Claire L. graduated valedictorian of Queens University of Charlotte, a small private institution, in May of 2019 with two bachelor’s degrees, three completed internships and plans to “save the world.”
She studied international studies and sociology to better understand how to help groups of people abroad, but she didn’t fully understand the gravity of the $100,000 in student loan debt she would be taking with her on that mission.
After spending seven months applying to jobs looking for the right fit, she found herself sitting alone at her kitchen table, on the phone trying to figure out how to consolidate her monthly loan payment totaling $900. “I very rarely cry or get upset,” she explained. But after she learned it wouldn’t be possible to consolidate her loans without a verifiable income, she broke down in tears.
“It was definitely a shock,” she says of navigating the experience. “No one tells you…I didn’t know how bad the interest would be.”
And she certainly isn’t alone. A study by the American Association of University Women (AAUW) revealed that women hold two-thirds of the outstanding $1.5 trillion student loan debt in America.
Women hold two-thirds of the outstanding $1.5 trillion student loan debt in America.
Now, as college seniors graduate into a job market and economy battered by COVID-19, those struggling to make ends meet are even more vulnerable to domestic violence and sexual harassment, and this discrepancy in student loan debt has become an even more pressing issue.
But it isn’t an issue that exists in a vacuum. Rather, it is a symptom of a larger, longstanding system where men have held the money and the power. A system that penalizes women who step outside its reinforced lines.
“Even when women do advocate for themselves, we pay a price for acting “out of role,” and the response is often exaggerated,” says Diane Bourdo, CFP, President of The Humphreys Group.
Essentially, we can’t get mad about this, or it could cost us even more.
Yes, more women attend college than men
Ever since the 1980s, more women have earned bachelor’s degrees than men, up to 57% in 2019, so it’s no surprise that women owe more. But it is shocking that women hold about 66.67% of the debt. That’s a difference that amounts to an almost $150 billion burden resting squarely on women’s shoulders.
I believe that the future is female…but right now she’s drowning in debt.
Based on the data from AAUW, and a 10-year repayment plan at a 6% interest rate, we can estimate that every month women spend an average of $30 more on their student loan payments than male graduates.
It’s easy to see how that additional $30 payment can affect the short-term, maybe she cuts back on takeout or can’t save quite as much in an emergency savings account. But debt we pay off doesn’t only impact what we miss out on right now. It is also a sacrifice we make for the future.
Imagine if she had that $30 a month and could invest it instead over the standard 10-year repayment period of a federal student loan. After those 10 years, she could have $6,145. And if she left that money in her account, thanks to compound interest, she could earn over $164,000 by retirement. For black women, this disparity is even bigger: over $695,000 after paying an average of $127 more per month than the average male graduate.
Why does this debt discrepancy exist?
It can be very tempting to dismiss this issue as part of the choices women make, like pursuing lower-paying careers or choosing motherhood over monetary gain, but that fails to acknowledge the roots of these underlying issues.
The gender pay gap
Women currently make 82 cents to every dollar a man makes, and it’s far wider for women of color and for working mothers. That 18-cent gap is widely referred to as the “gender pay gap” and widely criticized for failing to consider the fact that women tend to work in different fields, and those different fields have different compensations.
But even when you control for this “self-selected” segregation of occupation, women still earn 94.6 cents for every dollar earned by men, according to a Glassdoor study.
I believe that the future is female…but right now she’s drowning in debt.
We also have to wonder: are women really going into lower-paying fields with more flexibility to take care of children because we’re naturally suited to making less money? That’s a hard sell. These tendencies are held up by centuries of institutionalized gender bias in America.
Careers have historically taken on the compensation of the gender currently doing them. “Look at computer programming, it started with women back in the day,” says Claire Wasserman, founder of Ladies Get Paid. “Then, all of a sudden, there started to be more men coming into computer programming and guess what happened? The pay went up.”
So, not only do women take on more debt to fund our education, but we’re expected to pay it off on inexplicably smaller salaries, adding insult to interest.
Traditional female roles
“Gender stereotypes play a role in perpetuating this gap,” explains Bourdo. Claire L.’s story is the story of so many women. We are conditioned to be helpers, healers and caretakers, and then severely financially penalized for pursuing those roles.
Looking down on a woman who takes on debt to become an educator or social worker for her choice to help others at all costs doesn’t make a lot of sense when you think about the financial education high schoolers receive. This education is largely left up to our parents, and research has shown that even parents talk to their sons differently about money than to their daughters.
Parents save more for the education of male children
Not only are the conversations different – and inadvertently disadvantageous to young girls, but parents save more for college education for sons than they do for daughters. A T. Rowe Price study found that 50% of boys-only households reported they had saved money specifically for their childrens’ education, while only 39% of girls-only households had done the same.
