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College Students and Recent Grads

How to Consolidate Student Loans: Your Complete Guide

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Keeping track of multiple student loans from several different loan servicers gets confusing fast. Fortunately, you can simplify student loan repayment through combining multiple student loans into a single payment.

There are two ways to combine many loans into one: through federal student loan consolidation or via private student loan refinancing. Although the term “consolidation” is sometimes used to refer to both these options, consolidation and refinancing have some key differences.

For instance, federal consolidation only applies to federal student loans, and it doesn’t lower your interest rate. Refinancing, on the other hand, can combine federal and private student loans together, and it could get you a lower rate.

Both approaches have advantages and drawbacks, so it’s essential to weigh the pros and cons before making any changes to your student loans. This full guide will take a deep dive into how to consolidate student loans, as well as compare consolidation and refinancing so you can decide which strategy is right for you.

Student loan consolidation vs. refinancing: The basics

While both consolidation and refinancing can combine several student loans into a single loan, they do so in different ways. This chart shows the key differences between consolidating student loans and refinancing them.


Note that while both consolidation and refinancing can combine loans, you don’t actually have to include more than one loan. There could be benefits to consolidating or refinancing a single student loan.

For instance, a parent borrower might consolidate a parent PLUS loan to make it eligible for Income-Contingent Repayment, which cuts your monthly repayment amount. Or a student might refinance a single student loan to get a lower interest rate and save money.

Even if you have several student loans, you can also cherry-pick one or two to consolidate or refinance, depending on what would be most beneficial.

What is federal student loan consolidation?

Consolidation turns one or more of your federal loans into a new loan, possibly with a new term length. For this, you’ll need to apply for a direct consolidation loan from Federal Student Aid.

You can combine most types of federal student loans, including direct loans (also known as Stafford loans), as well as parent PLUS or grad PLUS loans, and federal family education loans (FFELs).

You’re typically eligible to consolidate school loans once you’ve graduated, withdrawn from school or dropped below half-time enrollment.

6 pros of consolidating student loans

Federal student loan consolidation comes with a variety of benefits, as well as some drawbacks. Let’s look at benefits first.

1. Simplify repayment by combining multiple loans into one

If you consolidate multiple loans, you turn them into a single loan. Instead of having multiple payments each month, you’ll just make one payment toward your new, consolidated loan. You will only have to remember a single interest rate and one loan servicer.

According to a 2017 report from Experian, the average student loan borrower has 3.7 loans. Consolidating these could simplify repayment and make it more manageable.

2. Opportunity to choose a new repayment plan and adjust your monthly payment

When consolidating student loans, you can choose a new repayment plan. You can return to the standard 10-year plan with fixed payments, or you can lower your payments via the graduated repayment plan, in which the payment amounts increase over time. Likewise, you can extend your terms and lower your monthly payment on an extended repayment plan, or choose an income-driven plan which will cap your payments based on your disposable income.

Choosing something long-term will keep you in debt for longer and means you pay more interest overall, but it also could lower your monthly payments. If you’re struggling to keep up with high bills each month, choosing a longer term could save your budget.

3. Chance to choose a new loan servicer

Along with choosing a new repayment plan, you’ll also get the chance to choose a new loan servicer. Your options for federal loan servicers are:

  • Navient
  • Nelnet
  • Great Lakes (now owned by Nelnet)
  • FedLoan Servicing (PHEAA)
  • HESC/EdFinancial
  • CornerStone
  • Granite State – GSMR
  • OSLA Servicing
  • Debt Management and Collections System

If you’ve had a good experience with your current loan servicer, you can stick with them. But if you haven’t, you’ll get the chance to switch and hopefully have better communication with the next.

4. Make parent PLUS loans eligible for Income-Contingent Repayment (ICR)

Parent PLUS loans are designed for parents who are helping pay for their child’s education. But they’re only eligible for one income-driven repayment plan — ICR — and only after the borrower has first consolidated the loan.

After turning your parent PLUS loan into a direct consolidation loan, you can select ICR as your repayment plan. ICR adjusts your payments to 20% of your discretionary income or to the amount your payment would be on a 12-year fixed plan, whichever is lower.

If you still have a balance at the end of the term on your income-driven term (25 years), it could be forgiven.

5. Rehabilitate student loans that are in default

Federal consolidation is also one way to rehabilitate student loans that are in default. If you fall behind on payments, your student loans could go into default, which could result in a host of bad consequences.

Your credit score could plummet, for instance, and the federal government could garnish your wages, tax refund or even Social Security benefits. If your loans are in default, it’s essential to pull them out and get them back in good standing.

One option for doing this is consolidating the defaulted student loans into a direct consolidation loan and placing them on an income-driven repayment plan. Your defaulted loan will be eligible after you make three consecutive, on-time payments.

Once your loan is out of default, it will once again be eligible for federal programs and protections, such as forbearance and deferment.

6. It’s free to apply, and there’s no credit check

Anyone with federal student loans can apply for a direct consolidation loan at no cost. If a company is charging you a fee, beware: You can easily complete the application on your own for free.

What’s more, you don’t need to pass a credit check or meet an income threshold to qualify. As long as you have qualifying loans, you can consolidate.

4 cons of consolidation

Along with the advantages of federal consolidation, there could be some downsides to consider. Make sure you understand the potential cons before applying for a direct consolidation loan.

1. You could get a slightly higher interest rate

Federal consolidation doesn’t get you a lower interest rate. In fact, it could actually result in a slightly higher interest rate.

When you consolidate multiple loans, Federal Student Aid determines your new rate by taking the weighted average of your interest rates. Then, it rounds up to the nearest one-eighth of 1%.

This isn’t a big increase, but be aware that consolidation won’t save you money on interest.

2. You’ll pay more overall if you choose a longer repayment term

Not only will consolidation not save you money on interest, but it could cost you more overall if you choose a longer repayment term. For instance, income-driven plans extend your terms to 20 or 25 years.

Your monthly payments will become more affordable, but you’ll also fork over a lot more in interest over the life of the loan. The only way to save on interest would be to pay off your loan ahead of schedule.

Of course, lowering your monthly payments might help your budget in the short term. But make sure you understand the long-term consequences before adding years to your debt.

3. Your previous payments won’t count toward PSLF or forgiveness from an income-driven plan

The federal government offers a few options for loan forgiveness after years of qualifying payments. The Public Service Loan Forgiveness (PSLF) program, for example, awards loan forgiveness after 10 years of working in a qualifying organization.

And income-driven plans, such as Income-Based Repayment or Pay As You Earn, end in loan forgiveness if you still have a balance after 20 or 25 years. To qualify for any of these programs, you must make a certain number of on-time, consecutive payments.

