Americans now owe more on student loans than they do on car loans or credit cards—and the burden is increasingly falling on women. Shocking new statistic: Female college grads now owe almost two-thirds of all student-loan debt, or a whopping $890 billion, according to a new report from the American Association of University Women (AAUW).
In contrast, men owe “only” $490 billion in student loan debt. And that student loan gender gap has gotten rapidly worse for women, nearly doubling in the past four years.
Student debt can stress an entire family—and, indeed, may pose a drag on the entire economy, according to Federal Reserve chair Jerome H. Powell. In an extended family, a young woman (like a young man) starting out in a new job with a crushing debt load can affect the financial security of her parents, even her grandparents. Here’s what the new report shows—and how to family members can help.
The Student Loan Gender Gap
One major contributor to the rise in student debt—for both women and men—is the skyrocketing cost of a college education. Between 1976 and 2016, the cost of a college education in the US rose 148%, on average, but the increase in median household income in the same period was a mere 21%. Result: Most high school grads intent upon earning a bachelor’s degree will have to take out student loans to pay for it.
But there are specific reasons why this burden is falling more heavily on women. One reason is that more women than men go to college now—56% of bachelor degrees in the US are now awarded to women. Plus…
- Women in college are more likely than men in college to take out loans to pay for it. That holds true for almost every level of degree, associate to doctoral and across all types of institutions. In 2015–2016, women’s initial loan balances, on average, were 14% higher than men’s.
- Compared with men, it takes women two years longer, on average, to repay their loans. One big contributor to the problem is the wage gap. Women with full-time jobs make 26% less than men in equivalent positions, on average, and lower earnings means less disposable income for paying off student debt. As a result, many women struggle to pay their student loans while covering the basic needs of living.
Taken together, these challenges point to a treadmill effect: Women take out more in student loans, repay that debt more slowly and wind up paying more in interest, which only serves to increase the overall cost of their debt.
How to Reduce the Burden
The AAUW recommends a range of actions that can help close the gender debt gap and make a college education more affordable. These include increased state and federal funding for public colleges and universities…addressing costs beyond tuition, such as books, housing and supplies…passing legislation to increase pay equity, such the Paycheck Fairness Act, a proposed federal law.
But there are many things that concerned parents and grandparents (of women and men with college debt) can do. Start by encouraging your child (or grandchild) to explore programs such as Public Service Loan Forgiveness, which forgives student loan debt for employees of certain public and nonprofit jobs, as well as income-driven repayment plans, which reduce payments to 10% to 15% of discretionary income. Both are run by the US Department of Education. Important: Not everyone qualifies for these programs, so it’s important to explore the details. One website that might be helpful is StudentLoanHero.
Of course, the best option is to avoid loans in the first place—or borrow less. Prudent help from parents and other relatives is key. If your child or grandchild is young, look into 529 college savings plans or other tax-advantaged savings plans for education costs. Pay attention, since the new tax law has changed the advantages and disadvantages of these plans.
Should you help your child or grandchild pay off her student loans? That’s a personal decision. But there’s one kind of help that financial advisers warn against: Tapping your retirement funds for money. Recent grads have many years to pay down loans, but you’ll run out of time to make your nest egg grow. Who would be the burden then?