Photo courtesy ofAmel Majanovic
What is a stipend?
A stipend is a fixed amount of money that someone receives to offset living costs while serving in a particular role. Stipends are typically offered to students, interns, or apprentices.
Stipends are usually for those in trainee roles where the student or trainee is expected to gain more from the experience than the employer will. Basically, it’s money for you to live on while your job is to learn. (An exception to this rule are Peace Corps volunteers, who, though they are contributing in a substantial way, are paid a small monthly stipend.)
For example, graduate students often receive stipends that help cover living expenses while they’re studying or working as a research assistant. They aren’t technically being paid to be a student, but they are receiving funds to offset living expenses, like food and rent.
How does a stipend work?
The way a stipend works can vary depending on the organization. Stipends can be paid either as a lump sum or on a monthly basis. The payments are a fixed amount not based on hours, performance, or a negotiated salary.
Most stipends are fixed amounts, so it’s unlikely you'll be able to negotiate your way into a larger stipend, regardless of how talented or qualified you might be.
Stipends might also vary from year to year or semester to semester. It all depends on the changes in the budget and your employment or student status. Find out who makes the budget decisions for your stipend. You can ask them about what criteria you need to meet to maintain your funding—or get even more.
Is a stipend different than a salary?
Short answer: yes. A salary is pay for your time and expertise, a stipend is a fixed amount designed to offset living expenses. And a stipend can be paid in a lump sum, while a salary is generally paid monthly. Salaries are also generally larger. A lot larger.
Are stipends taxable?
Is a stipend taxable? Well, yes…and no. A stipend is not considered a wage, so federal taxes like social security and medicare are not deducted.
But a stipend is considered income and it is taxed as such. Employers or educational institutions do not withhold income tax from stipends on your behalf, so it’s a good idea to set aside some money for taxes as you’re paid.
Read more:A Beginner’s Guide to Investing
What else should you know about stipends?
A stipend is designed to be used for living expenses, so you’ll get the money in cash or via direct deposit to use as you see fit. Whether you need it for gas, a new computer, rent, or groceries, etc., you get to choose where the stipend funds are most needed.
It is also important to note that stipend pay is not required to meet minimum wage requirements, and amounts can vary wildly. So if you’re comparing internships, you may find that similar companies offer very different stipends (be wary of unpaid internships). This is something to keep in mind as you compare offers, programs, and costs of living.
Read more:9 High-Paying Jobs for College Students