Now, factor in the strong pressure from our society for high school students to go on to earn a college degree; that same society isn’t financially supporting that expectation, and it’s not doing it adequately for either gender.
The motherhood penalty
Women have babies. That is a well-known, and factual, reason that women currently make less money over a lifetime than men do. But I fail to see how bringing another life into the world and caring for it should be a large contributing factor to why I can’t retire at 65.
While the U.S. is incredibly behind on family leave policies, the equitable implementation of paid family leave can help alleviate the disparity. But it’s not just an issue of lost income, it’s lost experience and opportunity. “It should be paid family leave, not maternity leave. Men need to take this as well,” Wasserman says.
When employees are offered leave, women are far more likely to take it. A Harvard Business Review study revealed that men had the same internal conflicts when it comes to being a working parent, but due to the same traditional roles that segue women into lower-paying careers, women are the majority of the ones taking accommodations to address them, and thus the ones who took the hit to their careers.
Offering accommodations without adjusting our cultural expectations of parents can’t solve the root of the problem.
Financial equality for women is important for everyone
Women in leadership is good for business
Despite a track record of women outperforming male investors, women are less likely to invest, and it isn’t because of a lack of business sense. The Peterson Institute for International Economics found that increasing the representation of women in leadership from 0 to just 30% increased the company’s net revenue margin by 15%.
But women aren’t nearly as likely to see the benefits of this work because we are less likely to invest. So even though we do a great job of working for our money, our money isn’t working for us, and that makes it even more difficult to grow enough wealth to cover the extended breaks we take from work to care for family and our longer lifespans.
Women with money are good for the community
Research also shows that money is more likely to come back into a community when it is in the hands of women. A 2017 survey by The Institute of Fundraising found that 54% of women had given to charity within the last year, compared to 40% of men. This is an especially important statistic in light of our struggling economy where families and small businesses are desperate for help.
How can we work toward financial equality for women?
We need more women in places of power
We need women to look up to, but we also need women to look out for us. “There is a lot of coded patriarchy that has characterized the financial services industry,” Bourdo says. After generations of gender bias, money and the way we earn it, is full of nuance for women. This applies in personal finance, it applies at the workplace and throughout our lives.
Talk to women about finance, equitably
While women are bombarded from birth with signals that we should be curtailing frivolous spending and finding the best deals, women don’t hold a mere 32% of the world’s wealth because we missed a few clipped coupons.
We need to start talking to women about money in a way that is not only approachable, but equitable. If investing and compound interest are valuable personal finance concepts to understand, let’s share that with both men and women.
Tackle imposter syndrome
It would be great to simply tell women to go out and ask for more money for their work, but when decades of media, family and friends have sent us signals that devalue our work, there is an internal conflict around this subject. “You have to believe you’re worthy of that salary…you can’t constantly keep hedging yourself,” Wasserman says.
Once you are able to feel confident in your worth, you are in the position to make real change for both yourself and other women by asking for more. “If you spend a lot of your energy questioning yourself, think about how you’re not using that energy to help yourself or other women,” she explains. What ideas are living inside women who are too consumed by self-doubt to create and share them?
Partner with those in power
Women are financially and socially penalized for acting out of our traditional roles, and yet there is an illusion that women consider all jobs in existence and objectively settle on positions of service, welcoming the poor working conditions and low wages that currently accompany them.
To make real change, we not only need to partner with those in the position to promote and pay women more – who are overwhelmingly male – but we need to get everyone onboard. These traditional gender roles will be slow to change, but it is worth working toward a more equitable future, and financial equality is a large part of that balance.
While there are a lot of actions we can take as individuals to elevate women, we can also affect broader actions, and paid family leave policy is an important step. Wasserman suggests visiting paidleave.us to learn more about improving the paid leave policy at your company and how to get involved at a larger scale.
Financial literacy classes could also help level the playing field. “I believe students should be required to learn about budgeting, loans, prepare a simple tax return, basic insurance, retirement planning and investing principles,” says Echo Huang, CFA, Founder and President of Echo Wealth Management. She encourages people to work with local lawmakers to put these measures in place.
Even though we do a great job of working for our money, our money isn’t working for us.
Claire L. found a job she loves in the health care staffing industry, connecting nurses with the patients that need them and helping others during this pandemic. But the cost of finding the right job was high, and she wasn’t prepared to face it. The issue of student loan inequality in America is only one facet of the complex financial burden placed on women as a result of the cultural expectations set by society.
Women don’t have a chip on our shoulder, we have an anchor on our feet. Understanding that the disproportionate student debt burden didn’t happen in a bubble, and that there are ways that everyone can support financial equity – without requiring someone to take the blame – can help us work toward a brighter future not just for our daughters, but for our world.