While many American students continue to fight the uphill battle of the Student Debt Crisis, the American Association of University Women (AAUW) states that women hold two-thirds of U.S. student loan debt, just under $1 Trillion. 

Through centuries, women have displayed the courage to overcome challenges, defy vicious societal norms, and have risen to greater heights of success with each succeeding generation. Women’s History Month is a tribute to celebrate great achievements by women and their contribution to American history. It gives us an opportunity to recognize women’s varied and often under-recognized accomplishments throughout history. 

Coming back to the student debt crisis, datacollected through various surveys clearly points out the prominent existence of the gender gap in student debt loans. Let's have a look at the reasons contributing to this disparity: 

Importance of Education 

Women recognize the power of education and consider it as a valuable asset for financial independence. They are more likely to enrollin college and complete their degrees. They lean on student loans as a tool to afford college education to secure a better future. Hence, women do borrow and accumulate student loans with a plan to pay them off with better future income. 

Advanced Degrees 

Women are more likely to continue with education and opt for advanced degrees. Recent statistics show, women earned 40% more of the graduate degrees than men. This is great for those women who get advanced degrees, but the reality is that they get further buried in student debt.  

Gender Biased Employers 

Women who wish to work face a tough time in achieving equal pay. Women with bachelor’s degrees or higher make 76% of what men do with the same qualifications. Pay discrimination is the most prominent reason for women struggling to repay student loans.  

Bias Against Mothers 

Women who are mothers or are of childbearing age are less likely to hear back from recruiters. The (erroneous) conclusion is that their devotion to family and childcare makes them less committed and unable to put in long hours like their male counterparts, especially at high-level jobs.  

Professional Growth 

Despite advanced degrees and exceeding performance standards, women are denied promotions to executive roles. As suggested by this report, “For every 100 men promoted to manager, only 86 women are promoted.”  

As the title suggests, women in the corporate world face numerous modern-day challenges which deny them an equal footing to deal with student debt as compared to their male counterparts. They are fighting this battle on both fronts. Women face pay discrimination and carry the lion's share of the student debt burden. 

Each of the challenges mentioned above poses a barrier to the professional progress of women. We, as a society, must solve the student debt crisis but we have to recognize that it will take even more to solve the student debt crisis for women. 

Income Share Agreements, also known as ISAs, are a financing method that was first proposed by Milton Friedman in the 1950s. Friedman proposed the idea as a way of selling personal stock. In this agreement, a person agrees to pay a fixed share of their future income for a set period of time, in exchange for an upfront amount of cash. For example, a person who wants to finance $5,000 of student loans could pledge 3% of their income for 5 years. In this case, they would receive the money up front and be responsible for monthly payments that equal 3% of their income.

Over the years, this idea has developed and has been used to provide protection for someone who receives funding. Recently, ISAs have featured a minimum income that people must have in order to be responsible to share their income. If people make below that threshold, normally around $20,000 per year, then they are not responsible for any payments. Most ISAs also feature a payment cap, where you won't pay astronomically more money than you borrowed. This is useful for someone who may start their own business and it does really well.

 Instead of paying back multiple times more than they borrowed, they will only be responsible up to the payment cap. 

With student debt currently at $1.5 trillion and continuing to rise, ISAs have been seen as a way to alleviate that debt. ISAs allow for the person being funded to refrain from taking on debt. However, an ISA may not be for everyone. Before you go straight to an ISA, you may want to think about a few things. If you have not used all of your available federal financial aid, it may be a good option as it offers a robust set of protections. Also, if you expect to make way more than an average person in your degree program, a loan may be right for you. However, if you do not want to worry about the risk if you possibly lose your job or end up making less than expected, an ISA may be a good tool to protect you.

At the moment, only a handful of companies offer these products as a financing tool and these companies can be limited in who they offer their products to. Defynance is one company that hopes to offer this product to all students. Currently they are only offering their product to University graduates with a degree, but are expanding to current students in the near future.

If you're struggling to pay your loan, you're not the only one. In fact, 27% of students who graduated in 2004 have defaulted on their student loans. While missing a payment of your student loans may seem alarming, there are some options that can help you out. But first, what happens if you don't pay your student loans?

What happens when you don't make payments?

Depending on the type of loan and how late the payments are, many different things can happen. In all cases, your interest will continue to accumulate and you will have more debt to pay off than before. As this interest piles on, your payment can rise and make it even more difficult to get out of debt.

