As the costs of higher education have continued to climb, everyone from parents to policymakers are wringing their hands over student loans. Current students are right in the middle of the college cost crisis. So how are they coping in the face of immediate educational expenses — and the prospect of student loan repayment post-graduation?
We surveyed over 1,000 undergraduate students enrolled at least half-time to see what kind of costs they are facing this school year, and how they are planning to tackle them. Here’s what we discovered.
2016-17 college costs and student loan use
Many students say they are considering costs and potential earnings when choosing a college and major. A majority of students show signs of smart decision-making by considering costs and future earnings when choosing a school and major.
Four out of five students attending school this year agree that their choice of college was impacted by costs of attendance. For students concerned about costs, this focus led them to low-cost schools. Students facing costs under $20,000 are the most likely to say cost was a major deciding factor.
Nearly half of students have reasonable education costs for the 2016-17 school year, with total costs under $10,000. An additional 26 percent are facing costs between $10,000 and $20,000. This means three-quarters of students are keeping costs below the 2013-14 annual average of $24,706, the most recent estimate reported by the US Department of Education.
Current students are also reporting a low reliance on student loans. Half say that they wouldn’t be covering any college costs with student loans. Another 23 percent of respondents said they were relying on education loans for only up to half their total costs.
Choosing colleges and majors with careers in mind
Students’ choices of majors indicate an awareness of how these decisions will affect them once they graduate. Two-thirds of students say they were certain of their majors when choosing a college or university. Two-thirds also agree that their future earnings potentials impacted their chosen areas of study.
Of the fields of study from which survey respondents could choose, Science, Technology, Engineering, and Math (STEM) majors are by far the most popular, with over half of students studying in this field.
Students in this field are the most likely to say they won’t use student loans to cover this year’s costs, a sign that they are more likely to graduate with lower student loans. Even better, STEM majors are in high demand and commanding some of the highest starting salaries right out of college, according to the National Association of Colleges and Employers.
Business and Health & Medicine are the two areas of study most common after STEM majors, with a respective 11 percent and 10 percent of students in each field. Students who chose a major related to business or health are also the most likely to agree that their choice was impacted by future earning potential.
More than two-thirds of students agree that salary and career earning potential impacted their choices or college majors. On the other hand, 17 percent disagree that salary considerations impacted their choice. Social Science and Arts & Humanities majors are the students who disagree with this statement most often.
9 in 10 students follow their passions
It’s encouraging to see so many students looking ahead to their careers and weighing their potential earnings when making educational choices. But it’s still more common to follow passion than practicality when deciding on a major.
In all, 88 percent agree that they chose their major based on passion, compared to the 67 percent impacted by earning potential.
Arts & Humanities majors, while less likely to be impacted by earnings considerations, are the most likely of any major to choose their study field based on passion at a rate of 96 percent. Those majoring in the STEM field aren’t far behind, with 92 percent reporting a passion for their chosen field.
2 in 5 fund non-educational bills with student loans
A troubling behavior many students report is using their student loans for expenses that are not directly related to education. Two in five say that they would at least use student loans to cover monthly bills.
This indicates that current students are more willing to use loans to cover non-education costs than even the most recent cohort of graduates. The Class of 2016 reported a rate of non-educational use of student loans that was half of current students’, according to a Student Loan Hero survey of recent graduates.
In addition to those paying for monthly bills, one in five respondents are using those funds to cover car costs like a payment or insurance. It’s possible that for many students, these are necessary expenses in their college budgets — phones might be used to keep up on assignments and cars could be needed for a commute to class.
But plenty of students are using their funds for more frivolous costs, as well. Fifteen percent say they will use student loans to pay for clothing and accessories, and 13 percent will spend student loan money at restaurants. About 3 percent of students plan to use student loan money to fund vacations and another 3 percent will spend it on alcohol or drugs.
Some students don’t know their costs
Despite the majority that’s facing lower costs and foregoing student loans, a significant portion of respondents are still choosing high-cost programs. More than 8 percent of students have annual costs over $30,000.
Higher costs also correlate to a higher reliance on student loans to cover their schooling. Students with costs of $30,000 or more are 60 percent more likely to use student loans to cover the majority of their educational expenses than those with costs under $30,000.
Perhaps the more troubling students are the 7 percent who say they don’t know what their costs of the 2016-17 school year will be. This clueless cohort is also the most likely to not know how much they would rely on student loans in the coming year.
Without an awareness of expenses and a plan to cover them, these students will have less control over their costs. This could leave them scrambling at the last minute to cover their expenses, possibly relying more heavily on loans.
Overall, however, most students enrolled for the 2016-17 school year say they are aware of costs and their future earning potentials. These students should use this information to keep costs and student balances low, and maximize their earning potential after graduation.
Even as student loan costs continue to rise, today’s students can make smart choices and avoid the pitfalls of over-borrowing in college and under-earning after graduating.
Survey was conducted via Google Consumer Surveys on behalf of Student Loan Hero on Sept. 8, 2016, with a nationally representative sample of 1,019 undergraduate students currently enrolled at least half-time in the United States. “Are you currently an undergraduate college student enrolled at least half-time?” was used as a screening question (with a target answer of “Yes”).
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1 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.
2 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.
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 3.19% APR (with Auto Pay) to 6.43% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 6.43% 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 June 15, 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 6/15/2020. 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 0.19% effective June 10, 2020.