5 Sobering Financial Realities I Wish I Understood Before Starting my Ph.D.

At the age of 24, I was accepted to a Ph.D. program at my dream school. It had been my goal to get a doctorate and teach at the college level since I was 19 years old, so career-wise, this was a huge win for me. It also felt like a financial win. Between getting my M.A. at age 22 and getting accepted to the program, I had struggled to find a job and had ended up working in a retail management position. The money was decent, but the hours varied, and making enough to feel comfortable often meant taking overtime where I could get it. By contrast, my program guaranteed steady funding for the first 5 years and paid a bit more than I was making at the store.  I felt like I was finally moving forward with my financial life.

To give some context, I have never been particularly good with money. The money scripts I learned as a child and developed as a young adult are too numerous to fully explore here, but suffice it to say, most of my financial problems could be traced to two main “money approaches.” First, I thought about my finances in the short term. In periods of scarcity I was okay about budgeting, but I saved basically nothing, and I tended to splurge on clothes or eating out whenever I got a small windfall. By the time was 25, I had cashed out 2 modest 401ks from previous jobs in order to fund moves or to support myself while job hunting. Second, my anxiety disorder manifested in avoidant behavior. I could manage to avoid looking at my bank account for weeks until another paycheck would be deposited, at which time I would finally look and see that I had overdrawn my account and racked up overdraw fees. I would immediately stuff unopened collection notices into a drawer in my kitchen so that I wouldn’t have to face the debt that was inside of them. Despite being a hard worker and being relatively career-focused, my financial life consisted of me barely keeping my head above water while student loan debt and small amounts of consumer debt threatened to slowly pull me under.

Grad school didn’t fix my bad financial habits (surprise?). Now swimming in the quotidian stress of grad school, it was even more tempting to ignore old collection notices. I avoided budgeting my stipend and in fact, the class anxiety I felt around wealthier students led me to spend far too much money on things like an overpriced professional wardrobe and going out to eat with my classmates. I spent every dollar I made and put nothing into savings. Grad school hadn’t been the catalyst that would help me to get my financial house in order – in fact, the opposite was true. While my bad financial habits are my own and certainly predate my stint as a Ph.D. student, I started to realize that grad school has a potentially dangerous ethos of deferred satisfaction when it comes to money. In an environment where you’re still considered by many to be a “college student,” it is tempting to put off the hard work of getting your finances in order. That is, until you get your first “real job” and your first real salary. Even though grad school takes up 5 or more years of your life, it is still considered temporary, something you have to grit your teeth, tighten your belt, and just get through so you can claim your prosperity at the end.

The 5 financial realities I discuss below have been hard-won, emotionally and financially. I’ve learned that I must get a handle on my finances before I finish my degree. I’ve also learned to view myself as a professional with a job now, which in turn has made me work harder to maximize efficiency, maintain a work-life balance, and put effort into my non-work priorities.

Financial Reality #1: You will not get a raise for 5 or more years.

Before I started my program, I was a shift manager at a grocery store, making about $16 per hour on the shifts I managed and about $12 on the shifts I didn’t. My net monthly pay was around $2000. My stipend paid about $500 more per month. From my perspective, I was getting a 25% raise by starting this program! I knew that the program didn’t give raises, aside from a 2-3% yearly increase to account for inflation, but I didn’t understand what that would mean in the long-term.

For me, it has meant watching my non-academic friends grow in their earning potential over the last 4 years, while it slowly sunk in that I won’t have the same opportunities until I finish my program. It’s meant creeping closer and closer to 30 and beginning to want a more stable financial life and future (a well-stocked emergency fund, retirement savings, vacations that don’t piggyback off of an academic conference) and realizing that these goals are very hard to reach on my stipend alone. Unlike other industries, there is no lateral movement while you’re in grad school: you stay in the same program the whole 5+ years.

It’s meant developing a certain pessimism about my job prospects after I graduate. I’m in the humanities, which means that there is no “industry” equivalent like there is in some of the sciences. It’s generally assumed that I will stay in academia after graduating and as many know, the job market gets harder with every passing year. A 2017 study published in Insidehighered.com shows that open positions for jobs in English or Literature (that includes postings for temporary research fellowships) have dropped from about 1800 jobs in 2000 to under 1000 jobs in 2015. Meanwhile, then number of students receiving a Ph.D. in 2015 was about the same as it was in 2000: about 1400 new Ph.D.’s per year. That’s a 400-job deficit and many whose first year on the market is unsuccessful will return to compete in subsequent years. For many, the windfall at the end of the road simply won’t be there.

