A new study by Student Loan Hero ranks U.S. states from best to worst according to student loan affordability
New York, NY, November 10, 2016 — Leading financial education company Student Loan Hero released a new study that examines how easily student loan borrowers can afford their payments in each state.
The study examined average debt upon graduation, cost of living and average annual wages for each state. The goal of the study was to determine the percentage of a typical graduate’s monthly disposable income that would go towards student loan payments.Similar to caps set by federal income-driven repayment plans, 10 percent of disposable income was considered the benchmark for affordability.
According to the study, the top five worst states for student loan affordability are:
- Hawaii (worst)
- New York
- New Hampshire
- Rhode Island
“This study highlights how affording student loan payments can be difficult for borrowers no matter where they live,” said Andrew Josuweit, CEO of Student Loan Hero. “Since cost of living has such a high impact on affordability, borrowers must consider options like moving to another state to make student loan debt more affordable.”
- Nationally, student loan payments averaged 17.3 percent of disposable income.
- None of the states nor the District of Columbia met the affordability standard of 10 percent the state with the most affordable student loan payments came close at 10.9 percent of disposable income (Utah).
- Borrowers in the state with the least affordable student loan debt (Hawaii) must allocate about 30 percent of disposable income towards payments.
- Student loan affordability correlated more closely with cost of living than wages.
The Student Loan Affordability Study compared average annual earnings in each state* to local costs of living and average student loan balances to find the states where student loan repayment is most affordable.
Disposable income of an average worker was calculated in each state, based on the Bureau of Labor Statistics’ 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 number was then compared to typical payments on the average student debt balance of a 2014 graduate in each state, based on a 10-year repayment term and assuming a 4% interest rate.
In line with federal standards for student loan affordability, student loan monthly payments equal to 10 percent or less of monthly disposable income were considered affordable.
*North Dakota was excluded due to insufficient data on student loan borrowing in the state.
About Student Loan Hero
Student Loan Hero combines easy-to-use tools with financial education to help the millions of Americans living with student loan debt manage and pay off their loans. Student Loan Hero has helped more than 100,000 borrowers manage and eliminate over $2 billion in student loan debt since 2012 and assists over 3.5 million people in becoming more financially healthy every year.
Student Loan Hero offers both current and former students free loan calculators, as well as unbiased, personalized advice and repayment plans through an easy-to-use online dashboard.
Founded in 2012 by CEO Andrew Josuweit, who himself had over $100,000 in student loans, Student Loan Hero operates on the belief that all loan help and recommendations should come with honesty and no hidden agenda.
For more information, visit https://studentloanhero.com/.
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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 3.36% APR (with Auto Pay) to 7.82% APR (with Auto Pay). Variable rate loan rates range from 2.41% APR (with Auto Pay) to 6.99% 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 April 17, 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 04/17/2019. 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.
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2 Important Disclosures for SoFi.
3 Important Disclosures for Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
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.
4 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.
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 2.45% effective May 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
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|2.60% – 9.60%6||Undergrad & Graduate|