Wait a minute, the OP is a graduate student. Why on earth wouldn't a graduate student use their Ph.D.-granting institution's letterhead? My dept certainly urged all of us ABDs to use it for jobs, fellowships, etc. I can see the argument not to use dept. letterhead if you're a prof back on the market but a graduate student?!? After all the OP's department/university presumably wants its grad students to get jobs and should gladly want to lend its name/reputation/paper to help that. I certainly would and did use it when I was a grad student.
Technically, the OP
was a graduate student; the thread was three years old when it was revived by hikingprof. OP may now be an assistant professor coming up on third-year review.
I have, and would again, use department or school letterhead if I were seeking a job with the knowledge of my department. I did so for my last job search with the department's blessings. Apparently it did not prevent me from getting my current job; I have no way to know if it ruined some other prospects for me.
