July 9, 2018
In May, total student loan debt in the U.S. broke through another milestone, topping $1.5 trillion, Tom. That fact alone is worth noting, as it tells us that American college students continue to take on huge amounts of college debt. What really grabbed my attention was a recent report from the American Association of University Women which found that two-thirds of this debt is held by women. Overall, after completing a bachelor’s degree, women’s average accrued student debt is about $1,500 greater than men’s, and Black and Brown women take on more student debt than any other group of women, with an average of $30,000.
Several factors contribute to this ratio. First, more women enroll in undergraduate and graduate degree programs. Women make up 56% of college students in the U.S., and 35% more women go on to attend graduate school and pursue higher and more expensive degrees than men.
This imbalance may be linked to the gender wage gap cycle. Some studies, including one from Georgetown University, suggest that one reason women enroll at higher rates is that women may need one more degree to earn the same as men. But it doesn’t pan out. While women are statistically more educated than men and seek out more graduate degrees, the report found women with undergraduate degrees working full time make 26% less than their male counterparts. This means it takes longer and is more financially burdensome for women to pay back student loans. The report found that in the first four years after graduation, men paid off an average of 38% of their outstanding debt, while women paid off 31%.
Finally, research out of George Washington University notes that financial literacy plays a part. One study found that women are less informed about the student loan process, and often end up taking out more money than necessary at higher interest rates. Together, these factors have meant that women carry most of America’s student loan burden.
Gender and racial discrimination combine to impact women of color, who have an even more difficult time of repaying loans. According to the report, 57% of Black women reported an inability to meet the essential expenses in the last year due to student loan payments. This is in large part because of the amount of loans they have to take out to pay for rising tuition, combined with the disparity in household wealth between white and Black Americans. It is also impacted by career choice, according to Mary Hansen, an expert in U.S. social policy and Economics Professor at American University. She states that women of color tend to pursue careers that are personally meaningful in education, social work, government, and psychology, which pay less and often require masters or doctoral degrees.
On the financial front, we have to ensure our kids are prepared when starting the student loan process. Remember that student loans are a tool, but there are things to keep in mind when considering student loans. First, we have to talk to our kids to understand their ideal career path and earning potential after graduation. Research starting salaries for jobs related to their expected major. By doing this, we can begin to determine how much debt is manageable. A good rule of thumb is to work to keep total student loan debt below 75% of expected first year salary. As parents, we need to make sure our child has applied for student aid and know what we can reasonably contribute. We need to ensure our kids take advantage of scholarships and other non-aid options when possible. If we are clear eyed about our child’s ability to manage student debt and understand the burden, student loan debt does not have to be a curse.
In terms of policy action, the report suggests a few solutions, including protecting and expanding Pell Grants for low-income students and addressing the pay gap, specifically calling on Congress to pass legislation like the Paycheck Fairness Act and the Pay Equity for All Act to aid in the economic security of women. The report also suggests continuing to support income-driven repayment approaches that reflect borrowers’ realities. Finally, the author suggests offering resources tailored to nontraditional students, citing on-campus child care as an example, in order to allow these student to complete their studies and graduate.
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