The uncertainty of job prospects and even of funding in later years means that some may earn less in their later years in the program than they did at the beginning. Opportunities to increase your income only come from receiving prestigious fellowships or grants (many of which are earmarked for travel and research expenses) or by taking on side work, which many programs officially limit or prohibit. As a result, grad students often quietly take on extra work to fund their financial goals. The last two summers, I’ve edited secondary application essays for ambitious medical school applicants. This brought in a nice chunk of money, but it also severely limited the hours I could spend on my dissertation for several weeks.

There’s this idea in grad school that if we toil long hours and accept our meager pay, our financial security will come to us. But this mindset can be dangerous, particularly considering that so many of us won’t get jobs immediately and our windfall will continue to be deferred.

Financial Reality #2: You may not need to pay your student loans, but you absolutely must have a working long-term plan for paying them.

When I began my program, I was struggling to repay the $37k I had racked up in my master’s program. Technically becoming “a student” again meant that I could take advantage of deferment, pausing my payments until graduation. I felt like I could finally breathe again and while I heard everyone’s warnings to pay down the accruing interest while they were in deferment, I didn’t listen. Not thinking about my student loans for 5+ years was frankly way more appealing to my anxiety-ridden mind. So, I didn’t think about them.

Fast forward three years. I had confronted my anxiety and started seeing a therapist. I was in a great relationship where I saw a long-term future and the fact that I have $37k in debt was suddenly starting to weigh very heavily on me. I bucked up and looked at my loans. Thanks to the magic of compound interest, I now owed $43k! It slowly started to sink in that I didn’t really understand my loans at all: I didn’t even know what my interest rate was or what my repayment options were. I nervously calculated how much I would owe if I did nothing with them for the remainder of the program (at that time about 2 ½ more years) and found out that I will add $9k to my bill. Yikes!

I knew I had to do something. I crunched the numbers and determined that the PAYE plan was my best option. Because my AGI is so low on a graduate student’s stipend, my required payment is $0. The number will increase as I make more money, but the percentage always remains doable. Eventually, I want to get to a place where I’m paying down more than I owe but since the PAYE plan pays your interest if your minimum payment doesn’t cover it for the first three years, I’ve bought myself some time to get my emergency fund bulked up. I’m finally doing something about my loans(yay!), but here’s the kicker: Income-Driven-Repayment plans last for a fixed amount of time. For the PAYE plan, this is 20 years or 240 on-time payments (including payments of $0). Had I completed this process at the beginning of my Ph.D. (3 ½ years ago), I would be 3 ½ years into my repayment plan, and I still wouldn’t have paid anything.

My advice for my 25-year old self? Run the numbers from the beginning and have a plan for your student loans. Even if deferment makes the most sense for you, have a plan for what you’ll do after graduating, including a contingency plan in case that you don’t get your dream job right away.

Financial Reality #3: Health, dental, and vision care matter, and you may need to supplement them in some way.

Yesterday, I saw my therapist. She charges $200 per hour (and for good reason, she’s very experienced and therapy has changed my life). I am incredibly fortunate that the health insurance provided by my program covers most of that cost – I pay a $10 co-pay per visit.

Today, I spent 2 hours on the phone applying for free and low-cost dental care in my area. Over the course of my 20s, I have completely ignored the literally erupting presence of my wisdom teeth, I have a broken molar that hasn’t been checked yet, and I likely have several cavities. I practice the best oral hygiene I can at home and thus far, I’ve hoped for the best, because I frankly can’t afford most dental procedures. My program does offer dental insurance for an extra $400 a year, but I’ve crunched the numbers on the work I need done against the work that is covered and I will still end up shelling out an exorbitant amount of money.

I knew that I needed to see the dentist when I started the program, but it was easier to defer that unpleasant task because it cost so much. I told myself that I wouldn’t always lack dental insurance – I just needed to make it through to the end of my program (see a pattern?). This wasn’t just my approach. In an orientation meeting, some asked about our options for dental insurance and a senior grad student replied that few people he knew paid the extra premium for it unless they had significant (and by “significant,” read “life-disrupting”) oral health issues. When I told my mom that I was thinking of purchasing the optional dental insurance my first year, she urged me to wait a year to see if I could actually afford to go to the dentist. Almost everyone around me treated dental costs as a luxury or emergency-only expense and, of course, what constitutes an emergency can vary from person to person. Many would probably say that my broken tooth is an “emergency,” and logically I would agree, but I’ve lived with it for almost a year now.

I’ve learned two big lessons from my experiences with healthcare in graduate school. First, your health matters and untreated medical problems only get worse. This may seem like a no-brainer to some, but for those in graduate school, it can often feel like the expense of medical, dental or vision treatment is something that you can reasonably put off until you finish the program and are (hopefully) making more money. But 6 years is a long time to put these issues off, and the damage that accrues from not treating a problem can make it even more expensive in the long run. Essentially, your body is racking up debt that future you will have to pay. Second, you cannot be proud when trying to access health care in grad school: learn how to take full advantage of your insurance’s offerings, but also take advantage of free clinics, low-income subsidies, and any other financial help that will keep your body and mind in working order.

