We sat down with Alyssa Schaefer, CMO of Laurel Road to discuss financial literacy between men and women and how Laurel Road is dedicated to educating millennials and helping them achieve their personal goals through digital lending. IVY had the pleasure of partnering with Laurel Road for multiple panel discussions bringing the conversation to IVY’s NY, CHI, and BOS members and we were eager to hear more about the results, and surprises, from their research and what we can expect to see from them in the future.
1. What was the need in the community that spurred the creation of Laurel Road as a business?
Laurel Road was created to provide driven, tech-savvy men and women with simple and easy lending options for life’s milestones. We found that other products out there for student loans or personal loans were confusing and time-consuming – offering very poor customer experience. For example, many lenders claim their application process is quick and all-online, but in reality, the borrower has to wait a long time to be approved, often requiring time – consuming calls or visits to loan offices. Our lending technology and application processes were built from the bottom up by our in-house engineering team to simplify the lending process in one easy-to-use, user-friendly online platform.
We also saw an opportunity to offer borrowers a way to preview rates personalized for them with no commitment. We don’t rely on cookie-cutter programs to generate your preliminary rate. Our digital-first platform develops a rate during your request for a quote that’s personalized for you – in a process that only takes about 5 minutes.
Interesting fact – we were actually founded as part of a community bank from Connecticut. Our founding team saw these opportunities, and we quickly grew and scaled nationally to the point where we were originating billions of dollars’ worth of loans. Laurel Road as a lending business was acquired by KeyBank in early 2019, so we still retain the scale and security of a large financial services company, and we pass those benefits along to our customers.
2. What was the genesis for Laurel Road’s research on financial literacy between men and women?
Women are more empowered and have more opportunities than ever before, but unfortunately, handicaps like the pay gap still exist. We had a hunch that, if you looked deeper, there were even more gender discrepancies when it comes to financial literacy and earning power that are exacerbating the pay gap.
As a company that’s committed to helping millennial men and women achieve their personal goals, we wanted to explore this hunch further. So last year, we began a campaign to better measure these discrepancies and learned that there are some stunning gaps in financial literacy among men and women.
3. What has been the most surprising conclusions your research has brought to light?
Student debt has reached epidemic status, hitting $1.6 trillion this year. Yet our research found that more than 1/3 of millennials admit that they didn’t understand the basics of student debt before taking out their loans.
Even more stunning – women are nearly twice as likely as men to have lacked this understanding before they borrowed. Women also hold 2/3 of the country’s student debt, according to the American Association of University Women. This could not be more clear – student debt and how they handle it is a huge issue for women.
We were also stunned to learn that women are behind in retirement and emergency savings. On average, women had $123,000 less in retirement savings than their male peers. Looking at emergency savings, only 66% of women report having a back-up fund. This is especially striking because of situations women have found themselves in where they need to use a walk away fund – for example needing to leave a relationship they were financially dependent on, or a toxic or abusive work environment. If you ever need to leave your job, your home or your partner, for whatever reason, this fund will put you in a position of power. Emergency funds should ideally be three to six months of expenses but take it one step at a time – aim for $1,000 at first, then grow that.
4. What are some examples of concrete impact Laurel Road has had on women across their personal finance journey?
We’re so proud that we’ve been able to help customers save on their student loans and take the stress and difficulty out of the process – it’s one small part of helping them achieve their financial and personal goals. In personal finance, every dollar counts. A large part of our customer base are women (and men) who have graduate degrees in medicine, business or law. These women go on to do really important work, but work that takes a lot out of them mentally and physically. We help to alleviate some financial pressure and give them peace of mind so they can perform their jobs to the best of their ability, and we’re really proud of that.
I’m also immensely proud of the impact we’ve had through our event series with IVY. We started this partnership because we wanted to take the findings from our research, educate women about the barriers we’re facing, and give them some actionable tips to get their financial house in order so they can achieve their goals, whatever they may be. Each of our three-panel conversations has been unique, but each has generated empowering and useful insights that IVY members can take home and apply in their everyday lives.
It was so validating to see women taking notes and lining up to speak with our panelists and moderators after each panel. To us, this confirmed not only that financial literacy is a real issue that needs to be addressed, but that women are seeking education and inspiration – they want to learn and do more!
5. Why is it the case that women are less financially literate than men, and why is it important for women to smarten up?
We’re asked this question of “why” whenever we share this data!
There are many factors contributing to this underlying gap but three are worth noting:
1) As we have discussed earlier, women are at a disadvantage with a lack of knowledge around their personal finances. It really differs on an individual level, but our data suggests that men are prioritizing earning power and financial topics during college, even though women are more educated.
According to our 2018 survey, fiscally confident millennial male grads (94%) were significantly more likely than their female counterparts (79%) to prioritize their future earning power over personal passions when picking a major. Of those without a degree in finance, 88% of male millennials reported taking personal or business finance courses while in college, compared to only 54% of female millennials.
2) Women are taking on increasing amounts of debt, as they are often more educated than men. According to reports from the Wall Street Journal a few weeks ago, in 2019 women just surpassed men as making up the majority of college-educated workers.
3) The pay gap further exacerbates this situation for women as they aren’t able to pay off their debt as fast as men.
Knowledge is power, so it’s critical that women understand the systemic issues we’re up against and the behaviors we can change or improve to put ourselves in the best possible position. We all have personal and professional goals, and financial literacy can help us achieve these goals.
6. What are some key learnings Laurel Road has garnered after the three-event series with IVY?
Women are hungry for knowledge and tips! We’ve learned that while student debt is a current reality for most women, women are also looking ahead to their financial future. For many IVY members, this means grad school, working for themselves or starting their own business, or buying a home and starting a family. It’s never too early to lay out your goals and understand what you need to do financially to get there.
Women all have different priorities and levels of fiscal understanding. But it’s not something you have to be alone in. We all have networks, and I would encourage women to connect with one another about what resources or tools have been useful to them – because when you grow your knowledge, you can grow your wealth! There are also so many partners women can connect with to support their financial health, whether it be a financial advisor or trainer, or a company or tool that can help them budget and save. We saw this come to life at our events, and I hope that our attendees experienced the benefits of sharing knowledge and will continue the conversation.
I love this one nugget of wisdom that came out of our Boston panel event to help women (and men) understand what they’re worth. Take your annual income after taxes and divide it by how many hours you work a year to understand what one hour of your time is worth. While it requires some math, this number will stick with you and provide important context when you’re making purchases. Is that dress or bag worth 3 hours of your time? Is it worth 1 hour? What about bigger expenses like a car or a vacation?
7. What’s next for Laurel Road and what are the ways people can stay connected and learn more?
We will continue to innovate and develop best-in-class lending products. We will also continue to shed light on issues in personal finance – look out for our next survey! You can get updates by following us on Twitter and LinkedIn at @LaurelRoad and Instagram at @Laurel_Road.
And, if you’re interested in refinancing and want to see how much you could potentially save, check out our application process on our site! You’ll receive a real, personalized rate in just a few minutes.