Financial Pressures for Graduate Students

Dr. Teresa Sullivan & Nick Repak

Graduate education is an investment that requires some financial sacrifice along the way. Even students with generous funding often find that some expenses are not covered, and that their general standard of living is not as high as they might like. Many gifted students fail to accomplish their dreams because the reality of tuition, housing and living expenses keep them from completing their degree. There are some clear reasons for the financial struggles and some solutions to the problem.

Some Emotional & Cultural Issues

Denial and poor assessment can be a common trap for many of these idealistic scholars. Most graduate students have experienced success academically since high school and throughout their undergraduate program, and they assume that grad school is a calling for them. But esteem issues become entwined with financial pressures for some. In interviews with Ph.D. students at MIT, one student shared with me, “I was the top in my undergrad chemistry department, but now I am just one star among many.” They may feel that they need to succeed to keep up with personal and family expectations, regardless of the cost. They take out personal loans, charge moving and living expenses to credit cards and then wonder how to make rent payments each month. Other graduate students have a sense of entitlement that causes them to spend without considering consequences. Certain students feel that graduate school is like a job where they are “earning their degree” and should be drawing a paycheck for their labor. In one case study, a graduate student continued to “pay herself a salary” with funds from government loans until she had accumulated $160K in federally-insured debt. Yet, she was still taking classes and had not even reached candidacy yet.

Economic difficulties may be so painful to think about that students engage in denial, making budgeting and expense-tracking impossible. At some point, it is too late to get help through traditional budgeting (even bankruptcy won’t clear the federally backed student loans). Radical cost-cutting, selling possessions and mortgaging property may be required to stop the financial pressure. But we hear of students going on spending sprees, unwilling to acknowledge their money problems. Spending is not always a rational action; spending money may be a way to avoid painful feelings. For many, spending is an escapist reaction to debt and depression.

Externalizing Their Difficulties

Some graduate students try to blame others for their situation, and a spouse may become the target for the blame. Divorce and bankruptcy are positively correlated, because money problems are often closely related to marital problems. Others blame their parents or the university. Graduate students may blame an advisor for failing to secure funding for the project for which a student is doing research. Many want to justify their habits by saying, “I can’t handle a job or Teaching Assistant position and excel in my academic program, so I need a Research Grant or Fellowship to study without the distraction of working.” The result is lingering of debt that goes unpaid.

Sometimes, people use finances to compare their status with other classmates or siblings. Graduate students may compare their situations with those of undergraduate classmates who took jobs immediately after graduation and now have a comfortable lifestyle. In academic fields where there are tight job markets, graduate students may never be assured of an income as high as they would like. The results of such comparisons and resulting envy can produce anger and resentment directed at others Yet we know that wealth and poverty are relative and not absolute. Many students count themselves fortunate to struggle from paycheck to paycheck because they are blessed with the opportunity to pursue research and study in a field that energizes them.

In the midst of a lagging economy and a volatile stock market, our culture has been prone to hype consumerism. It has even become a patriotic duty to buy and spend. Graduate students are not immune to this mentality.

The Beginnings

Financial struggles may begin before a person ever arrives on campus. The choices students make in funding their degree can be the foundation for stability or the framework for financial ruin. Graduate students can research the available options for funding long before they enroll. Some fellowships are available through national competitions, with the resulting funds available for study at any school. Other funds are provided by the schools themselves. Most campuses list options on their website for grad school funding. There are opportunities for “gift aid” such as institutional grants and scholarships that do not have to be repaid and “self-help aid” like student loans that are need or non-need based.1 These sources typically describe the rules for qualification for funds and ways in which the monies can be used. Current financial and employment status will have a bearing on qualification for funding and the process and interest on repayment.

There is a great diversity of funding options. Even employer savings plans may contribute to a degree, or employers may fund the degree completely. Families have given funds for students or loaned money with the intent of repayment. A large percentage of grad students are known as “returning grads” who have been in the work place for years or may have military assistance to add to their savings and school funds. Be aware that any choice will come with consequences. One student expressed the pressure he felt when parents paid for the entire degree and expense; “The desire to please them (parents) with grades is an overwhelming expectation.” Even free can come with strings attached.

The Bottomless Pit: Debt

While student loans and some living expenses (house mortgage) seem to require the accumulation of debt, many graduate students have made poor decisions on other costs (transition to a new city, entertainment, etc) and have allowed credit card debt to pile up. Comparison with peers, emotional escape through spending, or the deserving grad mindset may put you and your family into a financial mess that makes recovery seem impossible. While it didn’t take long to get into debt trouble, it may require a long-term mentality to get out of it. Debt reduction begins with a decision to change your lifestyle. According to Ron Blue in his book, How to Get Out of Debt, there are four steps to get out of debt:

1. Determine where you are (some are unaware of their total debt amount).
2. Stop going into debt (perform “plastic surgery” on your credit cards).
3. Develop a repayment plan.
4. Establish accountability.

Further suggestions for reducing debt include selling assets, doubling payments to decrease interest costs, reducing living expenses, reduce tax withholdings (a refund later may be better used as part of your budget now), and possible credit counseling.2 These hints, along with a renewed commitment to personal spending discipline can move you toward a financial foundation from which you can begin planning for a more stable personal budget, without the anxiety of personal debt.

Some Concrete Suggestions

1. Keep track of expenses. This is a first step in developing a practical budget. It helps you to determine the amount to assign to certain expense categories and prevents you from overlooking some expenses. Especially, look for hidden costs: taxes, car insurance, health & renters’ insurance. Do you really need life insurance (do you have dependent children)? If not, look into cashing it in. You may be surprised how much you spend each week in coffee shops and bookstores.

