Want to be happier? Paying down your student loan debts could help, according to a recent study from Purdue University.
Money is a major source of stress for Americans. In fact, money is the most common source of stress for American adults, according to the American Psychology Association’s Stress in America study released earlier this year.
Debt, in particular, can increase stress and hurt overall well-being, the Purdue University study found. In fact, college graduates without student debt are almost as likely to be happy as those with the highest incomes.
In other words, paying off student loans can make you happier — as happy as if you’d just been given a pay raise.
Student debt tied to stress and depression
“But few studies have examined whether debt can detract from happiness,” Tay explained.
The Purdue study found that debt commonly has significant, negative effects on well-being. These effects are more prominent with higher debt levels, lack of financial resources, and certain sources of debt.
The study also surveyed college graduates about their debts, income, and well-being. The results show higher incomes are tied to better well-being and life satisfaction.
Debt, on the other hand, correlates with more stress. And an overall worse sense of well-being.
“We found that carrying student loan debt is almost as important as income in predicting financial worry and life satisfaction,” Tay said.
Therefore, decreasing student loans will make you about as happy as getting a pay raise.
“We are speculating that part of the reason that these types of loans are so stressful is the fact that you cannot defer them, they follow you for the rest of your life until you pay them off,” said Katrina Walsemann, the lead author of the University of South Carolina study.
Student loan stress can also worsen your work performance.
A survey from the Society for Human Resource Management found that financial stress had a negative impact on workers’ performance and productivity. Two-thirds of employers say their workers are struggling with debt, the most common source of financial stress identified in the survey.
The payoffs of paying off student debt
Many student loan borrowers struggle with repayment because many of them are facing payments they can’t afford.
A recent Student Loan Hero study found that in every state, student loan payments exceeded the threshold of affordability (equal to or less than 10 percent of disposable income).
But being proactive and effectively using financial resources to pay down student debt can help. What’s more, getting rid of student debts ahead of schedule can have big payoffs for your finances, well-being, and even health.
Increase cash flow like a pay raise
Every time you pay off a student loan, you’re also getting rid of a monthly payment. So it makes sense that paying down student debts would have a similar effect as getting a raise.
Essentially without this loan payment, you’re lowering your monthly financial obligations and increasing your cash flow.
For example, for every $1,000 you save on what you originally borrowed and repaid, you have an extra $10-12 dollars in your budget each month.
That’s equal to a gross pay raise of $13 a month. Or, $158 a year.
Check out our calculator below to see how much you could save on interest when you prepay your student loans, too.
Get a guaranteed return
Paying down student debt can also be looked at as a smart investment.
Prepaying debt has a guaranteed return of helping you avoid years’ worth of interest costs. And these savings, unlike returns on a stock portfolio, are guaranteed.
Improve emotional and physical health
Of course, the well-being benefits of paying off debt are significant, as well.
Paying off debt can provide immense emotional and mental relief. It can also improve your health and immune system, and lower your risk of ailments like headaches or high blood pressure, according to Health.com.
Getting rid of debt and lessening financial stress can also help you perform better at work.
Achieving freedom from debt can allow you to focus more mental energy and willpower into your work. This, in turn, can increase your chances of earning a raise and advancing your career.
If you’re overwhelmed by student debt
Prepaying student loans is a worthy goal and one you should work towards.
But it’s also one that takes several months or years to accomplish. In the meantime, you should also focus on improving your mental health and lowering your stress.
Look ahead, one step at a time
First off, it’s important to know what’s not helpful or productive.
Feeling like a failure or beating yourself up over your debts doesn’t do anything to improve your situation. And it can increase your financial stress.
If you have student loan debts that doesn’t make you a failure, even if they’re really high. It makes you one of the 44.2 million Americans with student loans.
And maybe you’ve made some financial missteps along the way. But that’s also pretty typical and even normal. Focus on what you can do about it now instead of what you could’ve done in the past.
Don’t feel like you have to conduct a complete overhaul of your finances and debts overnight, either. Repairing your finances and building financial stability will take time.
It’s essential for you to start small, one step at a time. From making a get out of debt plan to reworking your budget, keep your efforts slow but steady. This will help you avoid burnout and create real financial change that can last.
Consider restructuring your student debts
If you are in danger of missing student loan payments or have already had issues making payments, that’s a sign that you might need to restructure these debts.
Luckily, there are a few options you can look into to help make your student debts more manageable.
Income-driven repayment plans can help if your monthly payments are too high, or your income is too low, for you to realistically pay them each month. Plans like Pay As You Earn (PAYE) can be used to reset monthly payments to match your level of income and costs of living.
