If it often feels like you can’t ever make more than a small dent in your student loan debt, you’re certainly not alone. And according to our latest study, it’s not just a feeling – it’s a fact.
We took a look at the average student loan balance for 2015 graduates in each state and compared it to the state’s living costs and wages. The goal: to see how affordable student loan payments are (or aren’t) for new grads across the country.
The key indicator Student Loan Hero examined to determine student loan affordability was the percentage of a typical graduate’s monthly disposable income that would go towards student loan payments (assuming the standard 10-year repayment period).
To be considered affordable, the average student loan payment should equate to 10% or less of a graduate’s disposable income – similar to how the federal government caps payments under most income-driven repayment plans.
However, none of the states or the District of Columbia passed this standard. The state with the most affordable student debt came close at 10.9% of disposable income.
On the other end of the spectrum, graduates in the state with the least affordable student loans could expect to put about 30% of disposable income toward their debt.
Finally, on the national level, student loan payments are equal to 17.3% of disposable income, on average.
Here’s a look at the five states where graduates have the most room in their budgets to repay loans and the five states where graduates are most burdened by their student debt.
5 best states for paying back student debt
In the five states that top our rankings, residents have more room in their budgets to repay student loans than the rest of the country. Among the states where student loan repayment is most affordable, a common trend is lower levels of debt upon graduating.
Utah, the top-ranking state in this study, had an average student loan balance of $18,873 among 2015 graduates. That’s more than $11,000 less than the 2015 national average of $30,100.
But that doesn’t tell the whole story. Low cost of living was an important factor in making student loan payments more affordable for many of these states. And for states in which cost of living and student loan debt crept higher, such as Colorado and Washington, the best states matched those with higher wages.
Here’s an overview of the five states that topped our rankings for student loan affordability.
- Average student loan balance: $25,840
- Average annual wage: $51,180
- Ratio of student payments to disposable income: 13.86%
For Colorado residents, the state’s higher wages give them the biggest boost in keeping up with student loans. Plus, cost of living in this state is slightly cheaper than the national average.
An average Colorado resident earns an additional $2,860 per year over the national average of $48,320, according to the Bureau of Labor Statistics. That’s an extra $240 a month, which is close to the $262 monthly payment on the average student loan balance.
- Average student loan balance: $24,600
- Average annual wage: $54,010
- Ratio of student payments to disposable income: 13.33%
Washington edged out Colorado for the No. 4 spot with both higher incomes and lower levels of student debt.
Wages in Washington are $5,000 higher than the median, while residents pay living costs on par with the rest of the country.
This combined with lower balances means that a typical Washington graduate can easily cover a $249 monthly payment still have $1,620 in disposable income left over each month.
- Average student loan balance: $22,683
- Average annual wage: $45,850
- Ratio of student payments to disposable income: 13.31%
Wyoming very barely edged out Washington, mostly due to lower starting student loan balances. Graduates of Wyoming schools are likely able to keep borrowing low thanks in large part to the state’s low tuition rates. Annual in-state tuition and fees at public Wyoming colleges are the lowest in the nation at just over $5,000, according to data from The College Board.
Residents of Wyoming are also helped by below-average living costs and earning wages higher than residents of most other states.
2. New Mexico
- Average student loan balance: $20,193
- Average annual wage: $43,170
- Ratio of student payments to disposable income: 12.22%
New Mexico landed in the No. 2 spot due to its low levels of student loan borrowing and affordable living costs.
With typical student debt at $20,193, the average New Mexico graduate owes about $10,000 less than the national average. Even with annual wages that are $5,000 below the national average, New Mexico graduates’ low debts are still affordable.
1. Utah (best)
- Average student loan balance: $18,873
- Average annual wage: $44,130
- Ratio of student payments to disposable income: 10.89%
Of all the states, Utah’s ratio of student debt to income is closest to the affordable level of 10%. This reflects the state’s affordable in-state tuition, currently the fourth-lowest in the nation at $6,581 per year at a four-year institution.
But it’s also indicative of a student culture that’s resistant to borrowing for college. Both the amounts borrowed by Utah graduates, just under $19,000 on average and the portion of graduates with student debts, 41%, are the lowest in the nation.
“I think that Utahns reflect the conservative nature of trying to avoid debt and trying to be very responsible about the debt that is taken on,” said David Buhler, commissioner of higher education, in an interview with Utah news network KSL.
5 worst states for paying back student loans
In the states where student loans are the least affordable, high costs of living make it difficult for graduates to keep up with their higher student loan balances.
Among these states, the ratio of student debt to disposable income was as high as 30%. This is despite the fact that residents of these states earn wages that are in the top half of states.
Residents these states devote so much of their income to basic living expenses that they end up with little disposable income. Hawaii and New York, for instance, landed among the top 5 due to having some of the highest costs of living in the nation.
But the five worst-ranked states include those with the highest levels of student loan debt. In New Hampshire, for instance, the average student loan balance for a graduate is a staggering $36,101 (nearly twice as much as best-ranked state Utah).
Here’s a rundown of the five states where graduates’ budgets are stretched the thinnest and student loans are the least affordable.
5. Rhode Island
- Average student loan balance: $32,920
- Average annual wage: $50,780
- Ratio of student payments to disposable income: 22.64%
Rhode Island graduates have the fifth-highest student loan debt in any state, which results in average monthly payments of $333. The state also has a cost of living that’s 15.6% higher than the national average.
The combined higher student loan balances and living costs means Rhode Island residents will have a hard time keeping up with student loan payments. This is true even though the state’s typical wages that beat the national average by $2,460 annually (an extra $205 a month).
- Average student loan balance: $34,773
- Average annual wage: $56,280
- Ratio of student payments to disposable income: 24.52%
High student debt (the third-highest in the nation) put Connecticut among the five worst states for student loan affordability. Monthly student loan payments tip the scales at $352, which is a quarter of the typical Connecticut resident’s $1,436 monthly disposable income.
The high student debt is offset somewhat by higher wages, which amount to an extra $663 a month above the average. But it’s not enough to match the state’s costly expenses. Connecticut’s average wages are 16% higher than the national average, while its living costs are 23% higher.
3. New Hampshire
- Average student loan balance: $36,101
- Average annual wage: $48,710
- Ratio of student payments to disposable income: 25.35%
Graduates in this state have to stretch those average wages a lot further to cover the state’s high student debts. New Hampshire has the highest rate of student borrowing of any state, topping out at $36,101 (with typical monthly payments of $366).
It shouldn’t be surprising that New Hampshire graduates borrow the most, since they face the highest in-state tuition costs in that nation, according to The College Board. At $15,650 a year, New Hampshire students pay three times more for their educations than those in the lowest-cost state, Wyoming.
These high student loans are a big burden on New Hampshire graduates, especially with the state’s living costs that are 14% higher than average.
2. New York
- Average student loan balance: $29,320
- Average annual wage: $57,030
- Ratio of student payments to disposable income: 25.83%
New York’s 2015 graduates actually had student loan debt below the national average, though higher than the median. A seemingly reasonable monthly payment of $297 turns out to be a financial burden for New Yorkers facing living costs that are 34.4% higher than the national average.
These high costs leave New York residents only $1,150 a month in disposable income, of which typical student loan payment would be more than a quarter. That’s despite New Yorkers earning some of the nation’s highest wages.
1. Hawaii (worst)
- Average student loan balance: $23,456
- Average annual wage: $47,740
- Ratio of student payments to disposable income: 30.61%
At first glance, things seem pretty good for Hawaii college graduates. They have the sixth-lowest average student debt. And the state’s wages beat those in most other states, on par with the national average.
But the island state’s notoriously higher living costs are 43% above the national average. These extra costs stretch Hawaii residents’ budgets to the limits, leaving them $776 in disposable income each month — that’s less than half the study’s average of $1,663.
With disposable income so low, the average $237 monthly payment eats up over 30% of the typical graduate’s disposable income.
How can students lower the cost of student loans?
This survey shows that where borrowers attend college, live, and work can greatly affect whether they can afford their student loan payments. Some might have the deck stacked against even their best efforts to repay student loans thanks to lower wages and higher living costs.
But the Student Loan Hero study also reveals a few ways borrowers can improve their financial outlook post-graduation.
Rely less on borrowing to cover costs
Graduates with less debt can more easily afford student loan payments and build financial security. Sure, this might seem obvious, but it’s not uncommon for students to borrow more than they need simply because they don’t know their other options.
A University of Kansas study found that borrowers with an extra $10,000 in student loans accrue wealth much slower than their less-indebted peers, reports MarketWatch. Those with this extra debt will take 26% longer to reach the national median net worth.
In fact, our study found that at average wages and costs of living, a college graduate would need to limit total educational borrowing to $16,400 or less to keep repayment affordable. That’s the limit for student loan balances that can be covered with 10% or less of a typical graduate’s disposable income.
Compare income against cost of living
Our study also found that while earning higher income is a key component of a graduate’s ability to repay student loans, it has to be considered alongside local living costs.
This study’s rankings found that student loan affordability correlated more closely with a state’s living costs than with its median wages. That’s likely because cost of living varies more widely than salaries do. Additionally, states with higher living costs don’t always have higher wages to match.
In general, it might be more advantageous for graduates to consider jobs in states with lower cost of living and relatively higher wages.
Consider an income-driven repayment plan
As none of the states’ levels of student borrowing qualify as affordable, our study reveals how common it is for student borrowing to outpace graduates’ abilities to repay. Graduates who are having trouble keeping up with their student loans can see that, if nothing else, they’re not alone in this struggle.
Considering these findings, it’s likely that a significant portion of student loan borrowers in each state could qualify for lower payments under an income-driven repayment (IDR) plan. Graduates living in the worst states, in particular, are likely to benefit from enrolling in an income-driven plan. Lower payments under IDR can free up monthly cash flow and create some much-needed breathing room in borrowers’ budgets.
College students and graduates should do their part to limit borrowing and responsibly repay student loans. But overall, Student Loan Hero’s study findings prove that student debt is far past the point of affordability for typical college graduates — no matter where they live.
This study compared average earning in each state* to costs of living and average student loan balances to find the states where student loan repayment is most affordable.
First, the disposable income of an average worker was calculated in each state. This was based on the Bureau of Labor Statistic’s reported mean wage in the state, less living expenses such as housing, transportation, food, and health care (based on national consumer data and adjusted for cost of living).
This disposable income was compared to typical payments on the average student debt balance of a 2014 graduate in each state. This was based on a 10-year repayment term, assuming a 4% interest rate.
In line with federal standards for student loan affordability, student loan monthly payments equal to 10% or less of monthly disposable income were considered affordable.
*Note: North Dakota was excluded from this study due to insufficient data on student loan borrowing in the state.
Sources: Bureau of Labor Statistics, The Council for Community and Economic Research’s Cost of Living Index, The Institute for College Access & Success
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1 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 June 23, 2020 and is subject to change.
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 0.2% effective May 10, 2020.