(a) Food. Prepared meals are more expensive. Avoid using eating as a source of emotional support or escape. Consider exercise instead. Don’t forget that coupons can save a lot on groceries weekly, as long as you are using them on items you would have purchased anyway and not using them to justify frivolous goods.

(b) Entertainment. Most large cities and nearly all large campuses have free or discounted forms of entertainment available, including plays, recitals and concerts, museums, and sporting events. There are publications that assist you in thinking creatively about spending and saving money. The Tight-Wad Gazette is one such book. Entertainment books allow you to eat out for half price in many major cities.

(c) Educational expenses – books, lab, and equipment. You cannot avoid these expenses, but you can plan for them. Photocopying costs, computer media, and similar expenses can add up.

2. Try to make a rational budget. There are some useful tips about preparing a budget that can be found in publications or on web sites. Let me share a few of my favorites.

(a) Begin by listing all set expenses. These would include education expenses (tuition, lab fees, books, conferences, etc), basic living costs (rent, food, clothing, etc) and entertainment. Assign each category a monthly amount. Any excess funds in a category need to be transferred to saving either for a future expenditure in the same area (such as a higher than normal cost of clothing) or simply put to savings. Don’t act like congress and simply spend it because it is there in the budget. Savings can then be applied toward unforeseen expenses of the future (or to cover a short paycheck).

(b) A budget is not only an important tool for making decisions about personal spending but also on questions concerning financial aid. Don’t assume that you should always ask for the maximum allowable loan. Seek only what you really need.

(c) Short-term liquidity loans may be available from your University.

(d) Do budget some “mad money”, so that you have a little flexibility and don’t become depressed.

(e) Use Quicken or other financial software to track funds and expenses.

(f) Learn to distinguish needs from wants and desires. There is a reason that grocers put certain items by the registers and at ends of aisles: they are attempting to encourage impulse buying. You need to be wiser than that and not allow your budget decisions to be scuttled by creative marketing practices.

3. Pay down loans as soon as possible. Begin with the short-term, high-interest debts, such as credit cards, because these debts grow much more quickly than subsidized student loans. (See note on getting ahead)

4. Be careful about rent-to-own programs at furniture stores. They may not tell you that the annual percentage rate (APR) can run as high as 800%.

5. In deciding where to go for graduate school, take into account variations in cost-of-living from one city to the next. There is a cost-of-living calculator on many university websites (see UT Austin grad school web site as an example) that enables you to do review costs, so you can make a more realistic comparison of the value of competing aid offers.

6. Beware of budget busters; accounting errors, forgotten expenses, impulse buying or quitting prematurely. Even an occasional setback can be corrected if you are diligent and committed to the process.

7. Give something away. I am always amazed at how my own outlook toward finances is improved when I focus outward on the needs of others. Many students have participated in Habitat for Humanity, Homeless Holiday Serving opportunities, etc. These are ways to give of your time that can improve your sense of self-worth and connection. The same is true for a financial gift toward the less fortunate. After an event that Grad Resources co-sponsored with the University of Texas Graduate Student Assembly, we surveyed the leftover cookies and sandwiches. Knowing that the students could save them and cover a few meals with these items, they were offered to the students who remained at the end of the meeting. The GSA president suggested instead that they be distributed among the hungry and homeless in the campus neighborhood. I will always remember his concern for the truly needy rather than the possible savings he could achieve by stocking his own fridge.

8. Develop a contingency plan. It is imperative that a reasonable plan (other than credit cards) be devised to cover such occurrences. Any plans that don’t allow for flexibility tend to break under new strains.

Getting Ahead

Once you have a firm grasp on your finances it pays to set realistic goals. These targets allow you to pursue something beyond a stable budget. In a brief article for a monthly publication, Money Matters, financial guru Ron Blue gave tips for sequential investing which can be implemented even in graduate school.

Step one is to eliminate all high-interest debt. “Paying off credit-card balances and auto loans can bring a guaranteed 15-21% return.” A second goal is to set aside one month’s living expenses in an interest-bearing checking account. These funds can be used for minor emergencies with the intent to repay the account when funds become available. One of the greatest drains on graduate student emotional energy is the constant fear of financial setbacks. The added security in having funds set aside lends greater peace of mind and an ability to focus on study without financial worries. The third goal may seem unattainable to those living check to check, but consider setting aside 6 months worth of funds for unexpected emergencies in a money-market account. Other goals listed in the article deal with varying degrees of risk and return in investments.3 For most graduate students, their primary investment is in themselves, their education and their future capacity to earn a living applying their craft in academia or industry. Long-term investments can be seen as a more future consideration, secondary to surviving graduate school. As one cartoon stated, “the money handbook for the rest of us: No-Money Management.”

A final word from Ron Blue: “Changing your financial direction is a four step process: spend less than you earn, avoid debt, build liquidity, and set long-term goals.”

1. UT Austin website, Graduate Student Orientation, Office of Student Financial Services.
2. Ron Blue, The Debt Squeeze, 1989, 57-68.
3. Ron Blue, Money Matters, The Concept of Sequential Investing, November 2002.
4. Ron Blue, Generous Living, Zondervan, 1997, p.87.

Dr. Teresa A. Sullivan is President of the University of Virginia. She formerly served as the Executive Vice Chancellor for Academic Affairs for the University of Texas System, and as the Vice President and Graduate Dean at the University of Texas at Austin. To learn more about Dr. Sullivan, visit

Nick Repak is the founder and director of Grad Resources, a faith based service organization addressing the needs of graduate students. He is also the founder of the National Grad Crisis-Line (877.GRAD.HLP).