When you’re struggling with student loans, life after debt can seem like a faraway fantasy. But millions of borrowers have managed to make it real, passing the finish line by sending in their very last student loan payment.
We wanted to get a snapshot of the journey to pay off student debt — and life after it’s gone. To that end, we surveyed former student loan borrowers who have completely repaid their college debt.
Most borrowers who paid off student debt had low initial balances. With our survey limited to borrowers who have completely repaid their student debt, it was unsurprising that most had below-average balances. Lower balances are easier and faster to pay off. Additionally, 69% paid off student debt in just five years or less.
The most common repayment strategy was paying more than monthly minimums. That’s the proven method that 61% of respondents used to help them conquer their student debt. Other popular strategies were using extra cash to make lump-sum payments (32%) and cutting their budgets (17%).
Student loan borrowers made big sacrifices to pay off their debt. Repaying student loans meant putting major life goals on hold. Forty-three percent of survey respondents delayed buying a home and 15% put off parenthood. Respondents also sacrificed non-necessities, such as taking vacations (46%) and eating out (36%).
The state of student debt for borrowers who’ve paid it off
When it comes to student debt, a lot of factors can influence how much (and how fast) you’re able to repay it. Our survey revealed that respondents who paid off debt both borrowed less and were able to pay off these smaller balances in surprisingly short order.
From the time they left college until they made their final payment, 7 in 10 respondents paid off student debt in five years or less. Just 8% of respondents took longer than 10 years — the length of the Standard Repayment Plan for federal student loans — to completely pay off educational debt.
With this survey limited to respondents who have fully repaid student debt, it’s unsurprising that initial balances are lower. Borrowers with lower balances have less to repay to get out of debt. A high 77% borrowed $30,000 or less, which is well below the $39,400 average student loan balance among 2017 graduates.
The survey also highlights proven methods these borrowers used to pay off their student debt (respondents could select more than one response). The most common strategy by far was paying more than the minimum each month, with 6 in 10 respondents selecting this.
Just about a third of respondents made a larger lump-sum payment when they could, and 17% cut expenses to pay more toward debt. Allea Grummert, a personal finance coach at Ask Allea, used a lump-sum payment to knock out the last $4,000 of her $21,000 student debt in March. “I decided I just wanted my student debt gone,” she said. “I didn’t want to worry about the cash flow anymore.”
And about 1 in 10 respondents also took advantage of each of the following: refinancing student loans, applying raises to student loan repayment, and picking up a side hustle to pay more toward student debt. Grummert had a side hustle, working one shift a week at a coffee shop that netted her an extra $180 a month to put toward student debt.
The rarer strategies were moving to a lower-cost city and pursuing a career that could qualify the borrower for student loan forgiveness. It makes sense that these strategies are less popular since both include a major life change that won’t make sense for every borrower.
The setbacks and sacrifices of paying off student debt
Another theme among respondents was that repayment wasn’t an easy process — and didn’t always go according to plan. Respondents shared what it took to pay off their student debt, from setbacks encountered to sacrifices made.
Respondents commonly wished they’d done more to pay off their student debt. Three in 10 respondents said not making extra payments set their repayment back the most.
Borrowers also regretted living beyond their means (24%) and not refinancing student loans (11%). Some regrets also stemmed from choices made in their college years, with 14% saying their biggest setback was taking out more student loans than they needed.
The burden of student debt also held many respondents back from working toward other important money goals. Most commonly, 2 in 5 borrowers felt their student debt kept them from saving for a down payment to buy a home.
Three more financial goals were commonly delayed because of student loan repayment, with a third of respondents selecting each. Respondents said their debt stood in the way of contributing more to retirement savings, fully funding their emergency savings, and paying off other forms of debt.
The sacrifices made to take out student debt touched more areas of respondents’ lives than just their finances. They often made other sacrifices, too.
Most commonly, borrowers who have paid off their student debt report skipping non-necessities such as taking vacations (46%) and eating out (36%). But some borrowers also put major life steps on hold to focus on paying off debt. The most common was buying their first home (43%).
Grummert was in this position. She considered buying a home a few times while repaying student debt. “But the responsibility of that mortgage, based on the cash flow I had available to me, meant it wasn’t an option,” she decided. Without as much in savings, she knew that “if anything happened, I’d be screwed.”
Respondents also sacrificed living in their dream city (17%), becoming parents (15%), getting married (14%), and even owning a pet (15%).
Even a few necessities ended up on the chopping block for some borrowers. An alarmingly high 13% said they sacrificed health insurance coverage because of their student debt. Others didn’t have a car (10%), and some also skipped a cellphone plan (8%).
When asked how they felt about these sacrifices, responses were mixed. A little less than half (42%) felt they missed out because of the sacrifices made to pay off student debt, while the rest (58%) didn’t.
Most respondents are still confident that making these sacrifices was the right thing to do. Only 15% said they would have taken longer to pay off their student loan debt to be able to afford the things they sacrificed.
What life is really like after student debt
Besides seeing how borrowers paid off their student debt, we wanted to see how they’re feeling about their finances now that the debt is gone.
Nearly half (48%) of borrowers who have paid off their student loans said accomplishing this debt goal positively affected how they view their finances.
Another 46% felt that paying off their debt had little to no effect on how they felt about their money. Grummert fell into this group. “Honestly, paying off my debt was a little anticlimactic,” she said. “It was a transaction — get it over with and done.”
Only 6% said paying off their debt changed how they viewed their financial situation for the worse.
Fortunately, most borrowers feel they are spending their money responsibly now that they are done paying off student debt (91.5%). Many who chose this response said they primarily spend on needs, with one saying: “I feel that I am carefully managing my money.” Another said they were saving for the future, citing retirement and a child’s college fund as goals.
In fact, we asked these borrowers what money goal they plan to focus on next now that their student debt is gone.
Money goals that increased financial security were among the most popular. Many former student loan borrowers said they would like to focus next on contributing more to retirement (39%), saving up a full emergency fund (35%), and eliminating other debt (27%).
Continuing a common theme tying student debt to homeownership, almost a third of respondents are saving up for a down payment on a home now that their student debt is gone.
Others are taking advantage of the cash flow freed up by eliminating student debt. Almost 3 in 10 respondents said they plan to travel.
To get out of student debt, borrowers pay the price
The vast majority of borrowers — 85% — feel that the sacrifices they made were worth the payoff of getting out of debt faster. With student debt gone, these borrowers enjoy more financial freedom and prove that paying off debt can be done.
Yet this survey shows that the major achievement of paying off student debt is reached only by leveraging smart strategies and making significant sacrifices.
The 44 million borrowers still repaying student loans can take a page out of these respondents’ handbooks and focus on strategies proven to get results. Making extra payments toward student debt, for example, is a smart place to start.
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1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.
The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.
You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 1, 2020.
Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 6.21% per year for a 5-year term, 3.40% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.89% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 4.20% per year to 7.05% per year for a 15-year term, or 4.51% 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).
Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.99% (with autopay) to 7.10% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of April 27, 2020, the one-month LIBOR rate is 0.43763%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.01% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.09% per year to 3.92% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.67% per year to 4.56% per year for a 12-year term, 3.44% per year to 6.65% per year for a 15-year term, 4.75% per year to 6.93% per year for a 20-year term, or 5.14% per year to 7.10% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of June 23, 2020. Information and rates are subject to change without notice.
3 Important Disclosures for SoFi.
4 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.79% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.64% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of July 31, 2020, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 7/31/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.18% effective July 10, 2020.