U.S. student debt is growing rapidly towards a record US$2 trillion. Education and economic commentators are calling this unprecedented level of indebtedness a national ‘crisis’ that will continue to affect many individuals and institutions for years to come, with data showing that women are unevenly impacted.
- Students, graduates, lenders and the federal government are all being impacted by the rapidly advancing price inflation in the U.S. university sector.
- Women face an economic hurdle repaying their loans because they earn between 18-20 percent less than men and clearly have less disposable income.
- Women are also susceptible to severe spikes in unemployment during economic recessions, such as the 2020 COVID-19-driven downturn.
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Student loan debt in the U.S. totals $1.71trn and is growing six times faster than the nation’s economy – exceeding accumulated car loans and credit card debt. This number had risen from $480bil in Q1 2006 to $1.683trn in Q1 2020.1
As the debt mounts each year, graduates, lenders and the loan-guaranteeing federal government are feeling the impact of escalating costs that come with accessing and funding higher education.
Servicing student loan debt is also potentially limiting demand across the post-COVID-19 U.S. economy due to decreased purchasing power.
U.S. student debt affects women more than men
As Figure 1 shows, it’s clear that the student debt burden affects women more than men. Women held 62 percent of the outstanding Federal Loan Portfolio in Q4 2020. And many graduates also fund their studies through private providers, adding to the total debt.
Figure 1: U.S. student loan debt by gender
Women face an economic hurdle repaying their loans because they earn 18-20 percent less than men and clearly have less disposable income. Figure 2 shows how this is a trend that has persisted for at least the last six years in the U.S.
Women have fewer career opportunities in many sectors, have been disproportionately affected by the acute spike in unemployment during the COVID-19 pandemic and have to contend with limited availability of childcare facilities.
Figure 2: U.S. salary levels for women versus men
Narrowing the earnings gap with more education
Women generally study for more degrees than men in order to increase their academic qualifications to secure better-paid jobs and ultimately work towards closing the earnings gap with men.
Women make up 60.7 percent of two-year associate degree graduates, 57.4 percent of four-year bachelor’s degree graduates and 57.4 percent of master’s degree graduates.2
According to an Educationdata.org report that examines student debt by gender, women face more challenges than men when they pursue a college education:
- Women hold 58 percent of all student loan debt.
- Women take an average of two years longer to pay off their student loans despite making higher payments.
- Women are less likely to get financial help for their studies from their parents and family than men.
- Black women have the highest average amount of debt.
- Asian women have the lowest average amount of student loan debt.
- The average black woman’s student loan debt grows 13 percent in their first 12 years of repayment.
- In the same period, the average white woman’s student loan debt shrinks by 28 percent.
Watch – Perspectives LIVE: The Gender Pay Gap: Fuelling The Student Debt Crisis
Why women have fewer career opportunities than men
There are notable sectors where there is a gender balance in the largest U.S. companies. This underscores women’s potential to enjoy good career opportunities.
In the healthcare industry, women make up 54 percent of the total workforce; in financial services they represent over half (52 percent); and in consumer discretionary women account for 48 percent.
Focusing on the make-up of employees in the Russell 1000 Index companies, women represent 40 percent of employees. Figure 3 shows that women are least represented in the materials, industrials and energy sectors in the U.S.
Figure 3: Percentage of women employed by Russell 1000 companies
COVID-19 exacerbates economic conditions for women
Women are also susceptible to severe spikes in unemployment during economic recessions, such as the 2020 COVID-19-driven downturn.
The data in Figure 4 shows that there was a steady decline in the unemployment rate for women in the U.S. who maintain families to a 10-year low of 4 percent. However, the pandemic resulted in a very steep jump to 16 percent unemployment for this same group.
The downward correction in 2021 to an 8 percent unemployment equates to the same level recorded in 2014, illustrating how much the pandemic has affected working mothers at this stage of the recovery.
Figure 4: U.S. unemployment rate of women who maintain families (percent)
Before the economic shock created by COVID -19, employers had an increasing role in providing childcare services to their workers. This helped reduce the unemployment rate of women in the 10 years prior to 2019 by encouraging more mothers back to the workforce.
While in 2010 just 11.9 percent of Russell 1000 companies provided childcare services, this number had nearly doubled by 2019. S&P 500 companies started the same time period at 20.2 percent of companies offering childcare services and by 2019 this had risen to 30.2 percent.
As more and more companies reported data in the 10 years prior to 2019 on the provision of childcare services, almost 74.2 percent of Russell 1000 companies and 69.0 percent of S&P 500 companies stated that they provided no childcare services whatsoever.
However, as more companies improve their corporate sustainability reporting, their disclosures highlight the gap in the provision of services that would support mothers to return to their careers. Measuring the lack of these services is the first step towards helping to manage the need for providing supportive family-focused services.
Supporting women in the workforce
There is a simple logic that the more women are encouraged and supported to stay economically active and return to the workforce, they will be able to address their student loan debt more effectively.
They will also be able to do what so many want to do: balance their family and professional roles to enjoy a rewarding life.
While this blog does not seek to discuss the escalating operating costs at state, not-for-profit and for-profit colleges, it is clear that students, graduates, lenders and the federal government are all being impacted by the rapidly advancing price inflation in the U.S. university sector.
As the student debt crisis grows, government has a big opportunity to investigate whether regulating loan providers and debt issuers in the college finance universe would help students and graduates to access tertiary education in a more cost-effective way.
The corporate world has an important role in continuing to narrow the gender pay gap.
The advances in provision of childcare services that Russell 1000 and S&P 500 companies made before the COVID-19 pandemic should be continued, and increased, as the U.S. economy recovers.
Companies should also ensure that they are hiring actively working mothers by offering career flexibility that allows parents to balance their family lives and careers.
If you have any thoughts or comments about the issues in this article, I’d love to hear from you. Please reach out to me on LinkedIn.
- U.S. Bureau of Economic Analysis (BEA).
- Refinitiv Datastream; National Center for Education Statistics IES NCES.