She grew up in Jamestown, New York and attended Jamestown Community College (she enrolled when she was 16), where she formed 10,000 Maniacs in 1981. She was with the group until 1993; after taking six months off she started work on her first solo album, Tigerlily, which sold about as many copies as the five studio albums she recorded with 10,000 Maniacs combined.
She first visited New York City when she was 16, and moved there around 1990. Between work on the Blind Man's Zoo (1989) and Our Time in Eden (1992) albums, she started doing volunteer work at a homeless shelter. She often returned to the shelter to help out even after going solo, saying it helped her "stay connected."
With 10,000 Maniacs, she was clearly the visual focus of the group, and her bandmates were fine with that. Knowing that she was more interesting to look at than they were, they made sure she was up front in photos and got most of the screen time in their videos.
She and Michael Stipe are good friends. The met in 1983 and their groups toured together in 1987. Stipe says she's the reason his lyrics got more political; after she told him about her research into Native Americans, they agreed to each write songs about their struggles. These turned out to be the R.E.M. song "Green Grow The Rushes" from Fables of the Reconstruction and the 10,000 Maniacs song "Among The Americans" from The Wishing Chair (both released in 1985).
She shuns publicity and has little use for fame and luxury, but she's fascinated with regular people and often engages strangers in conversation - she once said that cab drivers are the most interesting people she meets. In her Maniacs days, she would often make her way to the parking lot after concerts and talk to fans, sometimes for hours.
When she left 10,000 Maniacs, Merchant explained that it was "like having five husbands." The logistics of being the only girl in the studio and rehearsal space were a challenge - lots of empty beer cans and dirty dishes.