22-year-old twins Mike and Caitlin are one year out of college. Both studied at a four-year University, received bachelor’s degrees in engineering and are 12 months into entry-level jobs. Both siblings carry $20,000 in student loan debt, just about the national average.
All things being equal, Caitlin and Mike are on even (if unfortunate) footing for recent grads—making those first arduous steps up the career ladder, living on entry-level salaries and chipping away at hefty student loans. All things being equal.
Except that, at least according to new research from the American Association of University Women, all things are not equal. In fact, in comparing the salaries of men and women with comparable education in comparable fields just one year out of college, it’s plain to see that when it comes to paying off student loan debt and getting ahead financially, Caitlin—and all women—are much worse off. Men and women pay the same amount for college, but the rewards they reap are very, very different.
“There’s been a lot of attention paid to student loan indebtedness,” says Catherine Hill, Ph.D., AAUW’s director of research and co-author of the recent study “Graduating To A Pay Gap” which analyzed data of over 15,000 baccalaureate graduates captured by the Dept. Of Education. “But very little focus has been put to the way debt impacts men and women differently,” she says. The AAUW analysis is clear: 20% of women compared with 15% of men pay more than 15% of their take-home salaries to pay off educational debt.
“Women are behind men in pay from the moment they throw their hats into the air,” says Lisa Maatz, the director of public policy for AAUW. By setting the discussion of indebtedness in the context of the gender paygap that exists just 12 months after graduation the AAUW hoped to confront a clear and inarguable truth: that because women earn 82% of their male peers in their first year of employment (on average $35,296 to $42,918), the debt burden carried by women isn’t just proportionally heavier than it is for men, but it can have far-reaching impacts on their financial health long-term.
The disturbing reality for college-educated women, Maatz says, is that they are losing out financially from the day they receive their degrees to the day they collect their last social security check. “By virtue of doing everything they were told to—to go to school, to get a degree and find a job—they are potentially dooming themselves to lifelong poverty.”
It’s well-worn ground that entry-level salaries have a serious impact on lifelong earnings up to and including social security and pension payments (and I’ve examined how Millennials are already at a disadvantage at entering the workforce amidst recession), but Maatz and Hill say the added pressure of debt for women explains why women are also less likely to contribute to 401ks and retirement accounts. “With smaller paychecks and a grave debt-to-earnings ratio it’s not surprising that many women can’t afford to,” Maatz says.
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