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Survey: Lacking Personal Finance Education Contributes to Fiscal Woes Later in Life; Millennials Seek Recourse

Press Release

Published March 11, 2019

National survey by Laurel Road finds that the lack of financial education is felt more acutely by women, who come up significantly short in retirement & emergency savings, as well as understanding of student debt financing

New York, NY – March 11, 2019 – Nearly all (94%) college-educated Americans think personal finance courses should be required to graduate either high school or college, according to a new report. Findings released today by national online lender Laurel Road uncover factors contributing to this demand for early financial education, which is often associated with a lack of fiscal confidence and significant savings gaps later in life, especially amongst women. In fact, three-quarters (75%) of respondents believe that personal finance education courses would be a more useful college graduation gift than a check for their first month’s rent.

Women (85%) are significantly more likely than men (67%) to believe that earlier is better – advocating for a personal finance graduation requirement in high school. This is likely influenced by that fact that men tend to learn more advanced skills than women before graduating. While women are more likely than men to learn about basic money management, such as budgeting (69% vs. 63%) and managing bank accounts (75% vs. 65%), men were more likely to understand common finance terminology (52% vs. 42%), retirement savings (32% vs. 28%), and the ins & outs of investing (35% vs. 23%) before graduation.

Lacking financial education strongly ties to student debt crisis

The survey also found that less than half (44%) of millennials with student loans fully understood their repayment timelines before taking on debt to pay for college. And more than 1/3 of millennials admit that they didn’t understand the basics of student debt before borrowing – including timelines, monthly payments, interest rates, tax implications, refinancing and evaluating lenders. This education gap is especially pronounced for women, who were nearly twice as likely as men (37% vs. 20%) to not understand the basics of student loans before they borrowed.

As public concern and attention around the student debt crisis increases, millennials’ confidence in their own knowledge has taken a hit. One-third (34%) of millennials report this year that they are not confident that they understood their college financing options, versus just 25% in 2018.

Additionally, more than half (54%) of debt-saddled millennials have received help in paying off their student loans in the past year. Of all respondents receiving help, just 34% were female, while nearly half (49%) male. Still, respondents believe they’ll be paying off student loans until age 49, on average, pointing to the fact that student loans present a decades-long burden, regardless of gender.

Millennials are significantly more invested in their finances

Perhaps in response to this increased awareness around the importance of taking control, 87% of millennials (and 75% of all respondents) have spent more time proactively managing their personal finances compared to one year ago. In fact, financial proactivity increased year-over-year in every category, with more people investing in retirement & stocks, meeting with a financial advisor, negotiating higher salaries, and taking personal finance courses. Women in particular saw the biggest year-over-year jump, with 90% reporting personal finance proactivity in 2019, versus only 83% in 2018.

Concerning gender disparity in retirement & emergency fund savings

Despite this increase in financial proactivity, there’s still a ways to go – especially for women. Less than 1/3 of respondents learned about saving for retirement before graduating college, which could be a factor as to why 30% of respondents (and 34% of millennials) do not have any money saved for retirement, while 46% have less than $1,000. Of all respondents, women have roughly $123,000 less in retirement savings, on average, than their male peers, and are nearly twice as like (37%) than men (20%) to not have any money saved for retirement.

Meanwhile, it’s a similar picture for emergency savings. Nearly two-thirds (61%) of millennials have less than $500 in an emergency fund. And, of all respondents, only 66% of females even report having a backup fund, with an average of $5,493 saved, versus 82% of males and $9,820.

“The data shows a clear need for improved personal finance education, the lack of which women especially are paying for later in life,” said Alyssa Schaefer, Chief Marketing Officer of Laurel Road. “But despite this obstacle, women today are more empowered than ever before, and don’t shy away from building their knowledge on financial matters. To share in this burden, Laurel Road will host an event series to educate, support and engage women in a deeper dialogue about financial health – and particularly the role student debt plays.”

