Dec 6, 2022

Managing finances for grad school

Overview:  While graduate school will involve intense focus for completing the required courses and conducting research, you will also need to allocate chunks of your time each week for other things and activities. Time will be needed for doing basic household management (think food prep and cleaning), engaging in exercise, being social, self-care activities and managing your finances.   


Photo by Steve Johnson on Unsplash
This post is dedicated to helping you get a handle on this last topic- personal finance.  If you do not handle your money well while enrolled in graduate school, the ramifications will increase your stress and potentially make it difficult for you to finish your degree and launch into the life you want after graduation.  I reached out to Dr. Angela Morgan from the Clemson Department of Finance to determine what the most salient pieces of financial wisdom for graduate students (and those applying to graduate school) would be. The following article is the outcome of those discussions.  Nothing in it is radical information, however it is important.  Small changes in your financial trajectory in your 20s can have radical impacts on your finances later in life. (Caveat emptor: This content is for informational purposes, and you should not construe this as financial advice for your specific situation.)


Contributors: Drs. Marian Kennedy and Angela Morgan, Chair and Associate Professor of the Clemson Department of Finance


When I (Dr. Kennedy) initially went to graduate school in engineering, I was delighted that I was getting both tuition assistance and a stipend for living expenses. It was such a positive change from being an undergraduate.  As an undergrad, my jobs were clearly delineated from my degree progress. I was thrilled to get a yearly assistantship of $15,000 to do work related to my thesis- MS. During that process, I decided to pursue my PhD and again was lucky enough to secure an assistantship.


Today, it is much rarer for a student pursuing a MS in engineering to get a research assistantship. Instead, those pursing a MS are more likely to find support as a grading assistant as many programs are focused on providing financial support (teaching or research assistantships) to students pursing PhDs.  To give you an idea of the stipends available for STEM PhD students today, the University of Nebraska Lincoln College of Engineering has set the budget for graduate students in 2022-2023 as $2400 per month ($28,800 per year).  The exact stipend amount can vary, with the largest stipends typically associated with graduate student fellowships supported by institutions other than the university.


Getting an assistantship or fellowship during graduate school is wonderful.  However, students need to also put effort into making this stipend stretch to meet their financial obligations. The American Chemical Society surveyed graduate students in  2019 and found that 38% of US graduate students in the chemical sciences thought that their financial support was inadequate.  This is because many students are surprised at the amount of their stipend that gets used for routine costs such as health insurance and taxes.  Students need to really focus on what their high priority expenditures are (‘needs’) and what items could be removed from their budgets (‘wants’).  Without removing these, you would need to take out loans or credit card debt – both of which would have long-term consequences.


The following three sections below will collectively help you managing money in graduate school- (1) costs and benefits (ROI) of grad school, (2) budgeting and (3) FAFSA and loans. The knowledge and tips contained in this post are not novel, and you will see them individually mentioned on a plethora of blog posts and websites because so many people, including us, have found them helpful. We encourage you to read all the way through, identify those that apply to your specific situation and make some changes. We want you to matriculate through graduate school and be free to pick a position that you love because you are not weighed down with debt.


1.     Cost and benefits (ROI) of grad school

We attended graduate school to earn our terminal degrees and enter the professoriate, not to be lifelong graduate students. For us, advanced degrees were both a chance to learn to conduct research and a requirement for our jobs.  We individually committed our time and knowingly delayed major purchases like homes, cars, and nice furniture to achieve our career goals.  If you have not thought about the cost/benefits for getting an advanced degree previously, you should scan this article by Beth Howard (Weigh the Cost, Benefits of Graduate School).  The only thing that the article may leave out is how to determine if a graduate degree is needed for your desired position. You can figure that out by looking at job advertisements and talking to those who are currently in your dream jobs.   We have found that many people are willing to chat about their experiences and provide their advice for your situation when contacted on LinkedIn. 


Before starting a graduate program, make sure you know why you are undertaking the process and be able to clarify what the costs and benefits will be for you.  Part of this process will be calculating your investment (ROI) for your intended graduate degree.  An ROI calculation is used to understand the relative amount you paid for an investment vs how much you earned by making it. While you will never be able to totally quantify your investment in graduate school you can increase your ROI by reducing the amount of debt you take on during graduate school while spending enough of your time on classes and research to get the degree (and not languish in the program).  Preston Cooper and his team calculated the ROI for graduate degrees that can be found here. 



2.     Budgeting

“Living within your means” is living so that you can cover your expenses each month (gas, rent, groceries, entertainment, travel, electronics, etc.). The first step towards living within your means is to understand what income you have each month relative to the outgoing expenses. If you have no idea of where to start, look at your banking statement and credit card expenses from the last full month and then put items into categories such as groceries, utilities, etc. This retroactive assessment from the prior month will give you an understanding of how much you spend in each area.


The next step is to set up a realistic budget for the month going forward. You can find some free budgeting worksheets here (NerdWallet article by Courtney Neidel) to help you get started.  This suggestion was also made by the California State University Laguna Beach blog and on a post published by Federal Student Aid (an office of the US Department of Education). Remember that the categories and associated amounts will probably adjust every month. While some expenses (like rent) can stay constant over a year, other expense will vary significantly depending on the month. For example, you might see that you enjoy attending college football games during the fall seasons and need money in your budget for tickets. This expense typically disappears by January.  Therefore, we suggest fine tuning your budget each month to reflect the expenses you anticipate for that given month. 


