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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, statements 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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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).

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

Step-by-Step Guide to Applying for Private Student Loans

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements 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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Once you’ve maxed out your eligibility for federal financial aid, you might turn to private student loans to cover the costs of college. But you’ll soon discover that applying for private student loans is a different process than applying for federal ones.

To access private loans, you’ll need to seek out a bank, credit union or another financial institution. Along with all the required paperwork, you might also need a cosigner to sign on to your application. Learning how to apply for private student loans before you act will help ensure there are no delays along the way.

Applying for private student loans in 7 steps

1. Determine how much money you need to borrow

Your first step to getting a private student loan involves figuring out how much money you need to borrow. Private loans can be used for any eligible educational expenses, including tuition, fees, textbooks, room and board and other living expenses.

Take a look at your school’s estimated cost of attendance, which you can typically find on its financial aid website or your financial aid letter. Take the amount listed and subtract any other aid you’ve already received, like federal student loans, grants or scholarships.

If you haven’t received aid yet, the FAFSA4Caster tool can help you estimate your award. After submitting the Free Application for Federal Student Aid (FAFSA), you’ll also see your Expected Family Contribution (EFC), or the amount your family is expected to pay out of pocket.

If you still have a gap in funding after aid has been applied, you might fill it with a private student loan. But be careful about borrowing too much — you don’t want to be stuck with a burdensome amount of debt after you graduate.

What’s more, you probably can’t borrow much beyond your school’s cost of attendance anyway, since your school will likely have to certify any amount you request from a private lender. Estimating your costs will give you a good sense of how much you’re eligible to take from a bank.

From there, you can look for ways to lower the amount you need to borrow in student loans, whether that involves applying for more scholarships or working a part-time job during college.

2. Research private lenders

Once you have a sense of how much you want to borrow in private student loans, it’s time to research your options. You have lots of choices when it comes to borrowing a private student loan.

To save you some time, we’ve vetted private student loan lenders to help you find some of the best ones. Here are a few of our top recommendations for lenders with excellent rates and terms.

Since each lender is different, it’s useful to compare your options to find one that’s best for you. Along with finding the lowest interest rate, you might also look for other perks, such as flexible repayment options or a reputation for good customer service.

3. Compare private student loan offers

Another advantage to several of the lenders mentioned above is their offer of an instant rate quote. After heading to their website, you can check the rates available to you with just a few pieces of basic information, such as your name, school, and the amount you wish to borrow.

At this point, you can immediately see some pre-qualification offers, along with the rates you might get if you apply. This instant rate quote makes it easy to compare offers from multiple lenders so you can find one with the best terms.

Plus, it won’t impact your credit at all, since it’s just a soft credit check. Remember, however, these are only pre-qualification offers — you’ll need to submit a full offer and consent to a hard credit check to see your final loan offer.

But these pre-qualification quotes do give you a good sense of what you could be eligible for, as well as help you narrow down your options for lenders. Note that not every lender offers an instant rate quote, and you probably shouldn’t neglect the ones that don’t.

If you belong to a bank or credit union, for instance, it could be worth speaking with them about a loan to see if you can get an even better deal. Still, taking advantage of instant rate quote or loan comparison marketplaces such as LendKey will help you get an initial sense of what’s available.

4. Find a cosigner if necessary

Unlike the federal government, private lenders have underwriting requirements for credit and income. You’ll need strong credit and a steady income to qualify for a loan, as this reassures the lender you’ll be able to pay back your debt.

Most undergraduates can’t qualify on their own, so they apply with a cosigner, such as a parent. However, know that your cosigner becomes just as responsible for the debt as you are — their credit is on the line in the event you can’t pay, so have a conversation with your cosigner before applying for private student loans to ensure you’re both on the same page about who’s paying back the debt.

Cosigning debt isn’t a decision that should be made lightly. It’s important to clarify expectations so no one’s finances (or relationships) get hurt.

5. Gather the required paperwork

Once you’ve done the preliminary research, the time has come to collect all the necessary documentation. If you’ve submitted the FAFSA, you might already have some of this information on hand.

Although requirements can vary, most private lenders ask for the following:

  • Social Security numbers for you and your cosigner (if any)
  • Personal data, such as your date of birth, home address and phone number
  • Annual income, with pay stubs or W-2s as supporting documentation
  • Employment information
  • A copy of the previous year’s tax returns
  • Monthly rent or mortgage payments
  • A list of assets and their values
  • