How Conquering College Debt Can Make You Just as Happy as Getting a Raise

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.

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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

“There has been a lot of research looking at whether and how income makes people happy in life,” said Louis Tay, an assistant professor of psychological sciences at Purdue University, in a statement.

“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.

Another recent study from the University of South Carolina also found that student loans can be linked to higher levels of depressive symptoms.

“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.

Student Loan Prepayment Calculator

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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.

Start Your SoFi Application Today

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 6 lenders of 2020!
LenderVariable APREligible Degrees 
1.99% – 5.64%1Undergrad
& Graduate

Visit Earnest

1.89% – 5.90%2Undergrad
& Graduate

Visit Laurel Road

2.25% – 6.09%3Undergrad
& Graduate

Visit SoFi

1.89% – 6.77%4Undergrad
& Graduate

Visit Splash

2.39% – 6.01%Undergrad
& Graduate

Visit Elfi

1.99% – 5.41%5Undergrad
& Graduate

Visit CommonBond

Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.

Earnest Disclosures

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.


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.

  1. Checking your rate with Laurel Road only requires a soft credit pull, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
  2. Savings vary based on rate and term of your existing and refinanced loan(s). Refinancing to a longer term may lower your monthly payments, but may also increase the total interest paid over the life of the loan. Refinancing to a shorter term may increase your monthly payments, but may lower the total interest paid over the life of the loan. Review your loan documentation for total cost of your refinanced loan.
  3. 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. During any period of forbearance interest will continue to accrue. At the end of the forbearance period, any unpaid accrued interest will be capitalized and be added to the remaining principle amount of the loan.
  4. Automatic Payment (“AutoPay”) Discount: if the borrower chooses to make monthly payments automatically from a bank account, the interest rate will decrease by 0.25% and will increase back if the borrower stops making (or we stop accepting) monthly payments automatically from the borrower’s bank account. The 0.25% AutoPay discount will not reduce the monthly payment; instead, the discount is applied to the principal to help pay the loan down faster.

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 September 9, 2020. Information and rates are subject to change without notice.
 


3 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: Fixed rates from 2.99% APR to 6.09% APR (with AutoPay). Variable rates from 2.25% APR to 6.09% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.25% APR assumes current 1 month LIBOR rate of 0.18% plus 2.32% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score. Soft credit inquiries allow SoFi to show you what rates and terms SoFi can offer you up front. After seeing your rates, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit inquiry. Hard credit inquiries (or hard credit pulls) are required for SoFi to be able to issue you a loan. In addition to requiring your explicit permission, these credit pulls may impact your credit score. Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. 

4 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. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.

The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.

To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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 September 10, 2020.


5 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. 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 0.16% effective August 10, 2020.

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print to help you understand what you are buying. Be sure to consult with a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time.