Cost of Living Summary: Average inflation experienced and graduate student bucket breakdown

Though many students don’t realize, one of the major tasks of the Housing and Community Affairs Committee (HCA) at the Graduate Student Council is to calculate and recommend new stipend levels for the upcoming fiscal year to the senior leadership of the Institute. That’s right, the stipends that MIT graduate students get paid each year are set in a process which involves significant graduate student input!  Though this process has been occurring annually since 2003, recent efforts by HCA teams have resulted in a particularly rigorous analysis which models, more closely than ever before, the realistic cost of living faced by various graduate constituencies around the institute. The process is also a particularly high-profile example of the value of collaboration as the GSC has partnered with Dean Christine Ortiz (ODGE), Dean Colombo (DSL), and the Vice President Claude Canizares (Provost) in order to develop and deliver their recommendation.

This year, the GSC HCA recommended an increase of 5.23% to graduate stipends. This number accounted for baseline inflation of 4.73% and had an additional 2-year rental reconciliation plan which attempted to make up for underprojections of rent and compounded loss over the last several years. The final stipend increase was set by Academic Council at 4.75%. This amount represents the largest stipend increase in recent history and amounts to approximately $4.5 to $5 million additional dollars directly into the pockets of graduate students. Below, you can find a historical record of GSC HCA recommendations as well as the actual increases as decided by the Academic Council at MIT.

 

Recommended Fiscal Year Requested Actual
Spring 2008 2008-2009 3.5% 3.5%
Spring 2009 2009-2010 4.8% 3.4%
Spring 2010 2010-2011 1.4% 2.0%
Spring 2011 2011-2012 2.5% 2.5%
Spring 2012 2012-2013 5.23% 4.75%

 

We have received many questions about how the process works and what it means for the average graduate student. Here we will try to answer the most common inquiries and would ask that any further confusion or commentary be directed to the GSC Chairs at gsc-hca (at) mit (dot) edu

 

Q: So, does this mean I’ll be getting a 4.75% increase to my stipend next year for sure?

A: Not exactly. First of all, the 4.75% increase is only mandatory for the Schools of Science and Engineering. The other schools are also asked to increase at the same rate but the final decision rests with the Dean of that individual college in consultation with the Dean of Graduate Education. Having said that, for those that are in the School of Engineering or School of Science, you still may not receive a 4.75% increase exactly. The reason for this is because the increase actually sets what is called the average stipend value. This average stipend value is then used to adjust the stipend range in which all graduate student stipends must fall. The stipend range is bounded between 90% of the average value and 115% of the average value. For example, this last year the full time PhD RA stipend increased from $29,487 to $30,888, representing an increase of 4.75%. With this new value ($30,888), the new RA range is set from $27,799 to $35,521. Thus, if your department was already paying you well before this year’s increase and as a result you still fall within the new range there is no reason to conclude you would see an increase in your stipend amount. That being said, if you are being paid less than $27,799 right now, you can expect an increase in your stipend and should inquire with your department if this does not occur. Furthermore, from a long-term perspective with n-bumps in the range, it is fair to approximately say that each increase in stipend amount will provide, on the long-term average, that much increase across the board for students. For this reason, we say that approximately 3,500 students will be receiving, on average, a 4.75% increase this year.

 

Q: How does this process work? How can I trust you’re doing it right

A: The HCA has spent over a decade refining its process and has now developed Matlab algorithms for processing all of the student data with inflation indices in order to achieve a percent increase recommendation. The process works generally like this:

  1. Student expense data is obtained from Cost of Living surveys. These surveys are run every four years (most recently in 2011) and aim to quantify student expenses across a number of “buckets”. An example bucket would be something like rent which graduate students spend approximately 51% of their incomes on. From this data we know both how much students spend total per year in each bucket and the percentages they spend on each bucket. We are also able to break this data out across a large number of subgroups on campus (e.g. on/off, families/single, male/female, department, etc)
  2. We then take the cost of living bucket percentages and scale them up to current day using up-to-date consumer price index (CPI) data. This data is published by the Bureau of Labor statistics and tracks a number of general indicators like food, rent, or books – just like our buckets. Using these numbers we are able to rescale the relative percents of each bucket. We do this for every bucket except rent.
  3. For rent, we have to approach the problem in two steps. On-campus rents are set by the Division of Student Life and MIT Housing each year. We use this exact number to calculate the rent increase for the 1/3 of our population that lives off campus. For the 2/3 of students that live off campus it is a much trickier situation. In this case, we’ve recently moved away from the National CPI numbers because they aggregate over large metropolitan regions (in our case, a three state region) and are thus unrepresentative of the actual increases faced by graduate students living in Cambridge and surrounding cities. Thus, in order to get at the increase in rental rates for this region we tap into multiple data sets from the Cambridge Development Department, the MIT Off Campus Housing Office, craigslist aggregates, and actual reports from the Cost of Living Survey. Thus far, we have found the Off-Campus Housing numbers to be the most accurate and up-to-date so we are currently using those to calculate our inflationary increase in rents. As an aside, in previous years we had been using the national CPI numbers to model off-campus rents and as a result we’ve incurred a loss due to compounded underprediction from year-to-year. This year we developed a number of multi-year reconciliation plans to help us get back on track to where students were about 5 years ago.
  4. With all of these numbers in hand we then calculate a weighted sum of the different increases experienced by the on- and off-campus housing populations.
  5. Finally, we qualitatively discuss exogenous or speculatory variables such as gentrification, utility variability, and air travel volatility.

 

Q: Interesting, this sounds like a pretty neat project. How much work did it take?

A: Approximately 500 hours

 

Q: Who works on this team?

A: Great Question! The stipend recommendation team was composed entirely of students just like you! Here’s the team list:

  • Randi Cabezas, EECS
  • Javier Sanchez, Physics
  • Ellan Spero, SHASS
  • Maokai Lin, ORC
  • Brian Spatocco, Materials Science

 

Q: How do I get involved for next year’s analysis?

A: Simple! Email the hca chairs at gsc-hca (at) mit (dot) edu!