If your payment is late enough, your loan provider can report your delinquency to the three major credit bureaus. This will cause your credit score to fall and make it harder to get good rates when financing in the future. Even worse, depending on how long it's been since you made a payment, you can enter loan default.

Default

If you have federal student loans, your loans enter delinquency after 90 days without payment. If you don't pay your student loans for 270 days, they will enter default. Default can cause many problems that can cause years to fix, so it's best to avoid this option at all costs.

When you default, you're automatically responsible for repaying the full amount of the loan. The default will get reported to the three major credit bureaus. Your tax return and federal benefit payments can be withheld and applied towards your loan balance. Your wages may also be garnished, meaning your employer automatically sends a percent of your income to payoff the student loan.

If you have private student loans, the consequences for default can be similar. However, you will need to check with your current loan provider to see the default terms.

Other alternatives if you don't pay your student loans

If you're struggling to make payments and scared that you'll enter delinquency or default, there are options for you.

Use an income driven repayment plan

If your loans are federal, you can join one of their income driven repayment plans. With these plans, your repayment will be based off of your income, meaning if you aren't making a lot, you don't have to pay a lot. However, with these plans you can end up repaying for up to 20 years until your balance is forgiven and there is always interest accumulating. If your payments are not more than interest, your payoff balance will keep growing. This is a great option to avoid delinquency, but can hurt from the buildup of interest.

Enter Forbearance or Deferment

Forbearance and deferment can be good tools to temporarily pause your payments until you get back on your feet. Each has certain criteria, but you can use them if you're struggling to make payments. Check here to see if you are eligible. Deference may not accumulate interest depending on the type of loan you have, while forbearance will always accumulate interest. However, both will temporarily pause your payments until you can afford it. Be careful with these options, because again you will accumulate interest which could hurt you in the long run.

Refinance your loans

Another option to help you make your payments is to refinance your loans. This could help lower your monthly payments to a manageable amount. If you refinance to a loan with a longer term than you currently have, your payment will go down in most cases. However, this will also increase the total amount of interest you will pay over the loan's lifetime. If you make extra payments when you can, this increased interest will be minimal.

One new method that has become popular recently is an Income Share Agreement (ISA). In these arrangements, a person will pay a small percent of their income for a set period of time in exchange for funding. There is no interest or debt, you just pay that percent until your obligation is complete. ISAs also include downside protection. This means if you lose your job or decide to go for further education, your payments pause and don't have interest piling on. Defynance is currently working on an ISA for college graduates with debt.

Today, it's hard to get through college without taking out a student loan or taking on the burden of debt. The price of college keeps rising and there's less money to go around for everyone. You may not want to take out a student loan and avoid debt but, are there other alternatives? Let's explore a few options that may work for you.

Scholarships and Grants

Scholarships and grants are a great way to put yourself through school. It's pretty much free money if you can get it and there are scholarships for virtually everything. They come in all shapes and sizes, from under $50 to covering the entire cost of your degree.

There's also many services out there that will match you up with scholarships, such as scholarships.com. These tools will use the information you give them to find the scholarships that matches you best. This will help increase your odds of earning a scholarship and help you avoid wasting time chasing after ones that you don't qualify for. This is the best alternative to student loans as you don't have to pay anything back.

Pay your way through school

If you didn't get enough scholarship or grant aid to cover your educational costs, you can still pay your way through school. While not very attractive, working through school is a common option for many students. You can apply to nearby jobs or find a paid internship to help you earn money while in school. Internships also help you gain real world experience in a career that is related to your major, so they can be an extremely useful option whether you need money for school or not.

To help cut costs, you can avoid expensive Universities and go to a 2-year community college before transferring to a public university with cheap in-state tuition or even your dream school for half the cost. This route may not seem attractive at first because you want to go to a top university, but it is a good way to save some money on school and your degree will still show the name of the University that you ended up at.

Income Share Agreements as an Alternative to Student Loans

Another option that is picking up momentum is Income share agreements, a more socially responsible and balanced alternative to student loans. Income share agreements (ISAs), unlike a loan, are interest and debt free. ISAs also come with many built in protections for you, especially if you end up in difficult financial times. This includes not making payments when you lose your job or your income falls below a certain threshold. They also offer a payment cap if you do really well. This keeps it fair for all parties and aligns the goal of income sharer and investor.

Purdue University has been offering ISAs since 2016 and Clarkson University recently announced their own program. The state of California has also just passed a bill requiring the University of California system to develop ISA programs. Furthermore, Defynance is focusing on providing ISAs to refinance existing student loans. As the concept continues to spread and people begin to appreciate how ISAs are beneficial for everyone, they can become a common and easily accessible alternative to student loans.

What is Student Loan Consolidation?

Student loan consolidation is a way to combine your federal student loans into a single loan. This allows you to have all your loans in one place with a single payment, while keeping federal loan benefits. If all your student loans are federal student loans, then you are probably eligible for a Direct Consolidation Loan. Some federal student loans are not eligible, but many of the common ones are. If you have both private and federal student loans, you can convert your federal student loans into a Direct Consolidation Loan. If you get a Direct Consolidation Loan, you are also still eligible for federal income driven repayment plans and public student loan forgiveness. 

Consolidating your loans, like anything, has it's pros and cons. It can be easier to keep track of your loans when you consolidate into one payment. Consolidation can also lower your monthly payment by extending your term length. This can be good in the short term, but it will increase the amount of interest you pay over time. You also want to make sure that consolidating your loans does not make you lose any other loan benefits, such as interest rate discounts or cancellation benefits. A Direct Consolidation Loan will also cause you to lose any qualifying payments made towards the PSLF program. 

How do I Consolidate my Student Loans?

If all your loans are federal student loans, you can apply for a Direct Consolidation Loan here. For the Direct Consolidation Loan, it's as simple as logging into the federal aid website and filling out their form. The application can be submitted online or by mail. The application only requires some personal information as well as the loans you do and don't want to consolidate. 

What if I don't want to consolidate my loans?

An alternative to the Direct Consolidation Loan would be to apply for private student loan refinancing. The company will buy out your current loans and your new interest rate can change based on your credit. Doing so will also make you lose your federal loan protections. One option is to consolidate federal student loans with the Direct Consolidation Loan and refinance private loans separately to keep federal loan protections. This option should only be taken if you are eligible for a good rate by refinancing. 

You can even refinance your loans to an Income Share Agreement with Defynance. This option gives plenty of flexibility in payments as it is based on income. It even has protection for many people that make it easier to pay back and removes the specter of debt from the equation.

When someone mentions student loan forgiveness, they are normally referring to the Public Service Loan Forgiveness (PSLF) program, which forgives people with federal student loans. If you qualify for this program, the complete balance of your federal student loan will be forgiven. This means that your payments permanently end.  There are a few other programs that will forgive your federal loans, but the PSLF program is the largest and most popular.

The other programs include the Teacher Loan Forgiveness program, which can potentially forgive up to $17,500 if you work in a low income area. The government also offers Perkins Loan Cancellation, Disability Discharge, Death Discharge, Bankruptcy Discharge (rare), Closed School Discharge, False Certification of Student Eligibility Discharge, and Unpaid Refund Discharge. Click on the links to learn more about each program.

Student Loan Forgiveness Qualifications and Application

To qualify for PSLF, you must have made 120 qualifying monthly payments on your student loans while under a qualifying repayment plan. A qualifying payment must be made after October 1st, 2007, have paid the full amount due, not be over 15 days late, and be paid while employed by a qualifying employer. Payments while in-school and the grace period, deferment, or forbearance do not count as qualifying monthly payments. A qualifying repayment plan includes all of the income-driven repayment plans. This means  that you must make 120 on-time payments while on one of the income-driven repayment plans to qualify.

Moreover, a qualifying employer, means a government organization or a 501(c)(3) tax-exempt not-for-profit organization. A not-for-profit organization that is not tax-exempt can also qualify if their primary purpose is to provide certain types of qualifying public services. You must work full time for these employers to qualify. If you serve full-time as a AmeriCorps or Peace Corps volunteer, you also qualify for the PSLF Program. 

Additionally, to qualify, you must have direct loans from the government. Federal Perkins Loans and Federal Family Education Loans are not eligible. However, you can consolidate them into a Direct Consolidation Loan that will qualify. 

One final requirement is to complete and submit the Employment Certification for PSLF form while making eligible payments. You must submit this form every year you work at a qualifying employer or when you change jobs to qualify. If you have not been doing this, you can submit one for each employer you worked for while making qualifying payments. To submit the application, you can mail or fax it to the Department of Education. You can also submit it online if FedLoan Servicing is your servicer.

