The Washington Post

Women are making smart decisions about paying for their college education

(Source: U.S. Bureau of Labor Statistics) (Source: U.S. Bureau of Labor Statistics)

People borrow money for a lot of things. They borrow money to buy a car. They borrow money to buy a home. They borrow to improve that home.

Many people also borrow money — a lot of money — to go to college.

The typical college student borrows nearly $30,000 to pay for a college education, and about one of every eight college graduates owes more than $50,000. Outstanding student loan debt now exceeds $1 trillion.

The student debt problem is relatively recent. Whereas nearly two of every three of today’s college graduates has had to take out a loan to pay for college, their parents were luckier — a generation ago, less than half of the student body had to borrow money to afford college, according to a report by the Student Loan Project.

Part of the reason for the expansion in student loan debt is because college has become very expensive. The average annual tuition, fees, room, and board comes close to $45,000 at private nonprofit institutions and about half that amount at public institutions. These prices are about 40 percent higher for public institutions and 30 percent higher for nonprofit institutions than a decade ago. Meanwhile, median household income has remained almost flat during this time period, meaning that college costs take up a larger chunk of a family’s budget.

Student debt is now seen as a problem in part because the job market for college graduates isn’t looking very strong. Recent college graduates are much more likely to be unemployed now than before the great recession of 2007 to 2009. This group of young adults with a bachelor’s degree or higher faced an unemployment rate of about 6 percent in early 2013 compared with about 4 percent in 2007. (The figures are much worse for young workers without a college degree. Their comparable unemployment rates are about 12 percent in early 2013 compared with about 8 percent in 2007.)

Almost half of all college graduates will be underemployed, meaning that they’ll be working at a job that doesn’t require a college degree. And, many of these jobs won’t even be so-called “good jobs” that, although they don’t require a college degree, do pay well and are career-oriented. Unfortunately, about one of every five recent college graduates is working in a low-wage, non-career oriented job, such as bartender, food server and cashier.

Given this dismal job picture, it’s no wonder a recent survey conducted for the American Action Forum by Public Opinion Strategies found that 52 percent of respondents said that a four-year college degree wasn’t worth the $26,000 debt burden they’d carry with them to their first job.

The aversion to debt is stronger among women than men.

According to the survey of 800 likely voters completed Jan. 19-22, women are much more resistant to taking on student loan debt than men are. Some 55 percent of women thought that college wasn’t worth taking on $26,000 in debt, compared with 49 percent of men.

This is true even though recent college graduates working full time make $17,500 more a year than those who ended their education with high school, according to the Pew Research Center.  The picture is even brighter for women than for men, with median weekly earnings for women with a bachelor’s degree increasing by more than 30 percent over the past 35 years, compared with less than a 4 percent increase for women with just a high school degree.

What’s going on? At a time when education is seen as the way to a successful professional career, why does it seem that so many people, women in particular, are against borrowing money so they can go to college?

I asked Glen Bolger from Public Opinion Strategy why he thought women were averse to taking on debt for college.

“Rightly or wrongly, men may have more confidence in their ability to earn enough additional money by having a degree than they can still pay off the debt and come out ahead,” he told me via e-mail.

There you go again! Is the “confidence gap” once again leading women to make choices that are against their best interest?

No.  This time, the confidence gap doesn’t explain what’s going on.

It is true that women make choices that affect their future earnings power and, consequently, their ability to repay student loans.

Among college graduates, the highest paying occupations tend to be filled by men, while the lowest paying occupations tend to be filled by women. Engineers and computer scientists, for example, can expect to make around $60,000 in their first job after college, whereas social scientists can expect a starting salary of around $40,000, according to data from the National Association of Colleges and Employers.

Moreover, the greatest job growth for women is in relatively low paying jobs. According to the National Women’s Law Center, two-thirds of the job gains for women are in jobs in leisure and hospitality and retail. According to a recent report from the Federal Reserve Bank of New York, more than half of the college graduates with degrees in liberal arts or in leisure and hospitality are working in jobs where a bachelor’s degree isn’t required.

Thus, perhaps it’s not a confidence gap, but a reality check.

In fact, neither an aversion to debt nor the high cost of college is keeping women out of college. The opposite is true — women make up 57 percent of college students, and by age 27, 32 percent of women have earned a bachelor’s degree compared with 24 percent of men.

No, women just aren’t taking on crushing levels of debt to get their college degree.  After all, if a college student is planning a career in social services where she won’t be making a lot of money, then she better not rack up tens of thousands of dollars of debt.

In other words, women are choosing a college that they can afford.

Maybe women are making smarter financial decisions than some may have thought they were.

Joann Weiner teaches economics at George Washington University. She has written for Bloomberg, Politics Daily, and Tax Analysts and worked as an economist at the U.S. Treasury Department. Follow her on Twitter @DCEcon.

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