When you consolidate, though, you reset the clock on your payments. Any payments you made before you consolidated wouldn’t count toward the PSLF or income-driven plan requirements. You’d have to start over again, which could mean you won’t see forgiveness for many more years.

Note that if you’re working toward PSLF, you should put your loans on extended repayment or an income-driven plan right away. If you stay on the standard 10-year plan, you won’t have any balance left to forgive after 10 years of service.

4. Private student loans aren’t eligible

Finally, private student loans are not eligible for federal consolidation. You can only bundle federal student loans into a direct consolidation loan.

So if you borrowed from a private lender, such as Sallie Mae or LendKey, you would still have to pay these back separately with your assigned loan servicer.

How to consolidate student loans and apply for a direct consolidation loan

Source: https://studentaid.ed.gov/sa/

If you’re wondering how to consolidate student loans, rest assured the process is easy. According to Federal Student Aid, most people complete the application in less than 30 minutes.

You can apply at StudentLoans.gov with the consolidation loan application and promissory note. Before logging into your account with your FSA ID, collect the personal and financial information listed in the “What do I need?” section. For instance, you’ll need your loan documents to complete the form.

Along with providing your information, you’ll also indicate which loans you want to consolidate, and which ones you don’t (if any). You’ll also choose a repayment plan, whether it’s the standard plan, graduated repayment, extended repayment or an income-driven plan.

Make sure to read over your application before hitting submit, and speak with your loan servicer if you run into any confusion during the process.

Student loan refinancing can also combine multiple loans into one

Federal student loan consolidation isn’t the only way to replace several loans with a single student loan. You can also achieve this through student loan refinancing. While you consolidate school loans with the federal government, you would refinance with a private lender. This lender might be a bank, credit union or an online lender, such as SoFi or CommonBond.

Both federal and private student loans are eligible for refinancing, and you can refinance one loan or several together. Not only could this simplify repayment, but you might also qualify for a lower interest rate. Plus, just as with the federal student loan consolidation, you’ll get the chance to choose new repayment terms.

Refinancing can be a savvy strategy for saving money on your student loans and restructuring your debt, but first, you’ll need to qualify.

3 pros of student loan refinancing

So what are the advantages of refinancing student loans? Here are three big ones.

1. A single monthly payment is easier to track

Refinancing is similar to consolidation in that it can combine several loans together. Your refinancing provider, or the loan servicer it partners with, will be your new loan servicer.

If you refinance a Navient loan with SoFi, for instance, SoFi would be your new point of contact. And you’ll only have to keep track of one payment, instead of budgeting for multiple payments each month.

2. You could secure a lower interest rate

If you qualify for a refinancing offer, you could snag a lower interest rate on your student loans. SoFi has variable rates starting at 2.47% and fixed rates from 3.90%, for example. These are significantly lower than the 5.05% attached to direct loans or the 7.6% on PLUS loans.

Cutting your interest rate can go a long way toward saving you money on your debt. With less interest to keep up with, you might even be able to pay off your loan more quickly.

3. You’ll get to choose new repayment terms on your loan

Along with choosing a variable or fixed rate on your refinanced student loan, you can also pick new repayment terms. Most lenders offer terms from five years up to 15 or 20 years.

If you can swing higher monthly payments, you could choose a short term to get out of debt fast and save money on interest. If you need some relief, on the other hand, you could reduce your payments with a longer term but pay more interest throughout the life of the loan.

Note that you can always throw extra payments at your student loans without penalty. So even if you need to choose a longer term now, you can still prepay your loan if your income increases in the future.

3 cons of refinancing

Although saving money through refinancing might sound ideal, make sure you understand the potential disadvantages before applying.

1. You’ll lose access to federal programs and protections

Refinancing federal student loans with a private lender means you turn them into a private loan. And private loans are not eligible for federal protections or programs, such as PSLF.

If you’re relying on any federal options, it wouldn’t be a good idea to refinance. Similarly, you might not want to refinance if you’re concerned about your ability to repay the loan.

Private lenders don’t usually offer as much flexibility as the federal government does when it comes to repayment. For instance, they don’t have income-driven repayment plans, and only some lenders offer forbearance or deferment if you go back to school or run into economic hardship.

So before you refinance, find out which, if any, benefits your lender offers to borrowers. If you’re concerned, you might wait to refinance until you’re confident you have a steady income and the means to pay back your loan on time.

2. You need to pass a credit and income check to qualify

Unlike consolidation, not everyone will qualify for refinancing. Since you apply with a private lender, you’ll have to meet its underwriting requirements for credit and income. The criteria are in place to ensure you have the financial means to pay back any money you borrow.

3. You might have to apply with a cosigner

If you can’t qualify on your own or are trying to get the lowest rates possible, you could apply with a creditworthy cosigner, such as a parent. By signing onto the loan, your cosigner will share responsibility for your debt.

This might not be a problem if you and your cosigner are on the same page about sharing debt. But if you can’t pay back the loan, this agreement could ultimately do damage to your cosigner’s finances, not to mention your relationship with that person.

Before adding someone to your student loan, make sure to set clear expectations about who will pay back the loan and what will happen if you run into financial hardship. Also, find out if your lender offers cosigner release. Some will remove your cosigner from the loan after a few years of on-time repayments.

How to refinance your student loans with a private lender

Since there are lots of lenders that provide student loan refinancing, you’ll want to shop around to find one with the best offer. Along with finding the lowest interest rate, you might consider additional factors, like customer reviews or extra benefits, such as forbearance or cosigner release.

Banks, credit unions, and online lenders provide student loan refinancing. Some online lenders, such as SoFi, CommonBond and Earnest, make it easy to prequalify and check your rates from your computer or phone.

You’ll provide a few pieces of information, and these lenders will show if you prequalify. This check only takes a minute, and it won’t impact your credit score at all. Note, however, that when you choose a lender and submit a full application, you will need to consent to a “hard” credit inquiry, which can reduce your credit score slightly.

Once you’ve chosen a lender, you’ll submit basic information, such as your name, address, degree, university data, total loan debt and monthly housing payment. You’ll also provide proof of income and official statements for any private or federal student loans you wish to refinance.

As soon as you’re approved, you can choose your repayment term, as well as select a fixed or variable interest rate.

Make sure you keep paying off your old loans until you’re 100% certain your refinanced loan is up and running. You wouldn’t want to fall behind on payments before everything has been processed, so wait for your new lender to give you the green light before you forget about your old student loans.

Federal consolidation vs. refinancing: Which is the right choice for you?