Additional findings include:
  • Earlier is Better: 77% of respondents think personal finance courses should be required to graduate high school.
  • Back to Basics: The majority (61%) of college-educated Americans didn’t learn basic personal finance skills, such as budgeting, credit scores or investing, until they were 18 or older.
    • For nearly 1/3 of respondents (29%), that number jumps to after age 22.
  • Raise Up: Only 38% of working females requested a raise in 2018, versus 58% of males. Of those, only 86% of females were successful, vs. 95% of males.
About the Survey

The Laurel Road survey was conducted by Wakefield Research among 1,000 nationally representative college-educated U.S. adults, half of whom have earned a graduate degree, between January 31 and February 11, 2019, using an email invitation and an online survey. Quotas have been set to ensure reliable and accurate representation of the U.S. college-educated population 18 and older.

Results of any sample are subject to sampling variation. The magnitude of the variation is measurable and is affected by the number of interviews and the level of the percentages expressing the results. For the interviews conducted in this particular study, the chances are 95 in 100 that a survey result does not vary, plus or minus, by more than 3.1 percentage points from the result that would be obtained if interviews had been conducted with all persons in the universe represented by the sample.

About Laurel Road

Laurel Road is a national online lending company and FDIC-insured bank, offering online student loan refinancing, personal lending and mortgage products as well as consumer and commercial banking services. Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with graduate and undergraduate degrees to refinance and consolidate more than $4 billion in federal and private school loans. With our low rates, borrowers have reduced their monthly payments and on average saved tens of thousands of dollars. For more information on potential savings, see laurelroad.com/student. Laurel Road Bank is a Connecticut chartered bank offering lending products in all 50 U.S. states, Washington, D.C. and Puerto Rico. The mortgage product is not offered in Puerto Rico. Laurel Road Bank is an Equal Housing Lender, Member FDIC. NMLS ID # 402942.

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Media Contact:
KWT Global PR for Laurel Road
212-352-4651
laurelroad@kwtglobal.com

Terms and Conditions

REFINANCE/CONSOLIDATION LOAN – RATE DETAILS, TERMS, AND CONDITIONS

Laurel Road Bank is a Connecticut state-chartered bank offering products in all 50 U.S. states, Washington, D.C., and Puerto Rico.  Laurel Road has helped thousands of professionals with graduate and undergraduate degrees across the country to refinance and consolidate over $4 billion in federal and private school loans, saving these borrowers thousands of dollars each.

Lending services provided by Laurel Road Bank, Member FDIC.

Laurel Road Bank is an Equal Opportunity Lender.

© 2019 Laurel Road Bank.

EFT DISCOUNT

The interest rate table above is inclusive of all Electronic Funds Transfer (EFT) discounts. To qualify for the EFT discount of 0.25%, monthly payments must be paid automatically from a bank account.

FIXED APR

Fixed rate options consist of a range from 3.75% per year to 5.80% per year for a 5-year term, 5.14% per year to 6.25% per year for a 7-year term, 5.24% per year to 6.65% per year for a 10-year term, 5.30% per year to 7.05% per year for a 15-year term, or 5.61% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan). The monthly payment for a sample $10,000 loan at a range of 3.75% per year to 5.80% per year for a 5-year term would be from $183.04 to $192.40. The monthly payment for a sample $10,000 loan at a range of 5.14% per year to 6.25% per year for a 7-year term would be from $142.00 to $147.29. The monthly payment for a sample $10,000 loan at a range of 5.24% per year to 6.65% per year for a 10-year term would be from $107.24 to $114.31. The monthly payment for a sample $10,000 loan at a range of 5.30% per year to 7.05% per year for a 15-year term would be from $80.65 to $90.16. The monthly payment for a sample $10,000 loan at a range of 5.61% per year to 7.27% per year for a 20-year term would be from $69.41 to $79.16.

However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.