To implement your budget and track your income and expenses, you can choose from a wide range of tools. You can use to track your money including paper and pencil, a simple spreadsheet like Google Sheets or Microsoft Excel, or and financial software. When we started graduate school, we used paper check registrars to keep track of our spending.  Dr. Kennedy was inspired by some of her research colleagues who were using Mint to try computer-based tools. While her financial life was not that complex, software made budgeting and tracking her expenses more fun. She also enjoyed being able to see the data graphically represented and use these to correlate small lifestyle changes and with end of the month balances.


As we have gotten older and our households have evolved (such as the inclusion of mortgage payments, spouse, kids, house, etc.), electronic tracking is now a requirement for Dr. Kennedy since the time to track expenditures using a paper registrar would simply take too much time.  She uses Everydollar since it allows us to do a zero-based budget each month and is user-friendly.  You might want to look at that software or try other free software (Mint and YNAB). Just like choosing the right citation software during your literature reviews for research, the most important selection criteria for budging software should be that you are willing to commit to using it.


If you have never budgeted before, be patient with yourself.  It took Dr. Kennedy about three months to set up and make a realistic personal budget in graduate school. 


If you are currently applying for graduate school and not in it, forecast your graduate school budget

Understand what your living expenses will be. Go ahead and research the cost of rent, transportation, etc. for the programs that you are considering. This article can help you brainstorm all the budget items you might want to consider. Then calculate how much income you would need to make it each month. In it the president of the University of Virginia and the leader of a nonprofit that serves graduate students suggest that graduate students develop a budget that includes allocating funding for food, entertainment, and educational expenses.


Set up a rainy-day fund (aka nest egg or financial cushion)

Your cushion should be sufficient at this stage of your life to cover three months of expenses. This way you’ll have money for unexpected expenses like a car accident or medical crisis. This emergency fund is not meant to be used for splurges like attending a friend’s wedding.  For any expense that you know is coming (you did receive a ‘Save the date’ card, start putting aside a percent of the needed funds each month so that when you need the money- it is waiting for you.   (At our stage of lives (mid-life plus), we use a cushion that is around 6-9 months of our living expenses.)


Learn to prioritize what is important to you and then lower your standards on the rest

Identify what things are important to you and other things that you don’t care about.  For example, Dr. Kennedy decided that dog ownership and the attending expenses (vet care, food, etc.) were vital during graduate school.  (She brought home a great dane named Libby and loved the company). To make her budget balance, she shopped at Goodwill. After looking at your list of expenses, you can try to incorporate your wants having roommates, buying used textbooks, or always pack lunches.


Determine if your offered assistantship stipend is livable by talking with current graduate students

On her blog, Emily Roberts (Personal Finance for PhDs) suggests that you talk to currently enrolled students for the programs you are interested in.  Specifically, she suggested asking current graduate students if the stipend you were offered is livable. This can be ‘scary’ because it is against the US cultural norm.  Many of us feel uncomfortable making our finances (income or expenditures) transparent to others.  You might make the conversation easier if you offer to tell those students what your offer was first.  You should also ask if COLA raises are expected in the program. 


One last thing you may want to discuss with current graduate students are restrictions for that institution’s graduate assistantships.  Because education is the primary relationship of students to the university, students are typically unable to work more than 20 to 28 hours per week when on an assistantship.  


Talk with your peers in graduate school to continually adjust and improve your budget

In an article entitled “The real cost of grad school in the US (Wynne Parry, Chemical & Engineering News), a recent PhD named Katie Johnson gave a wonderful tip.  She suggested that you ask other graduate students at your institution how they budget and how to cut expenses.  She highlighted that those a year ahead of you in the program could tell you where in town to find cheaper rents, deals for groceries, etc.  In addition to this, you can look for blog posts by graduate students at other institutions and identify tips that could be transferred to your own situation. 


3.     Fill out the FASFA and researching loans for graduate school

Some fellowships in graduate school, such as those supported by the Graduate Assistance in Areas of National Need (GAANN) program, require that students show financial need.  Graduate and professional students are considered independent students for FAFSA® purposes.  That means that as you fill out a FAFSA form for graduate school, you do not need to input parent or guardian information and that for many students their financial status as determined by FAFSA changes between an undergraduate and graduate program. 



In addition to filling out the FAFSA, we do encourage all students to look spend time looking at the options for loans in graduate school before needing them.  While we hope that you can obtain assistantships each year of graduate school and you can balance your income with expenses, there are sometimes events that necessitate loans.  For example, students pursuing STEM advanced degrees have used loans as they fought cancer, had children, or gotten married.  So, you should begin looking at the different types of loans available for graduate school, the types of loans where interest can be deferred while you are in graduate school and the application process for loans. 


About the guest contributor: Dr. Angela Morgan’s research focuses on corporate governance, mergers and acquisitions, and executive compensation. You can learn more about her research here: Google Scholar