Since both federal student loan consolidation and private student loan refinancing come with pros and cons, how do you decide which one is right for you? The decision comes down to your needs and goals as a borrower.

If you’re looking to simplify repayment or get out of default while at the same time retaining eligibility for federal repayment plans, consolidation would likely be the better choice. But if you’ve been paying your student loans for a few years and have a steady income, refinancing could be a wise strategy for saving money on your debt — and maybe even paying off your student loans ahead of schedule.

Take the time to understand your options so you can make the right choice with your student debt. By doing your due diligence, you’ll be able to find the strategy that best helps you manage your debt as you work toward paying it off in full.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Rebecca Safier
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Rebecca Safier is a writer at MagnifyMoney. You can email Rebecca here

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What the Election Results Mean for Your Student Loans

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

From health care to the economy, voters had many concerns in mind as they headed to the polls for this year’s midterm elections.

But one major issue that might not have gotten as much attention in news coverage was the government’s handling of student loans, a subject which impacts 44 million Americans. As our national student debt has exceeded $1.5 trillion, many borrowers are hoping for relief.

But while Democrats call for an expansion of financial aid and forgiveness programs, conservatives warn that increasing aid could be a burden for taxpayers.

Given the election results that gave the Democratic Party a majority in the House of Representatives, we might see them looking to influence the education policies moving forward. Still, they won’t have much hope for passing their own legislation without working out deals with the Republican-led Senate and White House.

On the other hand, a few ballot measures across the country and the presence of some lawmakers with a personal interest in student debt are enough to cast educational debt in a bigger spotlight.

Whether you’re a student, loan borrower or parent preparing for the costs of colleges, find out what the 2018 midterm election results could mean for you.

Democrats to weigh in on education policies

While some races are still too close to call, Democrats have locked in a majority in the House of Representatives, taking the gavel from the Republicans, while the GOP has added to its majority in the Senate.

This shift in the House could mean Democrats have greater influence when it comes to Department of Education policies, particularly those related to for-profit colleges and student loan forgiveness programs.

Critics of Secretary of Education Betsy DeVos have accused her of protecting for-profit schools at the expense of students. They have also objected to her efforts to scale back certain Obama-era protections, such as borrower defense to repayment, which discharges loans for defrauded borrowers.

Democrats have sent letters objecting to education policies under the Trump administration, but as the minority, they were unable to conduct oversight of the department. Now that they lead the House, however, Democratic members will likely be active on this front.

“Expect a Democrat-led House, for instance, to conduct hearings, demand documents and press the Trump administration on its appointment of officials with ties to for-profit colleges — and its reversal of Obama-era policies meant to crack down on the industry,” wrote Michael Stratford, education reporter for Politico on Tuesday.

Ally Bernstein, legislative counsel for the Association of Young Americans (AYA) agreed, “The [Democrats will] hold the department’s feet to the fire on its controversial rewrites of rules governing for-profit institutions, including whether federal student loan borrowers are protected from continuing to repay loans if these institutions committed fraud against them.”

The free-college movement shows up at local level

When running for president in 2016, Sen. Bernie Sanders (I-Vt.) supported the movement to provide free public college for all. In 2017, Sanders and Sen. Elizabeth Warren (D-Mass.) proposed a bill that would provide $41 billion a year to states to help eliminate tuition.

While there hasn’t been much progress on the national level, various state politicians have voiced their support for free community college during this midterm election season. For example, Ned Lamont, who won his bid for governor of Connecticut, supports two years of community college for state residents who agree to remain in state following graduation.

In fact, both the Republican incumbent Larry Hogan and his Democratic opponent for the governor’s seat of Maryland, Ben Jealous, proposed expanding Maryland’s free tuition college program, which currently provides no-cost community college to residents. Hogan, who won the race, said he supported expanding the tuition-free program to include four-year institutions.

And it’s not just the state governments. Seattle voters approved a measure to offer two free years of community college for public school students. The move will be funded by a property tax hike which the city predicts will raise over $600 million over several years.

So although the free college movement hasn’t gained much traction nationally, these city- and state-level victories could be signs of changes to come.

Politicians have student debt, too

For some politicians in this election, student loans are a personal issue. According to CNBC, one in 10 current members of Congress are repaying student loans, either for themselves or a family member.

Some of them are also trying to address the issue more broadly. Consider Rep. Tom Reed (R-N.Y.), who was re-elected to the House Tuesday.

“This is an area that affects the futures of so many young men and women, and it’s time to address the issue before it gets even worse,” Reed told Student Loan Hero in an interview earlier this year. “We’re shackling our children and grandchildren to debt if we don’t do something.” (Note: Student Loan Hero and MagnifyMoney are both part of LendingTree.)

Reed introduced a bill this year that would force some universities to use a portion of their endowments to help low- and middle-income students.

And there may be more such elected officials on the way, as millennials join the political arena and move up the ranks of state government.

Natalie Higgins of Massachusetts and Matt Lesser of Connecticut are two re-elected state representatives who have been open about their struggles with student debt.

Higgins, for example, borrowed more than $130,000 to pay for law school.

Lesser, also a student loan borrower, has made student debt a signature issue in his past few years on Connecticut’s state senate. In 2015, he sponsored a “student loan bill of rights,” aimed to make student loan companies follow consumer protection rules.

Committed to easing the burden for student borrowers, both Higgins and Lesser introduced a state bill requiring student loan servicers to abide by consumer protections.

“Having representatives who have experienced or are still experiencing student loans and understand the burdens and problems is really important,” said Ben Brown, founder of AYA.

Student loan legislation remains murky

With divided affiliations in Congress, competing visions for higher education from the Republicans and Democrats look less likely to become law.

Late last year, Republicans proposed the PROSPER Act, which would reduce regulation of for-profit schools, limit student loan forgiveness and increase funding for community colleges and apprenticeships, among other things.

Democrats, meanwhile, have proposed the Aim Higher Act, which would expand Public Service Loan Forgiveness (PSLF), increase funding for Pell Grants and revise income-driven repayment plans.

While the Republicans could pass PROSPER during the “lame duck” session before the new Democratic-majority House sits, any overhaul of the student loan system by the new Congress would require a deal between the two sides.

Student loans have become a political issue

With millions of Americans dealing with student loans, and with the cost of college higher than ever, it’s not surprising that higher education issues are increasingly part of the political conversation.

Now that Democrats have won a majority in the House, the current push to roll back Obama-era protections is likely to come under a lot more scrutiny. Likewise, previous plans for major changes to student debt through the PROSPER Act might need bipartisan consensus to move forward.

