Student Debt Can Hurt Women More Than Men

A loan can be more financially painful for women, whose pay doesn't grow at the same rate as men.

Why Aren't Women MBA's Earning More?

Women, you may already know, get paid less than men. That's true broadly—for every dollar that men take home, women earn 21¢ less—and among the nation's most educated workers. Bloomberg revealed last month that women with MBAs earn a median of $35,000 less than men eight years after graduating from business school. One particularly painful effect of that earnings divide is that it makes paying off student debt loads, which continue to balloon, harder for women at work. 

It will take women MBAs a year longer than men to pay back their student loans, according to our analysis of Bloomberg data, gleaned from our annual ranking of MBA programs.

In our annual ranking of business schools, we surveyed 9,000 newly graduating MBAs and 12,700 alumni six to eight years out of school at MBA programs across the country. Our survey shows that immediately after leaving business school, the typical woman MBA earned just $7,000 less than men. But by 2014, the pay gap between men and women was five times as large.

To figure out how that income gap affects debt payments, we estimated how long it would take this year's crop of MBAs to repay their debt loads, assuming they devoted 10 percent of their compensation to paying off the loans. We assumed male graduates would see their earnings rise at a similar pace to male alumni from their school and that female graduates would see their earnings rise at a similar pace to female alumni from their school. We limited our analysis to U.S. citizens who attended U.S. MBA programs and who had accepted jobs by the time they took our Student Survey in the spring of 2015. The analysis includes 1,438 men and 562 women. 

Our analysis found that men and women borrowed about the same amount to finance their MBA—$75,000 at the median. Right after graduating, when they get paid almost the same amount, that debt made up 56 percent of the take-home pay for men, vs. 62 percent of women’s compensation.

As the gender pay gap widens, the loans begin to weigh more heavily on women than on men. The typical woman would repay the debt seven years after getting her MBA, a year after the typical man who went to business school. That means that four years after graduating, student debt takes up 25 percent of women’s earnings but only 14 percent of men’s.

Of course, not everyone gets out from under that burden in seven years. Seven years after graduating, 28 percent of women still owe $50,000, compared with 21 percent of men.

Women also graduate college with a heavier debt burden, a new study by the Institute for Women’s Policy Research reveals. Immediately after they get their bachelor’s degrees, student debt makes up 111 percent of black women’s income and 92 percent of white women’s. Comparatively, education loans take up 70 percent of white men’s paychecks.

As more young people take out larger loans than ever, the pay gap means that men will have more resources to pay their way out of debt much faster than their female classmates. Americans hold about $1.3 trillion in outstanding loans, and one in four borrowers— millions of people—are delinquent or in default on their payments. The difference between what men and women earn has been shrinking over the last half-century, but the basic inequity persists. The way this gap undermines women's finances may become more obvious, as college tuition and the American loan balance grow. The total college loan balance is expected to double to nearly $2.5 trillion over the next 10 years. 

“Women and men are unfairly graduating from college and university in huge debt,” Gloria Steinem, the feminist activist and author, recently told Brian Lehrer on WNYC radio. “The young women know that they will earn about $1 million less over their lifetime to pay back the debt, so they’re angry at that.” Steinem appeared to be referring to the gender disparity in college graduates’ lifetime earnings.

It turns out that even the nation’s most qualified businesspeople are at the whim of the gender pay gap. Women who take out tens of thousands in debt on the assumption that an MBA will be their ticket to a lucrative career are not making a bad bet. Most of them end up earning six figures and get rid of their loans relatively quickly. They just arrive at that promised goal later than men.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE