Monday, August 21, 2006

Does Alicia Ingram need a faxless payday loan? She's only 22 years old, but she's already $27,000 in debt.

When Ingram graduates from Georgia State University this fall, her entry into adult life will begin with a slow crawl from student loans to solvency.

"I feel like that kind of hinders everything - where I'm going to live, how I'm going to live," says Ingram, who has delayed plans to attend graduate school. "It's having this burden of dishing out this money for something that I really hadn't expected."

Ingram is far from alone. Nationwide, those just graduating from college are surprised to find that early debts can have a far-reaching impact on the quality of their lives. As a result, quick payday loan use becomes more prominent in hopes of a fast fix.

Experts say this is especially the case for young women. Debt in America is nothing new. lds was $3,989 (in 2001 dollars). According to Tamara Draut, author of Strapped: Why America's 20- and 30-Somethings Can't Get Ahead, the trouble often begins with student loans. As females enter the workforce - making less money than their male counterparts - they may have to turn to payday advances to balance student loan payments with burgeoning social lives.

"These are such no-win scenarios," said Mary Ellen Garrett, first vice president of the Garrett Group, an Atlanta financial advisory team. "Debt is a phenomenon right now that is sweeping in droves, and I'm seeing it more in women than in men. Their biggest question is 'How do I get out of this?'"

The groundwork for debt may be laid in college or even earlier. Draut says the country's "debt for diploma" system has made borrowing one's way through college the norm.

"A generation ago, student financial aid was grant-based; now it is debt-based," Draut said. "You could work through the summer and pay for a whole year of college. That's not the reality anymore."

Meanwhile, more women are attending college than ever - they made up 56 percent of undergrads in 2000, according to the U.S. Department of Education. Subsequently, more women are graduating with student loan debt, an average of $19,360 in 2004, based on data from the Project on Student Debt, a nonprofit organization dedicated to finding cost-effective solutions to expand educational opportunity.

A recent Smith College study found substantial differences in the way men and women handle their finances - and a lot of it has to do with credit cards.

"Women on average have more credit cards than men," said Mahnaz Mahdavi, professor of economics and lead author of the study, conducted with two colleagues. "People with more credit cards tend to have more debt."

They also tend to apply online for no fax payday loans in order to pare down outstanding balances.

Women are also more likely to use their credit cards for personal items or to pay bills such as phone or Internet service, she said. They're less likely than men to pay balances on time or pay in full. Even after young women escape the collegiate chaos of credit cards and student loans, their debt problems may only get worse.

Women from the ages of 25 to 34 earn 85 percent of men's salaries, according to the U.S. Department of Labor, and the gap widens with age. As a result, women devote more of their incomes to paying off debts. In 2004, among workers ages 25 to 34, 23 percent of women with bachelor's degrees spent more than 10 percent of their income repaying student loans, compared with 16 percent of men.

Lack of financial know-how, Mahdavi said, was the most troubling finding in the Smith College study. Fewer than 1 percent of respondents, male or female, could answer simple financial questions about topics such as interest rates and federal savings programs. Women, she found, were more likely to not have that basic knowledge.

"When we look at 'Why does this woman behave this way or that way?' maybe financial knowledge has something to do with it," Mahdavi said.

Young women already straining under the weight of debt should take their cues from a man. This may mean considering a cash loan or it may not.

"What I see out there is a lot of fear," said Jennifer S. Wilkov, a certified financial planner and author of Dating Your Money, a step-by-step guide to money management for women."If women get lost, we look for someone to direct us. Men are more likely to figure it out on their own. If you are going to take (debt) on, you have to own it."

This entry was posted on Monday, August 21st, 2006 at 6:46 am and is filed under Consumer Debt.