As a student loan borrower, make sure to stay informed about any changes to federal programs, such as income-driven repayment or loan forgiveness. Also know that even though the election is over, you can still make your voice heard. Contacting your elected officials is easy and can have an impact if enough people take action.

Even if these debates feel far away, they could have a very real effect on your life and finances.

This report originally appeared on Student Loan Hero. Both MagnifyMoney and Student Loan Hero are part of LendingTree.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Rebecca Safier
Rebecca Safier |

Rebecca Safier is a writer at MagnifyMoney. You can email Rebecca here

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College Students and Recent Grads

Where a College Degree Matters Most

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

value of a college degree
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Earning your college degree can open the door to more career opportunities and a higher income. But, as a recent MagnifyMoney study points out, college degrees are more valuable in some metropolitan areas than in others.

Where you live has a major impact on your income, both during your working years and after you retire. Correspondingly, college degree holders in some cities are more likely to find employment, become homeowners or secure health insurance coverage than their peers elsewhere.

We examined income, employment and related data for degree and non-degree holders across the 50 largest metropolitan areas in the U.S. and ranked each area from 0 to 100. This “final score” represents the overall value of a bachelor’s degree in each area.

Here’s what we discovered about where a college degree matters most.

Top 5 cities where degrees are worth the most

Based on the study, the earnings-and-opportunities premium for those with college degrees seem most pronounced in wealthy and highly educated cities. The five places where degree-holders’ incomes outperformed were:

  • 1. San Jose, Calif. — At 79.1, this tech-industry nexus had the biggest boost for those with four or more years of college.
  • 2. Washington, D.C. — The nation’s capital, also known for its universities and policy institutes, ranked second, at 78.4.
  • 3. San Francisco — This neighbor to top-ranking San Jose scored 71.7.
  • 4. Raleigh, N.C. — With a rating of 71.5, Raleigh, home to many major corporate headquarters, came in fourth place.
  • 5. Austin — The Lone Star state capital rounded out the top five, with a score of 70.6

… And 5 cities where degrees matter least

  • 50. Riverside, Calif. — Of the top 50 U.S. metro areas surveyed, this neighbor to Los Angeles ranked lowest in terms of college degrees translating into higher salaries, rating 43.2 in our study.
  • 49. Las Vegas — This entertainment hotspot also had one of the smallest premiums for degree holders, with a score of 43.3.
  • 48. Buffalo, N.Y. — With a rating of 45.7, the upstate New York metropolis came third from last on our list.
  • 47. Pittsburgh — Pennsylvania’s second-largest city also fell low on the list, with a score of 47.4.
  • 46. Louisville, Ky. — At 51.7, Louisville ranks fifth from the bottom.

How a college degree affects income

A college degree remains a valuable asset for professionals, even when considering the student debt that often goes with it. On average, people with a bachelor’s degree make $22,422 more than those with only a high school diploma, as well as $16,682 more than those who attended some college or even received an associate’s degree.

But the difference is most pronounced in certain areas, such as San Jose, Washington, D.C., and San Francisco. As noted above, San Jose tops the list for places where college degrees are the most valuable. In this Californian city where nearly half the population has a bachelor’s degree or higher, the median income for degree holders is 83.6% above that for non-degree holders.

San Jose residents with college degrees also don’t seem to have a ton of student debt dragging down their finances. The ratio of median student loan balance to median degree-holder income was just 18.6%, the lowest of any metro area included in this study.

On the flip side, a college degree doesn’t correlate with a major boost in income in all areas. In Las Vegas, where 22.8% of the residents have a bachelor’s or higher, a degree only increases median income by 16.9%. In Riverside, California, the increase is just 20.4%.

Both these figures are well below the overall average of 53.9%. Plus, the ratio of median student loan balance to median income was 52.5% in Las Vegas and 58.2% in Riverside. So not only do residents see a lower return on investment from their degrees, but they also end up with burdensome student loan debt that’s difficult to pay off.

A relatively smaller salary and larger debt creates other problems, too. For example, if you’re hoping to use student loan refinancing to lower your interest rate or reduce your monthly payments, you’ll have more trouble qualifying for refinance with less pay and a heavier debt load.

It appears that differences in cost of living or earning opportunities can impact the value of a college degree to a major extent. Although a college degree increases earning potential anywhere, its effects are much stronger in some areas than in others.

How a college degree affects retirement income

Although a four-year degree’s effect on income varies by location, its impact on funds for retirement appears to be more steady. Overall, college degree holders have an average of 42.2% more in retirement income than those without a degree. This figure only changes by about 10 percentage points or less when factoring in location.

Retirement income refers to the money you have coming in after you retire. This could come from retirement savings, but it might also come from other assets, insurance, inheritances, stocks, pensions or Social Security allowances.

Surprisingly, having a degree only meant a 34.4% boost in retirement income in San Jose, the city where degree holders chalked up the biggest jump in income. The only city where a degree was even less valuable in terms of retirement income was Cleveland, where degree holders received an average of 32.2% more in median retirement income.

So why are people with degrees in areas like Cleveland only making 32.2% more than those without degrees, while those in other cities, such as Austin, get an average of 52.9% more? One key difference might be the availability of blue collar and government jobs with pensions.

Certain areas might provide more public sector jobs and other employment opportunities that come with pensions but don’t require college degrees. In those cities, non-degree holders might be better financially protected, even if they don’t have as high an earning potential as those with degrees.

Unfortunately, pensions in the private sector have become less and less common, and there’s no guarantee that even public sector pensions will continue to be available in the future. For now, though, they seem to be helping retired degree and non-degree holders alike, albeit in certain cities more than others.

How a college degree affects employment opportunities

Earning your bachelor’s doesn’t just open the door to higher-paying jobs; it also increases your chances of gaining employment at all. According to our study, degree holders are 52.7% more likely to be employed than non-degree holders.

Holding a college degree was most useful in Birmingham, Baltimore and Milwaukee, where degree holders were 63.7%, 63.7%, and 62.9% more likely to be employed, respectively.

On the other side of the spectrum, it had the lowest effect in Austin (35.4%), Los Angeles (39%), and Denver (40.5%).

According to the Bureau of Labor Statistics, a higher level of education corresponds with lower unemployment across the U.S. Bachelor’s degree holders had the lowest unemployment rate of 2.1% in April 2018. The data showed jobless rates rising for workers at lower education levels: 3.5% for people with some college education, 4.3% for high school graduates, and 5.9% for those without a high school diploma.

That said, employment opportunities vary by location, and some cities host industries that have little presence elsewhere. So while your education level impacts your chances of employment, so too does the metropolitan area in which you live.

How a college degree affects homeownership

Since higher education can lead to a higher income, it should come as no surprise that degree holders are also more likely to own homes. Overall, college graduates are 21.8% more likely to be homeowners than non-college graduates.

In San Antonio, bachelor’s degree holders are 40% more likely to be homeowners. In Las Vegas, having a degree correlates with a 33.7% greater chance of owning a home, and in L.A. it comes with a 31.4% greater chance.

That said, having your degree doesn’t necessarily mean you’re more likely to own a house. In Pittsburgh, degree holders are only 0.7% more likely to be homeowners. And in Buffalo, that likelihood is only 11.3% higher.

Lots of factors play into homeownership, including the average age of the local population, how much student debt residents have and of course, the cost of real estate itself. In some areas, low prices might make it easier for all residents to buy homes, regardless of whether they hold a college degree and receive the higher income that often goes with it.

On the flip side, high costs of living could make homeownership cost-prohibitive for everyone, especially if degree holders are paying off large amounts of student debt. With high student loan payments, graduates might be wary of taking on a mortgage — or might not have the financial credentials to qualify in the first place.

How a college degree affects health insurance coverage

The U.S. has an employer-based health insurance system, meaning many of us rely on our employers to provide coverage. Since employers tend to subsidize health care costs, employer-sponsored plans are typically the most affordable.

Since we saw that college degree holders tend to have higher rates of employment, as well as bigger salaries, it follows that they’re also more likely to have health insurance. The difference is not particularly dramatic, though: Overall, those with degrees are just 11.5% more likely to have health insurance.

The gap is most evident in Houston, Dallas and Miami, where college graduates are 20.1%, 18.2%, and 18.1% more likely than non-college graduates to have coverage, respectively. But in Buffalo, Boston and Providence, the difference is minimal, with the relative likelihood at just 4.4%, 4.5%, and 5.9%, respectively.

One variable to consider is the availability of state-sponsored health insurance. For instance, Massachusetts has MassHealth, a state-run program that provides affordable health insurance to low-income residents. If your state has a similar program, you might not need employer-sponsored health insurance if you meet eligibility criteria. But if not, you could be facing high premiums without the help of an employer.

College degrees remain valuable, despite high rates of student debt

With the high rates of student debt in the U.S. — $1.48 trillion at the latest count — it’s natural to feel skeptical about the value of a college degree. But even with the student loans that often accompany higher education, a college degree remains valuable across the country.

Not only does it correlate with higher income, but it also boosts your chances of employment. Plus, having your degree could lead to higher retirement income, an increased chance of homeownership and a greater likelihood of health insurance coverage.

That said, the value of a degree isn’t the same everywhere. Some cities might be home to industries that look for college degree holders, while others might not have as many employment opportunities or high-income careers.

If you’re looking for the greatest return on investment for your degree, consider moving to an area with job opportunities in your current field. Cost of living might be another important factor when choosing where to live, as it could have a big impact on your chances of becoming a homeowner.

By being selective about where you reside, you can leverage your college degree into a high-paying career, as well as a higher income after you retire. Not only will earning your college degree likely lead to greater financial stability but optimizing where you live can also help put your degree to work for you.

Methodology

This study was conducted by Prabhat Kumar and Aditya Patil. It was limited to the 50 largest statistical metropolitan areas by population, and measured differences between people ages 25 and older with and without four-year degree educations or higher. Six metrics were scored from 0 to 100: ratio of median loan balance to median income for degree holders; difference in median incomes between degree holders and non-degree holders; difference in median retirement incomes; difference in unemployment rates; difference in homeownership rates; and the difference in health insurance coverage. These were assigned weights and then combined into one score. Income and rent values were normalized using the Regional Price Parity from the Bureau of Economic Analysis to account for variability in buying power across the MSAs. Data was sourced from 2016 American Community Survey data from the U.S. Census hosted on IPUMS and American FactFinder and from a student loan balance study published in May by LendingTree (our parent company).

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College Students and Recent Grads

How to Refinance Your Student Loans, Even If You Didn’t Graduate

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

If you left school before completing the requirements for your degree, you’re not alone. According to College Atlas, 56% of students who start a four-year school drop out before year six of their college careers. Finances play a big role in the decision, with the study finding that students from low-income households were 7.6 times more likely to withdraw than those from well-off backgrounds.

But even if you left school before graduating, you might still owe a significant amount in student loans. Refinancing is one strategy for managing debt, but your options for lenders who will refinance student loans without a degree are limited. If you’re looking for help refinancing student loans without a degree, here’s what you need to know.

Lenders offering student loan refinance with no degree

When you refinance student loans, you can simplify your debt by consolidating multiple student loans into one. You might qualify for a lower interest rate, and you can adjust your monthly payments by choosing new repayment terms.

Although your options for refinancing student loans without a college degree are narrower, they do exist. The following lenders will work with you to restructure your debt, even if you didn’t graduate from college. Note that rates and terms below are accurate as of October 2018.

  • Citizens Bank
    • Refinances student loans starting at $10,000
    • Offers APRs between 2.79% and 8.69%
  • Discover
    • Refinances student loans from $5,000
    • Offers APRs between 4.87% and 8.24%
  • PNC
    • Requires that you’ve been repaying your student loans for at least 24 months
    • Offers rates between 4.98% and 7.59% APR
  • RISLA
    • Refinances student loans starting at $7,500
    • Offers APRs between 3.49% and 7.64% (with autopay)
  • Wells Fargo
    • Refinances student loans starting at $5,000
    • Offers rates between 5.24% and 9.99% APR

Most online lenders, however, such as SoFi and CommonBond, do require a degree as part of their refinancing eligibility criteria. So if you’re searching for a lender, you might want to first look at the ones listed above. If possible, get a few different offers so you can find one with the best terms.

Eligibility for student loan refinance without a degree

In order to refinance student loans, you’ll need to fulfill certain eligibility requirements. First, you’ll have to meet the lender’s underwriting standards for credit and income.

Although few lenders advertise a specific cutoff, most look for a decent credit score. They also look for a steady source of income that you’ve had for a number of months or years. RISLA, for instance, requires that you’re making an annual salary of $40,000 or more.

Along with strong credit and income, you might also need to have a certain amount in savings and to meet a threshold for debt-to-income ratio. If your debt-to-income ratio is too high, the lender will be concerned about your ability to pay back the loan.

If you can’t fulfill these criteria, there is another option: You could apply with a creditworthy cosigner. Applying with a cosigner could boost your chances of approval, as well as help you qualify for a lower interest rate.

However, your cosigner will share responsibility for the debt, meaning their finances will suffer if you can’t pay back the loan. Make sure you and your cosigner set clear expectations about who will repay the debt — and what will happen if you lose your income — before entering a student loan refinance agreement together.

