each other accountable and push each other forward towards meeting your goals. That sounds absolutely brilliant. And something that I hope that other people replicate in their own communities or among their own friend networks. Are there any other ways that you would say that your practice of personal finance is different than that of your peers?

21:19 Joumana: Hmm. I don’t know that there are any huge differences really, but I think taking a halal approach to investing and saving money is always really grounding for me in that it acts as this constant reminder that at the end of the day, my finances are meant to serve an ethical role in the world. So, they’re not just a fulfillment for my own needs and desires, but that they also function in this greater sort of just way in the world. And I don’t know, I don’t know if that’s the kind of relationship that many of my peers have been able to cultivate with their finances. I know that many do, I know that many are very interested in socially responsible investments. But yeah, at the end of the day, that is deeply important for me to know about my own finances.

22:11 Emily: Yeah. I think you articulated that very well. It’s very inspiring to hear. I’ve actually recorded another interview on socially responsible investing. I’m not sure if that’ll be published first or if this one will be published first, but in any case, I’ll, I’ll try to link from the show notes to the other one, which is on sort of environmentally focused, socially responsible investing approach. So, these two complement each other very well, I think, in talking about those principles.

Best Financial Advice for an Early-Career PhD

22:34 Emily: So, final question here, Joumana, as we wrap up. What is your best financial advice for another early-career PhD? And that could be something that we’ve touched on already in the interview, or it could be something completely else.

22:46 Joumana: Yeah. I think it’s incredibly easy to become overwhelmed when it comes to tracking money, especially as a grad student who is already not earning that much. But really, finding a system that works for you and supports your own mental health is way more important than applying every single piece of advice you read. So, really, the best financial advice that I can give to any other grad student is to do what works for you. To find a system that is helpful to you, and to explore all the options that exist out there. Because what works for someone might just be a terrible use of resources for you.

23:27 Emily: Yeah. I totally agree with that. These systems that we use for managing our money should absolutely be, you know, supporting and complimenting our lives and not be a super heavy burden or some onerous thing that we feel is like externally put on us. It definitely has to come from like within and be, of course, in adherence with your own values and your own priorities. It really should be something that makes you feel good and augments your life instead of, you know, feeling the reverse way. So, I hope that everyone can get to that point with their finances. And thank you so much for coming on the podcast and giving this interview. And you’re obviously, you know, very thoughtful about the subject and I’m so glad that you’ve learned about it and now you’re, you know, turning back around and helping your family and your community learn these principles as well. So, thank you very much.

24:14 Joumana: Thank you, Emily.

Outtro

24:14 Emily: Listeners, thank you for joining me for this episode. Pfforphds.com/podcast is the hub for the Personal Finance for PhDs podcast. There, you can find links to all the episode show notes and a form to volunteer to be interviewed. I’d love for you to check it out and get more involved. If you’ve been enjoying the podcast, please consider joining my mailing list for my behind the scenes commentary about each episode. Register at pfforphds.com/subscribe. See you in the next episode! And remember, you don’t have to have a PhD to succeed with personal finance, but it helps. The music is Stages of Awakening by Podington Bear from the free music archive and is shared under CC by NC. Podcast editing and show notes creation by Meryem Ok.

Form 1098-T: Still Causing Trouble for Funded Graduate Students

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Form 1098-T is issued to many (though not all) graduate students and reflects some of their higher education income and expenses. Until this year, the 1098-T was rife with problems for funded graduate students, and in many cases caused more confusion than it clarified. The 1098-T underwent a makeover in 2018, which corrected the worst of these problems. However, the shift could cause funded PhD students to owe a larger-than-expected amount of tax in 2018.

1098-T problems

Further reading: How to Prepare Your Grad Student Tax Return

What Is Form 1098-T?

Form 1098-T is a tax form generated by educational institutions to communicate the education-related expenses and income associated with an individual student. It reflects the transactions in the student’s account (e.g., Bursar’s account) from a given tax year. The form’s primary use is to document the amount of money a student (or the student’s parents) may be able to use toward an education tax benefit.

The 1098-T underwent a makeover for tax year 2018, and it has improved significantly. However, some of the issues with the prior version of the form are still causing problems in 2018. This article outlines those problems and their solutions.

What Does the 1098-T Communicate?

A few of the fields on the 1098-T are most relevant to funded PhD students.

Box 1 Payments Received

This box reflects the amount of money paid on your behalf or by you for tuition and related fees. For example, if your department pays for your tuition, the amount of the tuition will show up in Box 1.

Box 2 Amounts Billed

This box is no longer in use in 2018, but many (most?) universities used it until 2017. Box 2 also reflects tuition and related fees, but it is a sum of the charges billed in the tax year rather than the amounts paid. A bill could be issued in one tax year and not be paid until the subsequent tax year.

Box 5 Scholarships and Grants

This box reflects the scholarships, fellowships, and/or grants received by the student in the tax year. The money that paid your tuition and fees will show up in this box. The fellowship (or other non-compensatory income) that paid your stipend or salary may or may not be included in this box.

Box 7

This box is checked if any bills or payments for a term beginning in January through March of the following tax year were included on the current year’s 1098-T. For example, if your university received payment in December for a term starting in January, this box will be checked.

Box 9

This box is checked if you are a graduate student.

The remainder of this article reviews the problems with the 1098-T and how they can be ameliorated.

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Problem #1: Academic Year and Calendar Year Misalignment

Box 7 concerns the misalignment between the academic year and the calendar year.

