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Understanding graduate funding can be taxing

No one ever said grad school would be lucrative. And I don’t mean that no one ever said this to you—I mean no one ever spoke that sentence, period.

It’s long been a given that grad school is a time to “pay your dues,” both in the hard-labor sense and the literal lack-of-money sense. Yet despite this common perception of grad students as disheveled paupers, the actual fiscal details of Ph.D. programs remain, for many, a mystery.

I’ve had undergraduates tell me, for example, that they could never imagine pursuing a Ph.D. in the sciences because they could never afford to pay for 5 more years of school. “Actually,” I explained, after laughing at the assumption that it would only take 5 years, “Ph.D. programs pay you.” (I was then obligated to add, “Not much.”)

I’ve also been asked how much Ph.D. students make per hour. The accurate response to this question is that Ph.D. students are paid different stipends depending on a variety of factors, including their university, their department, and whether they have an individual fellowship—and that I’ve yet to meet a Ph.D. student who can consistently predict the number of hours they will work in a given week, so both the numerator and denominator are variables.

Even current grad students don’t always understand their own funding sources. When I started my Ph.D. program, all I knew was that a certain amount of money ended up in my bank account every 2 weeks, and that it was an amount consistent with my decision to sleep on a mattress some neighbors were throwing away. If you had asked me where the money came from, I would have guessed … the university? Like, some kind of endowment-y money hole place?

I’ve been thinking about the complexity of graduate funding recently because of a certain tax bill. If you’re unfamiliar with the reason grad students got a little more nervous last month, you haven’t been reading higher education blogs. In short, the bill would change the way grad students’ taxable income is calculated, resulting in substantially higher tax payments. (Update: Preliminary reports suggest that this change is not included in the reconciled tax bill. It's a Christmas miracle!)

Much has been written about how this provision may spell the end of grad school, and not in the “yay we’re graduating” way. That’s because, for many students, this change would turn their barely livable stipend into an amount that makes a Ph.D. financially unrealistic for all but the wealthiest students.

Part of the underlying problem is that many people—such as several of our country’s representatives, but also some current and prospective grad students—don’t understand the basics of graduate funding in the first place. So, I’m going to try to explain it. But the answer is weird and complicated, because graduate funding is weird and complicated. My understanding comes mostly from my own experience as a grad student, and I’m sure that many graduate funding variations exist that I don’t know about, so I can’t speak for all programs. But mine was fairly typical, and here’s how it worked.

Let’s pretend I’m just starting a Ph.D. program. First of all, my department will pay me a “stipend,” which is an academic word meaning “pittance.” As a Ph.D. student, I’ll take a few classes, but the vast majority of my time will be spent working in the lab. In a way, then, the stipend as quasi-salary reinforces the fact that lab work is my full-time (and often more-than-full-time) job.

For those of you blown away by the idea of getting paid to be a Ph.D. student, let me assure you that stipend livin’ isn’t exactly high livin’. A typical annual stipend in the sciences is around $20,000 to $30,000, and this will remain one’s salary for at least 5 years. Incidentally, this isn’t too far above the federal poverty level, but it can be a living wage if you do what I did and rent a scary row house filled with mice. (Ph.D. students in the humanities, by the way, typically have stipends about half as high as those of us in science. So be nice to them.)

Where exactly does that money come from? Often my adviser’s grant, or it could come from a department training grant, or from the university in exchange for teaching. And if I independently apply for and receive an outside fellowship, I could even be rewarded with—wait for it—being paid roughly the same amount of money but from a different source! That’s right: Merit-based outside fellowships are impressive, but if I earn one, it will likely replace, not augment, my stipend.

OK. Now we get to tuition. For the university to consider me a student, it needs to charge tuition. This is typically some mega-gigantic, laugh-at-it amount. Parents start saving for their children’s college tuitions decades in advance; now imagine those payments continuing through a Ph.D. program as well. I just looked it up, and tuition at my former grad school is currently just shy of $50,000 a year.

So, who actually pays this tuition? Get ready: The university pays itself.

“Oh,” the university says, “this costs $50,000 a year? Sounds fair. I’ll cover that.” Thus, the tuition conundrum is both begun and finished without me, the grad student whose tuition is being paid, even noticing.

But wait! Does this mean that I really make $75,000 a year instead of $25,000—and I’m just spending $50,000 of it on tuition?

Nah.

The word “tuition,” when thought of in the collegiate sense, covers tons of stuff. Classes! Activities! Free T-shirts with some kind of animal on them! But what’s “tuition” to a grad student? Most semesters of a Ph.D. program, you don’t even take classes. True, graduate student tuition pays for the general administration that keeps the university running, and it stops the staff from kicking you out of the library, but it’s not a cost that can be justified as directly as it can for an undergrad. So, in a way, tuition is more like the university asserting and then affirming its own value, thus maintaining its fifty-thousand-dollar-ness.

Yet the House tax bill proposes to include that massive tuition payment as taxable income—meaning that much of a grad student’s measly stipend will now become a tax payment. As hard-to-sustain as grad school currently is, this change would make postbaccalaureate education untenable.

As an analogy, imagine you’re training to be a professional flugelhorn player. To your delight, you’re hired to play on stage at some kind of Flugelfest. Even better, you’re told that, in exchange for your flugeling, you’ll be paid $100. Not exactly enough to buy a new, gold-plated Morse taper mouthpiece, but hey, it’s a nice recognition of your commitment to your craft.

Now imagine that the theater owner tells you there’s a $200 charge to rent his venue for the evening. You’re displeased, because the cost makes your flugelhorn performance a net loss for you, and you start to question why you spent your formative years learning flugelhorn instead of climbing trees with the other kids.

Then the theater owner kindly tells you that he’ll waive the rent, which solves your problem—until you begin to work on your taxes, flugelhorn gently resting nearby in its molded velvet case, and you learn you have to report your income from the gig as $300. In other words, you have to pay taxes on money that the theater owner paid himself. To make up the difference, you have to sell your flugelhorn on Craigslist, and you’re doomed to a life of shame playing the trumpet.

In the grand scheme, it’s not the worst financial consequence in the world (or in the tax bill). But it’s a change whose ramifications may not be fully considered, and it’s a change some lawmakers—not enough yet—have started agreeing to unmake.

If the tuition provision doesn’t make it into the final tax deal, you don’t have to worry about it—for now, at least. But if you’re in a Ph.D. program, or considering starting one, you owe it to yourself to at least learn where your stipend comes from and what this strange tuition thing is all about. And regardless of how this tax issue is resolved, it’s a reminder that Ph.D. students—and, really, most academics—are subject to policies crafted by those who may not understand the system’s idiosyncrasies.

Oh, and we need to change some of those idiosyncrasies, too. But as I learned in grad school, sometimes you have to focus on one horrific crisis at a time.

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