Financial Reality #4: You may be making less than minimum wage.

Here’s a fun exercise. Add together all sources of income provided by your university, including your stipend, grants, awards, or paid employment. Do not include reimbursement structures like travel funding for conferences or reimbursement for membership dues. These are benefits, not compensation.

Divide this total by the number of weeks in a year that you work. You can be generous here, if you like, and leave out the weeks that you will be taking off for holidays or personal travel. Or leave them in. Many salaried positions in the professional world include paid time off. Do not remove weeks in which you are traveling for conferences or to do archival research. This is work travel, even if you’re working in Paris and start every morning eating pastries on a rooftop café overlooking the Eiffel tower. If you work toward your degree in the summers, include these weeks, even if you don’t receive summer funding.

This is your weekly pay. Do three equations with this number. First, divide it by 40 hours, the ideal American work week and a pipe dream for many grad students. Next, divide it by 52, the median of hours that grad students estimate they work per week, according to Dr. Nathalie Mather-L’Huillier, Director of Accreditation and Alumni Relations at Ross University School of Veterinary Science (the actual numbers range from 35 to 70). Finally, divide it by 65 hours, what many students are expected to work in a typical week. Feel free to substitute your own number if it’s drastically different.

The numbers you’ve come up with represent your hourly wage at different hours worked per week. The hourly wage can be staggering. I am privileged to be in a well-funded program with one of the most generous stipend structures in the country (for the humanities, especially), and if I work 40 hours per week, I am making $14.79 per hour, less than what I made at my previous management job. At 52 hours, that number drops to $11.38 per hour, and at 65 hours, I am making $9.10. This is, of course, above minimum wage, but it is about what I made as a shift manager at the fast-food restaurant I worked when I was 19. And for many Ph.D. students in the humanities who receive a very standard $19k per year, at just 52 hours they’re making less than minimum wage for very difficult and skilled labor.

There are, of course, benefits that programs offer that supplement this compensation, included travel funding for conferences, tuition coverage, access to the university gym, access to department-funded events with eminent scholars (and the fancy wine and cheese) and flexibility in where we work and when. But like many jobs that substitute extra pay with “perks,” this ultimately can foster an overreliance on work to fill your life. The departmentally funded dinners and networking events are, in fact, work. If you want to use travel funding to offset the cost a vacation, you must write a conference paper and attend the conference. To access the university gym, you must be on campus.

Of course, we’re ultimately being paid to research and write about the subjects that we are personally intellectually invested in, and that in and of itself is a major benefit. That said, it can be easy in grad school to believe that because we are pursuing passion projects, it’s not a real job. And that’s simply not true. Whether we are providing monetizable labor for the university, like teaching, grading, etc., or unmonetizable labor, like representing the university at major conferences, what we do is work. And not recognizing the Ph.D. for what it is – a job – can lead us to not think critically or strategically about our compensation or benefits.

Calculating my hour pay was a major step for me in recalibrating my approach to work. While it is not always possible to limit my working hours to 40 per week, seeing how little I am making when I work more hours incentivizes me to try to limit how often I work overtime. It’s made me value my time, and it’s even made me a better worker, because I focus more on the work at hand, rather than letting a small task fill up half my day.

Financial Reality #5: You are not on hold until you finish your degree.

This one could really be coupled with any of the previous 4 financial realities, but it deserves to be stated on its own. You – your physical, mental, and financial health – cannot be put on hold for the duration of your program. Your debt is going to accrue interest faster and faster. Your body is going to get older. Those cavities will get worse if untreated. Your investment horizon for retirement will slowly but surely dwindle. And your life post-grad school, particularly if you go into academia, will not get any less busy. Developing the practical skills for taking care of yourself today is crucial.

It can be so tempting to put your needs on hold for the duration of your program, particularly when your money and time are stretched so thin. And if you do, trust me when I say that many people will agree with your logic – deferred gratification is the name of the game in graduate school. And while you might actively choose to delay some priorities until after graduation – like having children or buying a house or even tackling your student loans (if it makes sense for you) – taking care of yourself cannot be a delayed priority. The more you face your physical, mental, and financial health now, the less you’ll have to deal with, pay for, and fix damage on when you graduate and the so-called “real world” begins.

M. Elizabeth is currently a Ph.D. candidate in English literature. While she reads culturally-valued books and is lucky to attend a prestigious school, at heart, M. Elizabeth is a working-class woman from rural New York who has absolutely nothing figured out (and that’s okay!). She is deeply interested in the rhetoric of “getting out” of your small town and the career trajectories that that rhetoric leads to. In her free time, she grows eggplants and okra in the strip of dirt next to her driveway and goes to the park with her partner and chocolate lab-hound mix, Rosie.

Image via Unsplash

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