Pros and cons of refinancing student loans

Although refinancing student loans with no degree can be tricky, finding the right lender could be well worth it. When you refinance student loans, you could snag a lower interest rate on your debt. As a result, you could save hundreds or even thousands of dollars over the life of your loans.

You’ll also get the chance to choose new repayment terms. You could pick a shorter term to get out of debt faster. Or you could choose a longer term to reduce your monthly student loan payments and give your finances some breathing room.

Another benefit to student loan refinancing is combining multiple loans into one. If you’re struggling to track various due dates and bills, this consolidation could simplify repayment.

But at the same time, there are potential disadvantages to refinancing student loans.

When you refinance federal loans, for instance, you turn them into a private one. As a result, you lose access to federal protections and benefits, such as income-driven repayment plans, forbearance, deferment and Public Service Loan Forgiveness. If you’re relying on any of these programs, refinancing wouldn’t make sense for your situation.

But if you don’t need any federal options — and you’re confident you can pay back your loan on time — student loan refinance could be a savvy move. You’ll just have fewer options for refinancing providers than a borrower who graduated with his or her degree.

Other options for student loan repayment

If you’re looking for strategies to manage your student loans, refinancing isn’t your only option. If you have federal student loans, for instance, you could adjust your monthly payments with an income-driven repayment plan. You have four main options:

  • Income-Based Repayment
  • Pay As You Earn
  • Revised Pay As You Earn
  • Income-Contingent Repayment

All these income-driven repayment plans take your income and family size into account to adjust your monthly bills. They also extend your terms to 20 or 25 years, and if you still have a balance at the end, the government forgives the rest. That said, any forgiven amount will be treated as taxable income, so you’ll still have one last bill to pay on your debt.

And if you’re facing financial hardship, you could postpone payments on your federal student loans through forbearance or deferment. These programs can help you avoid default, but interest might continue to accrue on your loans.

Finally, you could choose a career that qualifies for student loan forgiveness or repayment assistance. Some of the careers eligible for forgiveness do require a degree, however, so you might consider returning to school to increase your career mobility.

These programs, by the way, are available for federal student loans, but not for private ones. If you’re struggling to pay back your private student loans, speak with your lender or servicer about your options. Although private lenders don’t typically offer as many options, yours might be able to work with you to find a solution.

Managing your student loans after withdrawing from college

Even if you didn’t finish college, you might be stuck paying off student loans from the years you did attend. That debt can be tough to pay back, especially if you have high interest rates.

But once you have a decent credit score and steady income — or can apply with a cosigner who does — you could refinance for a lower rate. Although you won’t qualify with every lender, you do have options for refinancing student loans without a degree.

And if you’re struggling to get hired for a job without your bachelor’s degree, consider returning to school to finish up your graduation requirements. Scholarships and grants could help you cover costs so you don’t have to take on additional debt to return to school.

Although it’s not for everyone, returning to school could increase your earning potential and career opportunities. In the end, you can use your higher income to get rid of your student debt once and for all.

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College Students and Recent Grads

How to Get Parent PLUS Loan Forgiveness (and Other Options)

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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New graduates aren’t the only ones burdened by student loans. Many parents also take on debt to pay for their children’s education.

In fact, more than 3.4 million people owe a collective $81.5 billion in parent PLUS loans, a federal student loan designed for parents financing their kids’ education.

Although these loans can be useful tools for covering college costs, paying them back can get overwhelming fast. If you’re struggling with parent PLUS loans, you might be wondering what your options are for parent PLUS loan forgiveness.

Although these loans don’t have as many options as other federal student loans, there are ways to get them forgiven — or at least to manage them more easily.

Read on to see how you can get a parent PLUS loan forgiven, along with others options to consider as well.

3 ways to get parent PLUS loan forgiveness

Parent PLUS loans can be forgiven, but it won’t happen overnight. In most cases, you’ll have to keep up payments for many years before you see loan forgiveness. If anyone is promising immediate loan forgiveness, steer clear: You could be encountering a student loan scam.

Here are three legitimate ways to get your parent PLUS loan balance wiped clean.

1. Put your loans on the income-contingent repayment plan

One potential avenue for parent loan forgiveness is through the income-contingent repayment plan, which is an income-driven plan that results in forgiveness after 25 years. While Federal Student Aid offers four income-driven plans, parent PLUS loans are only eligible for the income-contingent plan. What’s more, you can’t apply directly for the income-contingent plan. You must first apply for a direct consolidation loan.

After consolidating, your loan will be eligible for the income-contingent plan, which adjusts your monthly payment to 20% of your discretionary income or what you’d pay on a fixed 12-year plan, whichever amount is lower. Along with adjusting your monthly payments, the plan also extends your terms to 25 years.

If you still have a balance after 25 years of on-time payments, the government will forgive the rest. Your balance will go down to zero, but you might have one last bill to pay on your student loans in the form of a taxes, since your forgiven balance will likely be treated as taxable income.

Consolidating your parent PLUS loan and applying for the income-contingent plan can make your bills more affordable and eventually lead to loan forgiveness, but it will take two-and-a-half decades to get there.

2. Qualify for the Public Service Loan Forgiveness program

If you’re looking for loan forgiveness sooner, you could instead consider the Public Service Loan Forgiveness (PSLF) program. PSLF forgives loans after 10 years of qualifying service in an eligible workplace. This could be a federal, state, local or tribal government organization, a 501(c)3 nonprofit, AmeriCorps or the Peace Corps, for example.

If you’re going this route, make sure to submit the PSLF Employment Certification Form every year so that Federal Student Aid can track your progress. You also should submit the form when switching jobs.

By the way, you’ll need to put your parent PLUS loan on the extended repayment plan or ICR if you’re pursuing PSLF. This makes sense, since if you’re paying back your loan on the standard 10-year plan, you’d have no balance left to forgive after 10 years.

Note that the future of PSLF is somewhat uncertain, with Federal Student Aid reporting that as of June 30, 2018, only 96 borrowers have actually seen loan forgiveness under the program. For now, the program still seems to be functioning, but whether it will continue to exist in the future remains to be seen.

3. Apply for student loan discharge for an eligible reason

If you have a special circumstance that makes you unable to repay your loan, you could qualify for student loan discharge or cancellation. Part or all of your loan could be canceled if any of these apply to you:

  • You become totally and permanently disabled
  • You qualify for student loan discharge through bankruptcy (difficult but possible in rare cases)
  • The school your child attended closed, or it falsely certified your loan
  • Your child withdrew from school and the school didn’t pay the required loan refund
  • Someone stole your identity and borrowed the loan on your behalf

Programs such as borrower defense discharge and total and permanent disability discharge protect students and their families from predatory for-profit schools or the financial challenges that can come with disability.

