With tuition costs higher than ever, student loans have become a thorn in the side of more than 44 million borrowers. Collectively, we owe nearly $1.5 trillion — and this debt burden doesn’t appear to be going away anytime soon.
Nonprofit organization Student Debt Crisis and social impact startup Summer surveyed nearly 7,100 adults with student loans in 2018 to learn how their debt impacts their daily lives. The survey was released Nov. 1.
Among the key findings: More than 4 in 10 student loan borrowers are struggling to make their next payment, and many say they aren’t getting the advice they need from their servicers.
Throw in college debt’s role in draining bank accounts and even causing major psychological stress, as cited in the study, and it’s clear that student loans are having major negative consequences on many borrowers’ lives.
Borrowers struggling to make monthly payments
Student loans help you pay for your degree, and a college degree leads to higher-paying jobs, right? Well, this survey found the average borrower’s total debt load is higher than what they make in an entire year.
According to these findings, the average total debt per borrower was $87,500, while the average annual income was $60,000. It’s no wonder that 44% of borrowers said making their next student loan payment would be a struggle, and 1 in 5 said they would not be able to pay their upcoming bill.
Among this group, 18% said they were already in default on at least one of their student loans, a situation that could harm their credit and even lead to wage garnishment. This finding lines up with a recent (and startling) report from the Brookings Institution, which predicts that 40% of borrowers may default in the next five years.
Borrowers aren’t getting helpful information about their loans
Not only are borrowers struggling to pay back their loans, but their loan servicers aren’t helping the situation. Borrowers are confused about what they owe and to whom they owe it, with 35% reporting difficulty accessing information about their loan amounts and repayment status.
About 1 in 3 borrowers said their loan servicers were unhelpful, while a similar number used “untrustworthy.” What’s more, 59% of borrowers received unclear guidance about their repayment options, and 42% had trouble switching repayment plans when they ran into financial hardship.
Without effective guidance and education, borrowers will have an even harder time managing their student debt.
Borrowers have less money in their bank accounts
With student loans eating up a significant part of your paycheck each month, it can be difficult to save. According to the survey, 65% of borrowers have less than $1,000 in their bank account.
What’s more, many borrowers say their student loan bills are higher than other monthly expenses. More than half pay more for student loans than for health insurance, and 1 in 3 borrowers pay more for student loans than for rent each month.
With burdensome student loan bills, it’s unfortunate but not surprising that the majority of student loan borrowers are unable to grow their savings.
Borrowers say student debt stands in the way of their financial goals
Millennials are waiting longer to get married, have kids and buy houses, and student loans might have something to do with it. According to this survey, 56% of respondents said their debt has prevented them from buying a home, 19% said it has caused them to delay marriage and 26% said it has stood in the way of having children.
Fifty-nine percent said student loans prevented them from making a large purchase, 42% said they couldn’t buy a car and 80% said it got in the way of saving for retirement. A separate recent study has found that 1 in 3 Americans have less than $5,000 saved for retirement. This new finding suggests this retirement situation might not improve much while the student loan crisis persists.
8 pieces of advice for conquering your student loans
Given all the hardship and confusion around student loans, borrowers are seriously stressed out. Most borrowers — 86% — said their debt was a major cause of stress, and one-third of respondents said it was their biggest source of stress.
But while your student loans might be a struggle, they don’t have to ruin your life. Here are some tips for taking control of your student debt so that it doesn’t end up controlling you.
- Seek out information from reputable sources. Unfortunately, your loan servicer might not give you all the information you need. Learn about your options from Federal Student Aid, Student Loan Hero or other reputable sources. By educating yourself, you can make better choices about your loans.
- Get on the right repayment plan for your budget. Federal student loans come with a variety of repayment plans, including income-driven plans that adjust your monthly payment based on your budget. If your bills are too high, consider lowering them with a different repayment plan. And if you have private student loans, find out if your lender offers flexible repayment options or even forbearance until you get back on your feet.
- Set up automatic payments so that you never miss a bill. Auto-pay can be especially helpful if you have multiple loans and are having trouble keeping track of bills and due dates. Plus, some lenders offer a 0.25% interest rate reduction for setting up auto-pay.
- Consider loan forgiveness or repayment assistance programs. Look into forgiveness programs, such as Public Service Loan Forgiveness, and loan repayment assistance programs to see if you could qualify for any.
- Find ways to increase your income and decrease your spending. Managing student loans might require some careful budgeting. Consider searching for a higher-paying job, setting up a side hustle or reducing your monthly spending so that you can more easily afford your student loan bills.
- Look for an employer that offers student loan assistance. If you’re open to switching employers, look for a company that offers student loan assistance as part of its benefits package.
- Throw extra payments at your loans to pay them off faster. If you can afford them, extra payments could help you pay off your debt ahead of schedule. Make sure your loan servicer is applying your payment correctly.
- Consider refinancing student loans at a lower rate. Once you have a strong credit score and steady income (or can apply with a cosigner), you could refinance for new repayment terms and potentially qualify for a lower interest rate.
Be proactive about your student loans so that they don’t cause undue stress and hardship in your life. By informing yourself about your options, you can find a repayment plan that works for your budget. Keep chipping away at your debt so that eventually your student loan bills will be out of your life for good.
Interested in refinancing student loans?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.99% – 7.10%1||Undergrad & Graduate|
|1.99% – 6.65%2||Undergrad & Graduate|
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|3.18% – 6.06%5||Undergrad & Graduate|
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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.