What Is a Stipend?

How this form of payment differs from an hourly wage

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What is the definition of a stipend? If you're an intern who will receive one, it's important to know both what this term means and its purpose. A stipend is a fixed sum of money paid periodically to cover expenses you might incur while working as an intern, for example, and don't have eligibility to accept a regular salary for your work. In some cases, stipends can offer other benefits besides money, such as room and board.

Why Companies Offer Stipends

Stipends aren’t performance-based or hours based. Rather, many companies that can't afford to pay their interns on an hourly basis offer stipends to help students cover expenses that typically occur during the course of an internship. This includes costs related to travel, housing, food, and entertainment.

If employers plan to offer interns a stipend instead of an hourly wage, they should include that information on the advertisement for the internship and reiterate it during the interview. Many students can't afford to work for a stipend alone and require paying internships to make ends meet.

If you can afford to receive a stipend instead of an hourly wage, ask the employer if you can sign a work agreement acknowledging the stipend and when it will be paid. The majority of employers pay out stipends on a weekly, bi-weekly or monthly basis.

Some employers wait until the last day of the internship to distribute stipends. You'll need to know how this process will work, so you can plan when to pay your expenses. If there are any reasons the stipend would not be paid, you should know what they are before starting the internship.

Types of Stipends

Stipends may be offered to encourage certain activities. For example, academic institutions may offer stipends that work like grants, to incentivize researchers to further their work on certain projects. This could include books, articles, translating works, and interpreting and analyzing collected data.

Some schools offer stipends to help with specific expenses, such as a computer. These stipends may not be used to cover any other expenses. Some employers offer employees a stipend in addition to their regular pay, to cover some or all of the costs of health insurance, a gym membership or education for career or job development.

Expenses Students Incur During Internships

In the year 2000, a student commonly received a $100 weekly stipend for an eight- to 12-week internship. Since that time, stipends have grown. They cover the cost of gas, bus tickets, train tickets, Ubers or taxis to get to and from the internship. The cost of travel could range from zero dollars per day (if the student is walking to work) to $30 per day or almost $1800 over the course of an internship.

The cost of housing for an internship also varies. Students might be paying close to $400 per week to live in college dorms in major cities. But if an intern lives in the city or with a family member over the summer, the cost of living could be nothing. Out-of-area students may need as much as $5,000 for living expenses over the summer.

Food costs really depend on the students' circumstances and where they are living. They might pay extra to be on the college dorm's housing meal plan. They might have access to a kitchen (if staying with a relative or a friend) and be able to purchase groceries, or they might need to eat almost every meal out.

If the employer is able to cover the cost of food (while at the internship), that’s certainly a respected and common gesture. If interns are budgeting wisely and spending $10 per day on food, that’s nearly $1,000 in food costs over the course of a 12-week period.

Based on these estimates, students will spend a minimum of almost $1,000 to cover their food over the course of an internship. If they also have food and travel costs to incur, they could be spending upwards of $7,000 for their internship.

Keep in mind these figures don't account for the several students who pay extra to be enrolled in school over the summer, so they can get credit for their internships. Those costs vary from school to school.

These figures also exclude entertainment costs, which typically vary. Employers are not expected to cover the fees associated with an intern's social life. 

What Companies Are Paying

Internship stipends are usually given out in increments of $250. Several companies offer $250, $500 or even $1,000 monthly. Generally, the best thing an employer can do is try to understand the expenses students face and come up with a stipend that will amply cover them.