VARIABLE APR

Variable rate options consist of a range from 3.48% per year to 6.30% per year for a 5-year term, 4.85% per year to 6.35% per year for a 7-year term, 4.90% per year to 6.40% per year for a 10-year term, 5.15% per year to 6.65% per year for a 15-year term, or 5.40% per year to 6.90% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 1.00% to 3.82% for the 5-year term loan, 2.37% to 3.87% for the 7-year term loan, 2.42% to 3.92% for the 10-year term loan, 2.67% to 4.17% for the 15-year term loan, and 2.92% to 4.42% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.48% per year to 6.30% per year for a 5-year term would be from $181.83 to $194.73. The monthly payment for a sample $10,000 loan at a range of 4.85% per year to 6.35% per year for a 7-year term would be from $140.64 to $147.77. The monthly payment for a sample $10,000 loan at a range of 4.90% per year to 6.40% per year for a 10-year term would be from $105.58 to $113.04. The monthly payment for a sample $10,000 loan at a range of 5.15% per year to 6.65% per year for a 15-year term would be from $79.86 to $87.94. The monthly payment for a sample $10,000 loan at a range of 5.40% per year to 6.90% per year for a 20-year term would be from $68.23 to $76.93.

However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.

MAXIMUM RATES

Borrowers who take out a variable loan with a term of 5, 7, or 10 years will have a maximum interest rate of 9%. Borrowers who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.

FEE INFORMATION

Laurel Road has no origination fees and no prepayment penalties. However, if Laurel Road does not receive any part of a payment within 15 days after the due date, it may assess a late fee not to exceed 5% of the late payment or $28, whichever is less. The borrower may be charged $20 for any payment (including a check or an electronic payment) that is returned unpaid due to non-sufficient funds (NSF) or a closed account.

 

LOAN AMOUNT

Up to 100% of outstanding private and federal student loans (minimum $5,000). If you are refinancing greater than $300,000 in student loan debt, Laurel Road will refinance the loans into 2 or more new loans.

ELIGIBILITY

Must be a U.S. Citizen or Permanent Resident with a valid I-551 card (which must show a minimum of 10 years between “Resident Since” date and “Card Expires” date or has no expiration date) and meet Laurel Road underwriting criteria (including, for example, employment, debt-to-income, disposable income, and credit history requirements).

ELIGIBLE LOANS

Graduates may refinance and/or consolidate any unsubsidized or subsidized Federal or private student loan that was used exclusively for qualified higher education expenses (as defined in 26 USC Section 221) at an accredited U.S. undergraduate or graduate school. All loans must be in grace or repayment status and cannot be in default.

INTEREST RATES

The interest rate you are offered will depend on your credit profile, income, and total debt payments as well as your choice of fixed or variable and choice of term. For applicants who are currently medical or dental residents, your rate offer may also vary depending on whether you have secured employment for after residency.

DISBURSEMENT OPTIONS

The repayment of any refinance and/or consolidation student loan will commence (1) immediately after disbursement by us, or (2) after any grace or in-school deferment period, existing prior to refinancing and/or consolidation with us, has expired.

POSTPONING OR REDUCING PAYMENTS

After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship.

We may agree under certain circumstances to allow a borrower to make $100/month payments for a period of time immediately after loan disbursement if the borrower is employed full-time as an intern, resident, or similar postgraduate trainee at the time of loan disbursement. These payments may not be enough to cover all of the interest that accrues on the loan. Unpaid accrued interest will be added to your loan and monthly payments of principal and interest will begin when the post-graduate training program ends.

We may agree under certain circumstances to allow postponement (deferral) of monthly payments of principal and interest for a period of time immediately following loan disbursement (not to exceed 6 months after the borrower’s graduation with an eligible degree), if the borrower is an eligible student in the borrower’s final term at the time of loan disbursement or graduated less than 6 months before loan disbursement, and has accepted an offer of (or has already begun) full-time employment.

If Laurel Road agrees (in its sole discretion) to postpone or reduce any monthly payment(s) for a period of time, interest on the loan will continue to accrue for each day principal is owed. Although the borrower might not be required to make payments during such a period, the borrower may continue to make payments during such a period. Making payments, or paying some of the interest, will reduce the total amount that will be required to be paid over the life of the loan. Interest not paid during any period when Laurel Road has agreed to postpone or reduce any monthly payment will be added to the principal balance through capitalization (compounding) at the end of such a period, one month before the borrower is required to resume making regular monthly payments.

SAVINGS EXAMPLE

Average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.

LAUREL ROAD RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

This information is current as of January 30th, 2019  and is subject to change.