Student Loan Hero’s annual Student Loan Affordability Study for 2017 reveals that student loans are more affordable this year. Student loans are up to two times more affordable in the best states than in the worst states.
Austin, Texas, Dec. 5, 2017 — Student Loan Hero, a leading financial news and education site, has released its annual Student Loan Affordability Study for 2017. The study compares average student loan balances to wages and costs of living to find out how affordable this debt is (or isn’t) in each state.
Comparing results year over year, the study reveals that student loans are more affordable for the newest batch of college graduates:
- Average student loan balance: $27,822
- Average annual wage: $49,630
- Ratio of student payments to disposable income: 14.57 percent
In the 2016 version of the study, student loan payments ate up an average of 17.3 percent of borrowers’ disposable incomes. In 2017, student loan payments were equal to 14.57 percent of disposable incomes, on average.
“The good news is that after years of big increases in college costs and student loan balances, we’re finally seeing a plateau,” said Elyssa Kirkham, lead researcher on the study. “The most recent batch of graduates owed less on student loans. This trend, along with lifting wages, means these borrowers can more easily keep up with student debt payments.”
- The Class of 2016 borrowed about $2,300 less, on average, than the Class of 2015.
- At the same time, average starting salaries remained steady at $50,359 in 2016, just above the $50,219 average in 2015, according to the National Association of Colleges and Employers.
However, the study reveals that borrowers in some states fare better than others. Here are the top 10 states where student loans are most likely to be affordable and the percentage of disposable income devoted to student loan payments, on average.
10 Best States to Live In While Paying Off Student Debt
1. (Best) Utah: 10.01 percent
2. Washington: 12.16 percent
3. North Carolina: 12.46 percent
4. Colorado: 12.99 percent
5. Texas: 12.99 percent
6. Arkansas: 13.17 percent
7. Georgia: 13.28 percent
8. Nebraska: 13.28 percent
9. Virginia: 13.35 percent
10. Wyoming: 13.46 percent
The study also identified the worst states for paying off student debt. Borrowers in these states have higher student loan balances and face some of the highest costs of living.
Because of these factors, residents in these states face student loan payments that use more of their disposable incomes. Here are the 10 worst states to pay off student debt and the percentage of disposable income that goes toward student debt, on average.
10 Worst States to Live In While Paying Off Student Debt
1. (Worst) Hawaii: 22.17 percent
2. Maine: 20.45 percent
3. Connecticut: 19.90 percent
4. Pennsylvania: 19.35 percent
5. New Jersey: 19.35 percent
6. Alaska: 19.19 percent
7. Rhode Island: 18.96 percent
8. South Dakota: 18.51%
9. Vermont: 18.33%
10. Montana: 17.99%
This study compared average earnings in each state and the District of Columbia to costs of living and average student loan balances to find the states where student loan repayment is most affordable.
Average student loan balances in each state were calculated from Peterson’s data on indebtedness averages at four-year colleges. Colleges were excluded if they didn’t report a dollar average for the average indebtedness number or if the figure was for a year before 2015.
The disposable income of an average worker in each state was calculated based on the following factors:
- The Bureau of Labor Statistics’ reported 2016 mean wage in the state, released in March 2017
- LESS basic living expenses, including housing, transportation, food, and health care, based on national Consumer Expenditure data for 2016 and adjusted for local costs of living, sourced from the Council for Community and Economic Research’s Cost of Living Index
Disposable income was then compared to typical payments on the average student debt balance of a 2016 graduate in each state based on the following criteria:
- Each state’s average student loan debt was amortized over a standard 10-year repayment period, assuming an interest rate of 4.00%.
- The average payment was compared to disposable income to find the portion of disposable income needed to cover these basic payments.
The study was modeled on federal standards for student loan affordability. Income-driven repayment plans set affordable student loan monthly payments at 10 percent of monthly discretionary income. However, our methodologies differ and might not be reflective of results using income-driven repayment plan formulae.
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 150,000 borrowers manage and eliminate over $3 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 studentloanhero.com.
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1 Important Disclosures for SoFi.
2 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 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.54% APR (with Auto Pay) to 7.27% 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 March 18, 2019, and are subject to change based on market conditions and borrower eligibility.
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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.
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.
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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 2.5% effective February 10, 2019.
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