And if you have decent credit, you could benefit from refinancing student debts through a private lender, like SoFi for example. You could find significant savings by securing a lower interest rate, and could also choose a repayment period that could lower your monthly payments.
Take care of your health
Responsibly managing your debts can help lower your stress and make your debts feel manageable. That is an important step to lowering stress.
But there are other effective ways to manage stress and improve well-being.
Connecting with friends and family is one of the most effective stress-reducing behaviors, according to Psychology Today. Sufficient sleep and regular exercise can improve well-being and offset stressors like student debt.
So before you begin to feel overwhelmed by your student loan debt, take stock of all of your options and support systems. Then make a plan and just take it one day at a time.
Interested in refinancing student loans?Here are the top 8 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
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1 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 3.20% APR (with Auto Pay) to 6.99% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 6.89% 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 December 13, 2019, 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 12/13/2019. 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@example.com, or call 888-601-2801 for more information on our student loan refinance product.
© 2018 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.
2 Important Disclosures for SoFi.
3 Important Disclosures for Figure.
Figure’s Student Refinance Loan is a private loan. If you refinance federal loans, you forfeit certain flexible repayment options associated with those loans. If you expect to incur financial hardship that would impact your ability to repay, you should consider federal consolidation alternatives.
4 Important Disclosures for College Ave.
College Ave Disclosures
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
1College Ave Refi Education loans are not currently available to residents of Maine.
2All rates shown include autopay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
3$5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees.
4This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
Information advertised valid as of 1/1/2020. Variable interest rates may increase after consummation.
5 Important Disclosures for Laurel Road.
Laurel Road Disclosures
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. Mortgage lending is not offered in Puerto Rico. All loans are provided by KeyBank National Association.
ANNUAL PERCENTAGE RATE (“APR”)
There are no origination fees or prepayment penalties associated with the loan. Lender may assess a late fee if any part of a payment is not received within 15 days of the payment due date. Any late fee assessed shall not exceed 5% of the late payment or $28, whichever is less. A 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.
For bachelor’s degrees and higher, up to 100% of outstanding private and federal student loans (minimum $5,000) are eligible for refinancing. If you are refinancing greater than $300,000 in student loan debt, Lender may refinance the loans into 2 or more new loans.
ELIGIBILITY & ELIGIBLE LOANS
Borrower, and Co-signer if applicable, 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); state that they are of at least borrowing age in the state of residence at the time of application; and meet Lender underwriting criteria (including, for example, employment, debt-to-income, disposable income, and credit history requirements).
Graduates may refinance 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. Any federal loans refinanced with Lender are private loans and do not have the same repayment options that federal loan program offers such as Income Based Repayment or Income Contingent Repayment.
All loans must be in grace or repayment status and cannot be in default. Borrower must have graduated or be enrolled in good standing in the final term preceding graduation from an accredited Title IV U.S. school and must be employed, or have an eligible offer of employment. Parents looking to refinance loans taken out on behalf of a child should refer to https://www.laurelroad.com/refinance-student-loans/refinance-parent-plus-loans/ for applicable terms and conditions.
For Associates Degrees: Only associates degrees earned in one of the following are eligible for refinancing: Cardiovascular Technologist (CVT); Dental Hygiene; Diagnostic Medical Sonography; EMT/Paramedics; Nuclear Technician; Nursing; Occupational Therapy Assistant; Pharmacy Technician; Physical Therapy Assistant; Radiation Therapy; Radiologic/MRI Technologist; Respiratory Therapy; or Surgical Technologist. To refinance an Associates degree, a borrower must also either be currently enrolled and in the final term of an associate degree program at a Title IV eligible school with an offer of employment in the same field in which they will receive an eligible associate degree OR have graduated from a school that is Title IV eligible with an eligible associate and have been employed, for a minimum of 12 months, in the same field of study of the associate degree earned.
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.
The repayment of any refinanced 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 Lender 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 Lender 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.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of November 8, 2019 and is subject to change.
6 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers.
7 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 1.76% effective November 10, 2019.
8 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810.
As of 12/019/2019 student loan refinancing rates range from 1.90% to 8.59% Variable APR with AutoPay and 3.49% to 7.75% Fixed APR with AutoPay.
|1.99% – 6.89%1||Undergrad & Graduate|
|2.31% – 7.36%2||Undergrad & Graduate|
|2.06% – 6.81%3||Undergrad & Graduate|
|2.62% – 6.12%4||Undergrad & Graduate|
|1.99% – 6.65%5||Undergrad & Graduate|
|1.99% – 7.06%6||Undergrad & Graduate|
|1.85% – 6.13%7||Undergrad & Graduate|
|1.90% – 8.59%8||Undergrad & Graduate|