Bills and Payments to Your Student Account

Ideally, the bills and payments for a given term will all show up on the 1098-T for the same calendar year in which the term falls.

Each fall term is like that: you may be billed or make a payment a month or two prior to the start of the term, e,g., in August for a term starting in September, but all the charges and scholarships and payments are done in the same calendar year.

However, for spring terms, you may be billed and perhaps make payments at the end of one calendar year for a term beginning in January to March of the next calendar year. In this case, the 1098-T for the earlier tax year is the one that reflects those expenses, and if a tax benefit is in order, it can be taken in the earlier year.

Historical Billing Practices for the 1098-T

In 2017 and prior, this caused a significant though largely unnoticed problem for funded graduate students (or anyone receiving scholarships): A university could post a bill for a spring term in December of the prior year, for example, and not post the scholarship that paid that bill until the start of the term in the later calendar year. That means that the earlier year would have an excess of expenses in Box 2, while the later year would have an excess of income. If not corrected, this could result in a tax deduction or credit in the earlier year and excess taxable income in the later year.

Imagine a typical fully funded graduate student at a university that had its accounting system set up this way and that used Box 2 on the 1098-T. (This was a common scenario.) In the student’s first calendar year, there would be two semesters of expenses billed but only one semester of scholarships posted. If the student used the numbers from the 1098-T without correction, he would be eligible for a tax break in that first year (or his parents would take it if he were a dependent). Each subsequent calendar year would have an equal number of terms of expenses and scholarships posted, which would probably result in small, not very noticeable discrepancies between the expenses and income. However, in the student’s final year, the system would catch up, and there would be scholarships posted with no corresponding expenses, resulting in excess income and excess tax due. In some cases, the extra tax due could exceed the value of the tax break taken in the earlier year. (Not to mention that if the student were a dependent in that first year his parents would have received the tax break, whereas he has to pay the extra tax himself in the last year.)

The correction that should have been performed throughout these years when a scholarship and the expense the scholarship paid showed up on different years’ 1098-Ts is to match up in the same calendar year the expense billed with the scholarship that paid the expense. Typically, that would mean not using an available tax benefit in an earlier year and preferring to use it in the later year that the income came in. When the expense and the scholarship that pays the expense are used in the same calendar year, the scholarship can be made tax-free using the expense if it is qualified. Specifically, you would report the relevant qualified education expenses in the later year rather than the earlier, meaning that the 1098-T in both years would be inaccurate / need adjustment.

What Changed in 2018?

Starting in 2018, Box 2 has been eliminated. This means that all universities now have to report payments received for tuition and related fees in Box 1. If the university switched its reporting system between 2017 and 2018, Box 3 is checked.

This is a much better system going forward for funded graduate students. It means that when a scholarship is posted to the student account to pay for tuition and related fees, that amount will show up in Box 5 and Box 1 in the same year, since they are the same action. It doesn’t matter if that happens in the same calendar year as the term or an earlier calendar year, because they will always be reported together.

However, this change causes two potential problems in 2018 for students at universities that made this switch.

1) If a charge was billed at the end of 2017 for a term stating in the first three months of 2018 and the bill was paid in 2018, the same expense will show up on both the 2017 and 2018 1098-Ts, first in Box 2 and then in Box 1.

Therefore, anyone receiving a 1098-T with Box 3 checked must determine whether one or more of the expenses summed in Box 1 was already used to take an education tax benefit in 2017. If that is the case, the expense cannot be used again in 2018.

2) This change in accounting systems also may force the unbalancing issue I described earlier for students finishing grad school. 2018 could be the year that there is excess income with no expenses available to offset it (after correction). If this happens, the student can either choose to pay the extra tax in 2018 or file amended returns going into the start of grad school when this problem originated (up to 3 years) to match up all the prior scholarships and expenses properly. This would still result in extra tax paid now, though it may be less than if the problem remained unamended.

The good news is that after catching up in 2018 if necessary, starting in 2019 the 1098-T will be much more straightforward.

Problem #2: Qualified Education Expenses Are Incomplete

The tuition and related fees reported on the 1098-T are not quite synonymous with the “qualified education expenses” you use to take an education tax benefit. In fact, there are different definitions of qualified education expenses depending on which benefit you use. Most likely, the amount listed in Box 1 is the amount of qualified education expenses the student has under the most restrictive definition for the Lifetime Learning Credit or the American Opportunity Tax Credit.

The definition of qualified education expenses for the purpose of making scholarship and fellowship income tax-free is more expansive. It includes certain required fees and expenses that were excluded from the definition of QEEs for the other education tax benefits, such as student health fees and required textbooks purchased from a retailer other than the university.

To find these additional qualified education expenses, check your student account, bank account, and saved receipts. Then, net them against your excess scholarship and fellowship income to make the income tax-free.

Problem #3: Not All Students Receive One

When Box 5 of the 1098-T exceeds Box 1 for a given student, the university does not have to generate a 1098-T. Some universities, as a courtesy, generate 1098-Ts for all students regardless of the Box 5 vs. Box 1 balance. This inconsistency generates confusion among graduate students and leads to the information in the student account being ignored.

Conclusion

It is clear that the 1098-T was not designed with funded graduate students in mind. Ideally, the 1098-T would be completely redesigned or a new form would be created to assist graduate students in preparing their tax returns. Until that happens, the 1098-T is not an independently useful document as it must be considered alongside the transactions inside and outside of the student account. The makeover to eliminate Box 2 was an improvement; at least starting in 2018, the 1098-T is no longer grossly misleading.