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Living on A Stipend, Part I: AmeriCorps and City Year

Sept. 15, 2012
Managing Money, Personal Finance
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Committing to a long-term volunteer program is a great experience and can add a lot to young peoples’ lives. But, that being said, there are practical factors to consider when you’re making the commitment, and it’s important to begin long fellowships such as AmeriCorps or City Year with a strong financial game plan.

AmeriCorps is an excellent program that gives participants the chance to gain valuable skills and experience while giving back to the community.  AmeriCorps offers many different programs to volunteer in, which can translate into experience for a career later in life. For example, if you wish to be a teacher, or work with at-risk kids, City Year is a popular AmeriCorps program, in which members tutor and mentor children who are in danger of dropping out of school. AmeriCorps offers a stipend and the Segal AmeriCorps Education Award, as well as medical insurance.

But what does it take to help out a community while also keeping your own head above water? What pit-falls should you avoid?

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Making It Work on a Stipend

Volunteer terms under AmeriCorps vary slightly from program to program, but typically the amount of time required for you to be considered full-time is 10 months to a year. During this period you will be placed in a program, and if you are part of the NCCC Program (made up of 18-24 year olds) you will most likely be living on a campus. Both VISTA and NCCC members receive a stipend, which varies depending on a number of factors, but is never more than $12,100. Stipends are calibrated around the Federal poverty line in the region of service. Since NCCC members will most likely not need to pay rent, their stipend is smaller.

A stipend is not like a regular paycheck: this is compensation for volunteer work, and the amount of money you’re getting reflects that. According to Samantha Jo Warfield, spokesperson for the Corporation for National and Community Services, the organization that runs AmeriCorps, individuals who apply should have a need or desire to volunteer. “For a lot of members it can be a challenge, but they sign up knowing that,” she said. “A lot of members will say, ‘it was tough, but I’m really glad I did it.’”

Living off the stipend, especially if you are not provided housing, can be a tough feat to pull off, but you’re not alone. Stacy Mobley, now a Naturopathic Doctor and Medical Consultant, served in AmeriCorps in Jacksonville, Fla., and said she found guidance within the program that helped her get by. “My coordinator was a great help. We did not specifically ?receive financial counseling throughout the program, yet we were given? flexibility to do what was needed to make ends meet,” Mobley said. “The great part of ?being a part of AmeriCorps was the additional layer of resources and ?mentorship via the coordinator of our particular placement sites as well.”

While it’s not a big sum, you will likely find that your stipend is enough to live on. Samantha Gross-Galindo is a 23-year-old alumna of City Year and is joining AmeriCorps NCCC this fall for another term. She explained that the stipend makes you change your lifestyle, but isn’t as earth shattering as it may seem. “With the stipend, I learned how to ?manage money on my own and find free or cheap methods of entertainment like?going to the library to get books, CDs, and DVDs, hanging out with friends and ?going to parks,” Gross-Galindo said. “City Year did provide training on?the Segal Education Award as well as methods to manage our stipend.” Director of External Affairs at City Year Michelle DeLuties points out that there are hundreds of people in the same position as you, and that by talking with them and you can gain valuable insight. “The best financial guidance we can offer incoming corps members is the opportunity to connect with City Year current corps members and staff who’ve lived through their year of service on the AmeriCorps living stipend,” said DeLuties. “These are the individuals who have made the stipend work by budgeting their expenses and living frugally. City Year offers incoming corps members several opportunities to connect with a network of corps members who have served and can offer first-hand advice.”

However, sometimes financial factors may become too much, as was the case for AmeriCorps VISTA member Benjamin Von Blon. “I previously served ?two years in New Orleans with Rebuilding Together…After being in New ?Orleans, I moved back to Columbus because I could not afford to stay,” Von Blon said. “The cost of living there took [my entire] stipend plus some and I had spent all of my savings.  I was living with multiple other AmeriCorps members, which helped with the costs, but they had decided to leave the city as well.  Moving home seemed like the safest play.” But despite money troubles, he’s back in the program now, attracted by the satisfaction he got from giving back to the community. “I ?took a residential construction position [in Ohio], but rejoined the VISTA program ?after becoming dissatisfied with my for-profit experience,” he said. “I moved back in with my parents. That is what is making it possible for me to serve a third term.”

AmeriCorps also now has a partnership with FEMA, and their first class of members is training now. They are provided with a work laptop as well as a Blackberry. City Year also used to provide each member with a cellphone as well as service; however, the program has expanded and can no longer offer that feature. They are currently preparing to roll out a new plan, which will allow members to make business calls as a write-off on their current service plan.

Using Your Education Award

Once you’ve served your full term, you will receive the Segal AmeriCorps Education Award. This is a great benefit since you were probably unable to begin paying back your loans during your year of service. The award is directly tied to the maximum amount given by the Pell Grant (currently $5,550), and can be used on all Federal loans or for continuing education. Don’t consider this free money, it must be given directly to the institution, and plan your payments wisely.

AmeriCorps alumni Bill Smith learned how to use the award the hard way. “Be careful about using the award as a lump sum,” he said. “As someone who was not ?finance and tax savvy, I didn’t realize that in?my naive quest to immediately rid myself of monthly payments, I would end? up owing the government money.” He explained that without the award, he would be paying about $105 a month for his Federal loans. “Compared to many of my friends, this is not a huge amount,” Smith noted. He chose to use the entire award at once, a choice that translated to being able to wait until 2016 to make another monthly payment. “On the flip side, because I used the entire award, that counted as income,” he said. “So when I did my taxes this past March, I owed money, because I hadn’t had any withholdings from [the award]. If I could do it over, I would have used about $1,260 of the award my first year, so on and so forth for the next few years.” That way, Smith said, he would have had an additional $1,260 in taxable income—which would have resulted in a slight increase in owed taxes—but still covered the monthly payments.

Of course everyone’s tax situation is different and this may not be the case for you, but it is something to consider. Bill went on to say: “My personal advice is to calculate what your rough monthly payments would be, figure out what you would pay for the year, and use that amount of your award.”

NerdWallet’s Recommendation

Don’t think of your service with AmeriCorps as a regular job: just because it has the schedule, experiences and slight payment of a regular vocation, it is anything but.

Having public service in mind can make you feel like you want to give the world, but you have to know your limitations.

As an NCCC member, you will be provided housing, so volunteering away from your hometown may be considerably easier. But for VISTA member this is typically not the case. It may be wise to do a VISTA term close to home, so you can still live with your family. Completing your service in a city like New York or San Francisco while having to pay rent with your stipend might be a difficult choice.

Some people interviewed for this article said that they also had to use some of their personal savings to make ends meet. Try to limit the amount that you dip into your funds. Your savings account will be a valuable safety net once you are out of the program and are no longer receiving a stipend. It is recommended that you set up a personal budget and daily allowance once you start your term. Calculate how much your stipend will be every week, create a breakdown of how that fits into your daily expenses, and stick to it. Having the discipline to budget is hard, but given your scanty income, it’s a necessity for AmeriCorps members.

Be smart with your education award. It is very tempting to try to knock out your loans in one fell swoop, but it is not necessarily the best course of action. Talk with your lending institution before, during and after you are in the program to set up a payment plan that will work to your advantage and won’t have any holes that will require you to make extra payments to anyone down the road.

Finally, talk to other people in your program, especially those who have already served a first term. They can give you all the insight you need to make your stipend and education award work. Financial security won’t be your only consideration when deciding to commit to a long-term volunteer program, however, you can make a plan and stick to it, in order to make your term a successful one.