Consider refinancing parent PLUS loans with a new lender

While your options for parent PLUS loan forgiveness are limited, you could try other strategies for getting your loans under control, such as refinancing with a private lender.

If you meet a lender’s underwriting requirements for credit and income, you could qualify for a lower interest rate than the 7.6% charged for PLUS loans as of July 2018.

You could also restructure your debt by choosing new terms. For instance, you might choose a shorter term to get out of debt faster and save money on interest. Or if you want to lower monthly payments, you could choose a longer repayment term, often up to 15 or 20 years.

Finally, you could shed the debt completely by refinancing in your child’s name. In this case, your child, rather than you, would need to apply for loan refinancing. They would also need to meet requirements for credit and income, unless you choose to cosign. Of course, this arrangement only works if your child is able and willing to repay the parent PLUS loan.

But keep in mind that refinancing a federal loan turns it into a private one. As a result, your loan would no longer be eligible for federal programs and protections, such as the income-contingent plan, PSLF or federal loan discharge programs. If you’re counting on any of these, refinancing probably wouldn’t be the right move.

But if you understand the consequences of turning your debt private, refinancing could make repayment more manageable, or it could even get the loan out of your name entirely.

Seek employers who offer a student loan assistance benefit

In recent years, more employers have started offering a unique benefit: student loan repayment assistance. Much like a 401(k) match, these employers will match up to a certain percentage of your student loan payments, thereby helping you get rid of debt faster.

If you’re open to changing employers, you might search for one who can help you pay back your loan. Or if you refinance the PLUS loan in your child’s name, then you child might prioritize companies with this helpful perk.

Since loan forgiveness can take a long time, seeking alternative strategies, such as an employer student loan benefit, could be one more strategy for getting out of debt.

Keep chipping away at your parent PLUS loans

If you borrowed a large amount for your child’s education, you might be paying it back for years to come. But don’t lose hope — you will pay it off eventually.

Parent student loan forgiveness programs also take a long time, but they can sometimes be a great option. And if you don’t qualify for forgiveness, keep chipping away at your balance and focusing on the long game.

Although you might have to take small steps to get there, ultimately you’ll reach your destination: a life free of student loan debt.

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New Court Ruling Allows Obama-Era Student Loan Protections to Take Effect

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A U.S. district court ruled Oct. 16 that Obama-era rules to protect student loan borrowers defrauded by colleges will take effect without further delay.

Initially slated for July 1, 2017, this policy was put on hold by Education Secretary Betsy DeVos, who said the rules made it too easy for borrowers to have their student loans canceled.

With this new ruling, the delay has come to an end, meaning that students who attended predatory for-profit schools might now qualify for cancellation of their student loans.

No more delays: Borrower defense to repayment will take effect

The legal decision impels the Department of Education to enact borrower defense to repayment, a policy approved during the Obama administration that offers student debt forgiveness to students found to have been misled by for-profit schools.

Critics of the decision to delay the policy say these schools target vulnerable populations such as veterans and those living in poverty, with former for-profit college enrollment officer Tressie McMillan Cottom telling NPR that these groups are the focus because they “qualify for the maximum amount of student aid.”

The policy is meant in part to address cases in which students take on debt to attend but leave without the skills or certifications they were promised or credits that could transfer to another institution. CNN cited an estimate from The Century Foundation that more than 1,400 schools closed between 2013 and 2015 and meet this description, and that their former students might now be eligible for loan forgiveness.

Almost 48,000 claims for debt forgiveness have been granted so far, most of which were processed under the Obama administration. Currently, 106,000 applicants are waiting for a decision, which should come faster with this latest ruling.

Consumer advocates celebrate ruling; conservatives uncertain

The latest court ruling is a major victory for students, according to consumer advocates.

“Today’s decision is a huge win for defrauded borrowers around the country,” said Julie Murray, an attorney who represented students who sued the Department of Education, in a statement after the announcement. “The rule is finally in effect. No more excuses. No more delays.”

Murray added, “Industry will continue to challenge the rule in court, but we will work as long as it takes to defeat those corporate interests and an administration beholden to them.”

But while students and their advocates support the ruling, it represents a defeat for DeVos and her fellow conservatives, many of whom claim loan cancellation could hurt taxpayers.

Although DeVos’ office said it wouldn’t argue against the ruling, it signaled that it intends to revise these regulations.

“Regardless of what the court decides, many provisions of the 2016 regulations are bad policy, and the department will continue the work of finalizing a new rule that protects both borrowers and taxpayers,” DeVos spokesperson Elizabeth Hill said in a statement.

The policy is one of many dealing with borrower protections that the Department of Education under DeVos has sought to roll back.

News comes on the heels of startling student loan statistics

Student protections such as the borrower defense to repayment policy are more important than ever, as the national student loan debt burden has never been heavier.

According to a report by Bloomberg based on data from the Federal Reserve, student loan debt, which stood at $1.5 trillion as of mid-2018, is the only debt category that has grown continuously since the Great Recession.

Student loan debt has increased by 157% in the past 11 years, while mortgage and credit card debt have gone down.

At the same time, rates of student loan delinquency and default have seen increases. This time last year, there were 4.6 million student borrowers in default on their educational debt.

Find ways to protect yourself as a student loan borrower

If you think you qualify for borrower defense to repayment, you can complete the application on Federal Student Aid.

You will need to provide documentation to support your case, including transcripts, enrollment agreements, promotional materials from the school and the school’s course catalog. If you have questions, contact your loan servicer or BorrowerDefense@ed.gov for guidance.

More generally, if you have student loans, educate yourself about your options for repayment and forgiveness. There are a variety of ways to get your loans discharged or forgiven, especially if you commit to working in a public service organization or a high-need area. Plus, some employers now offer a student loan repayment assistance benefit to help employees shed their debt.

Even if you don’t qualify for loan forgiveness, you could adjust your payments on an income-driven repayment plan or extended repayment plan. Or if your budget allows, you could make extra payments to get out of debt faster.

Many consider our national student debt to be a crisis, and Federal Reserve Chairman Jerome Powell has said it has long-term negative effects on borrowers and could hurt economic growth. But by finding the right strategy for your debt, you can avoid default and the harmful consequences that go with it. And hopefully, U.S. education officials will implement rules to help borrowers manage their debt and not stand in their way.