Only after having completed all of these steps and submitting the PSLF application form will you be considered to have officially applied for student loan forgiveness.  The process may not provide a great experience but it can certainly relieve someone of their student loan obligation.

Alternatives to Student Loan Forgiveness

If you do not qualify for the PSLF option, there is still hope. You can always check out the other options that were listed above. You can also try to get the loan discharged in bankruptcy. While rare, it does still happen on occasion. To qualify, you must declare Chapter 7 or Chapter 13 bankruptcy. You must also prove that repayment of your student loans would cause undue hardship to you and your dependents. The court will examine multiple factors to determine undue hardship.

Another option for those looking to have their student loans forgiven is to refinance their loans to an Income Share Agreement. If you're not familiar with Income Share Agreements, you can find out more here. This financing option can help lower, or even eliminate, your monthly payments in times of hardship. To learn more, check out the Defynance website. 

Year over year, the average amount of student debt per borrower continues to rise. College prices have been climbing, so students continue to borrow more money to pay for their education. This burden causes recent graduates to delay major life events, just so they can pay their loans. 

So, what is the average amount of student debt?

Currently, total student debt sits at over $1.5 trillion. According to the Federal Reserve, seven in ten adults enroll in some form of higher education.  Of these people going to college, 42% have taken on some form of debt. Around 20% of them claim that the costs of their degree was higher than the benefit. Students who borrow for college leave with an average of $28,400 of debt. This is an almost 30% increase from the average borrower debt in 2001. 

Are people paying back their student debt?

This is a tough question to answer, because while many people are paying back their debt, some are defaulting on their student loans. The default rate for has rose from 10% for graduates in 1996 to 17% for graduates in 2004. This percent also rises for people who have lower amounts of debt. Those who have $5,000 in debt are more likely to be behind on payments than those with $100,000 in debt. This is because more debt is linked to higher education, and an increase in salary. 

With the cost of education not likely to fall anytime soon, there needs to be a solution to the pile of debt that is growing. One such solution is the use of Income Share Agreements as a debt-free alternative to student loans. 

The recent decision by Dartmouth College to no longer include student loans as part of the institution’s financial aid package, while worthy of applause, is also worthy of a closer look to explore its wider repercussions. Eliminating student loans as part of a financial aid package is a step in the right direction but it could quite possibly be a classic case of “treating the symptoms rather than the illness” because eliminating student loans does eliminate student needs. 

Dartmouth has announced that it will fill the gap once covered by student loans with grants, so clearly, this decision is far from some reactionary or performative impulse on the part of the leadership. 

Nevertheless, Dartmouth should stand out as an example – or warning if things go south in the future – for other institutions considering the same. Student needs will not go away. Tuition increases will be the biggest influence, so it would be ironic that the funding for the grants stagnates or rises slower than the institution’s own tuition increases.  Books, food, and housing – all remain – and will increase in cost independent of the grants. Either, students will have to take less or institutions will have to admit fewer in order to make the grant monies go farther. 

This is not inevitable. The fact is, there are always additional needs. Removing student loans from the financial aid package will restrict access to student loans and channel applicants to them in unpredictable ways. If you take away access to federal and private student loans, then the access to them will most likely be via marketing channels in which federal student loans do not partake as deeply as private companies. When offered as part of the financial aid package, there is a strong likelihood that the financial aid office will advocate for including lower-cost federal options first. Without such advocacy and without the same visibility as private lenders, federal student loans could recede into the background. 

In the end, private student loans could surge in terms of usage. If it comes down to a marketing battle, private companies are more likely to win when pitted against the federal government. Private companies, despite any given institution’s ability to fulfill the financial needs of its students, can find ways (and reasons) to supplement the institution’s financial aid package. 

In the end, our country still needs to address the underlying problems confronting its student population. Higher education and research are very much a part of our competitive advantage and, like so much of our physical infrastructure, our system of higher education needs fixing. Increased government support in investment, is not a handout, and the growing income and wealth gap has become a crisis. 

Yes, we applaud Dartmouth College’s decision to replace student loans from its financial aid packages, but grants may not be the most effective or sustainable solution.  Income Share Agreements, where the goals of the students, originators, and investors are all aligned in a meaningful and positive way would be a better alternative.