Saturday, June 23, 2012

A Practical Consideration on Doctoral Stipends

We have been looking into buying a car lately – used, but newer and more reliable than the 1996 Honda Accord we drive right now. During this process we’ve checked into getting a small auto loan in order to leave a little bit of breathing room in our savings, since our income is relatively irregular – I receive three stipend checks during the school year from the university, we get a small monthly stipend (again, during the school year) for our work as residence staff, and Tricia’s work as a doula involves payment from clients after babies are born (quite an unscheduled thing!). Most of Tricia’s clients are non-paying, too, as she does a lot of her work with Chicago Volunteer Doulas, a (fabulous) group that offers free services to low-income mothers.

So we went to our bank (Chase) and ran into a problem with applying for a loan. The bulk of our income is my doctoral stipend from the Divinity School, which for the 2011-2012 school year was $21,000. However, because this was stipend money coming from a degree-granting educational program, the loan representative would not count it as income.

I had a long and aggravating discussion with the representative trying to figure out why they have this policy about education-related income. I couldn’t really get out of him what exactly distinguished academic labor from other sorts of labor in the eyes of the bank. He ended up explaining that student remuneration was different than regular income because I could leave the doctoral program at any time and then I wouldn’t have the stipend any more.  I suggested that he could leave Chase at any time and he would lose his income as a banker too. He told me that we weren’t talking about him. I gave him a long speech about trying to feed my kids and how their policies are just making it more difficult for people who are just trying to get by, but there wasn’t much more to say that would have changed the immediate situation regarding the status of my stipend.

So, long story short, Chase does not consider a doctoral stipend as income when evaluating loan applications. I don’t know what the policy is with other banks, but my guess is that this is pretty typical (or at least not out of the ordinary). This is something that people going into or already in a stipend-granting program should be aware of ahead of time. To my mind it’s a stupid policy, although I’m open to hearing the sense in it from others. Sensible or not, it’s at least another financial hurdle for students who are already often struggling with things like expensive family plans for university student health insurance (family plans for staff are more reasonable, in my experience) or how to find affordable childcare so that a second income becomes a possibility.

In our case the problem is now moot because the credit union associated with the University has no issue with university stipends – this may be a possibility in other financial institutions that have relationships with a school and so understand academic peculiarities a little better.  For situations where stipend legitimacy is still an issue, though, we found that there are possible workarounds to consider.

Apparently, Chase had an issue with the fact that I earned “income” for being a student. It would have been different if I were teaching, however, because that is legitimate “labor” in their eyes (or something). Upon hearing this, I asked the representative how they handle something like a graduate assistantship, where the income is not only for your work as a student, but also for your work as a TA, instructor, proctor, etc. He said that this would probably be fine. Afterward I asked my brother about this because he has an assistantship at a doctoral program, and he confirmed that this counted as income when he and his wife were buying their house.

At the University of Chicago Divinity School, a program has been in place for a few years where every doctoral student gets a standard stipend (as I said above, currently $21,000... the school year before it was $20,000). They don’t call it an “assistantship,” but at some point during our program we are required to fulfill a certain amount of “teaching points”, which includes options like TAing, working at the undergraduate writing center, or instructing. I have not worked toward any of these teaching points yet, but because the stipend as a whole is contingent upon fulfilling these requirements at some point during my program, the Chase representative thought that it probably would be adequate basis for considering even my current stipend income as real “income”. Again, we haven’t needed to pursue proper documentation for this from the university because the credit union already accepts stipends in any form, but it sounds like the option is there for us or for others who go to schools with a similar financial aid set-up.

This may not be relevant information for many of you- I was speaking with our Assistant Dean of Students about it, and she said she could only recall one other instance during her time here when an issue like this came up (it involved a loan for a house, and I assume it was long before the Divinity School had their current assistantship-like program in place). But as you apply to graduate programs or even now that you’re in one, it may be worth quizzing the school about how exactly their financial package works. Sometimes a program will offer highly-valued assistantships to some admitted students and smaller grants to others.  The difference between these two options may not simply be the prestige of the award or the opportunity for you to teach... one of them may count as “income” to a bank while another doesn’t. Outside grants or dissertation fellowships may function differently as well.

I am no expert on financial matters, which may have been why it was a surprise to discover that stipend income didn’t count as income in the first place (where it’s a personal benefit to count, at least... of course no one has a problem with considering it income when taxes are being determined). But if I wasn’t aware of this, I’m sure there are a few other finance-ignorant humanities folks out there who could likewise use this sort of heads-up.

6 comments:

  1. The other thing worth checking is the tax treatment of funding. Certain funding only pays FICA taxes, but income tax is not withdrawn (it's not supposed to be - that's OK).

    However, some scholarships from the school or elsewhere do have to be reported on your taxes, but the taxes may not be withdrawn (which means at the end of the year it'll look like you owe a bunch). Most schools are good about documenting this, and the internet is helpful too, but it's another thing to watch out for.

    If you've gone through a couple tax seasons you probably know how your funding is treated already, but its a good thing for new students to check.

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  2. Another practical consideration: since its tilted that picture on your CV looks like you're on a ship.

    And by the look of that china its a pretty fancy one!

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  3. The picture used to have you, Kate, and Maggie in it before I cropped it.

    Regarding the topic of the post, though, I'd add on taxes that TurboTax gets very confused by grad stipends of any sort. Not something to save for late at night on April 14th!

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  4. By the way, Daniel, now that you have the Sloan Foundation grant, do you know how something like that would be treated in contrast to your previous arrangement?

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    1. I think exactly the same but that's one thing I need to find out this week.

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