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Study Shows Student Debt Can Kill 75% of Millennials’ Average Net Worth

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It’s no secret that millennials are swamped with student loan debt. While more millennials have obtained bachelor’s degrees than those in generations past, they also borrowed the most to earn those degrees. As of 2018, outstanding student loan debt in the U.S. surpassed $1.48 trillion, almost one-and-a-half times what Americans owe on credit cards.

According to a MagnifyMoney analysis of Federal Reserve data, all this debt is hampering millennials’ chances for long-term financial success.

In fact, this study revealed that the average net worth of a millennial with student loans is only 25% of the net worth for a fellow millennial without them. What’s more, the data suggest student loan debt is preventing some millennials from saving for retirement or buying homes.

And while it’s likely that those without student loans tend to include more people from wealthy homes, the massive disparity between those who owe and those who don’t suggests that educational debt can supercharge the difference in income.

If you’re a millennial, your financial journey since graduation has probably been an uphill battle. Here’s how student loan debt has held your generation back, along with our advice on how to conquer your debt once and for all.

Key facts

Millennial households with student loan debt have…

  • An average net worth of $29,087, compared with $114,376 for student loan-free households.
  • 46% less in their savings and checking accounts (median balance of $5,500 vs $10,180 for those without student loans).
  • $21,160 in retirement savings versus an average of $39,905 for those with no student loan debt.

 

Student loans weigh heavily on millennials’ net worth

The wealth divide between households with student loan debt and those without it has been widening over the past few decades.

In 1989, under-35 households with student loan debt had just 13% less in average net worth than households without any student loan debt.

That difference had nearly tripled by 1998, when under-35 households with student loan debt had a net worth 36% less than their debt-free peers. The former had an average net worth of $68,687, while the latter held an average of $108,146.

In 2016, the gap had grown to 75%, with student loan-saddled millennial households having an average net worth of $29,087, compared with $114,376 for student loan-free households. In other words, millennials unburdened by student loans held over $85,000 more than those who still had debt from college or graduate school.

Even though a college degree typically leads to a higher-paying job, the student loans that often go with it can significantly undermine your ability to build wealth after graduation.

Student loans mean less money in the bank (and more credit card debt)

If you’ve got student loans, you know those payments can be a struggle to make month after month. According to our analysis, millennials with student loans are putting a significant amount of their paychecks toward their debt — leaving them with less money in the bank.

In fact, holders of student loans had 46% less in their savings and checking accounts in 2016 than millennial college graduates without debt. The former group had a median bank balance of $5,500, while the median for other millennial grads was nearly twice that, at $10,180.

Perhaps because millennial borrowers have less liquid cash, they also end up taking on more credit card debt. Fifty-five percent of those with education debt also had credit card debt, compared with just 32% of those without student loans. They also carried larger balances — $2,888 — as opposed to $1,476 for debt-free millennial graduates.

If student loan bills are eating up a big part of your income, you might use credit cards to finance big purchases. But credit card debt tends to be even harder to pay off than student loan debt because of high interest rates and the temptation to overspend. Caution is key when it comes to paying with plastic.

Student loans get in the way of saving for retirement

Considering that millennials with student loans have less money in the bank, it should come as no surprise that they also have less saved for retirement. After all, once you’ve paid your student loan bill and other recurring monthly expenses, you might not have much left over to contribute to your 401(k), individual retirement account (IRA) or other nest egg account.

Our analysis found that millennials with education debt have an average of $18,745 less in retirement savings than their debtless counterparts. The average grad with debt had saved $21,160 in 2016, while those without student loans had an average of $39,905 in their retirement savings accounts.

When it comes to preparing for the future, the earlier you can start, the better. Thanks to the power of compound interest, any amount you can set aside today can grow significantly over time.

Student loans seem to be an obstacle to homeownership

When it comes to buying a home of their own, millennials can encounter many challenges.

The high cost of rent is one of them, with nearly 21 million households paying more than 30% of their income on rent, according to Harvard’s Joint Center for Housing Studies. While rent costs have gone up, wage growth has remained stagnant, even for those with college degrees. This makes it all the more difficult to save for a down payment and other costs associated with buying a home.

And student loans create further obstacles, resulting in lower rates of homeownership among millennial graduates with student loans (34%) than among those without (36%). Those who have managed to buy a home end up with a lower-value home and a bigger mortgage, compared to their contemporaries who don’t carry education loans.

According to MagnifyMoney’s analysis, the home values of millennials younger than 35 with student loan debt are 5% lower than those without student loan debt. The median value for those with student loans was $157,000 in 2016, while millennial homeowners without student debt had homes with a median value of $165,000.

What’s more, homeowners with student loans had to take on even more debt to buy their homes, possibly because they weren’t able to save as much for down payments. Their median mortgage was $104,000, versus $98,000 for those without student loans.

Not only does student loan debt get in the way of buying a home, but it also forces millennials to take on even more debt to realize their goal of owning a home.

Get proactive about reducing your student loan burden

Although you might feel you got tricked into taking on debt at a young age, burying your head in the sand about your student loans will only make a difficult situation worse. Instead of giving up hope, try to get proactive about paying off your debt.

If you can make extra payments, you can get out of debt faster and save money on interest. Create a budget to see if you can spare any extra cash each month. Look for areas where you can cut down on spending. Some people even take drastic steps, such as downsizing their apartment or selling their car, to get rid of debt as fast as possible.

If you’re working, find out what steps you can take to get a pay raise. Or consider changing jobs altogether to boost your salary. Alternatively, you might take on a side hustle, such as driving for Lyft or running errands for TaskRabbit, to increase your income and throw that extra money toward your loans.

Another option is to move into a career that could qualify for student loan forgiveness. For instance, those who work in public service fields or as teachers in qualifying schools could be eligible for federal student loan forgiveness.

You can also look into state-based and private programs that offer student loan repayment assistance for your private or federal student loans. And some employers even offer a student loan matching benefit to help you pay off debt.

Finally, some borrowers could benefit from refinancing their student loans. If you have decent credit and a steady income — or can apply with a cosigner who does — you could qualify for a lower interest rate than what you have now, as well as choose new repayment terms. As a result, refinancing could save you money on interest and help you pay off your student loans ahead of schedule.

Whatever you decide, make sure you’re being strategic about the best way to manage student loan repayment. Even though student debt has held back millennials in major ways, there are steps you can take to overcome this obstacle and reclaim your financial freedom.

Methodology: MagnifyMoney examined the Federal Reserve’s Survey of Consumer Finances to compare households headed by someone under age 35 with student debt versus those without. All monetary amounts are expressed in 2016 dollars (the date of the latest survey).

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Rebecca Safier
Rebecca Safier |

Rebecca Safier is a writer at MagnifyMoney. You can email Rebecca here

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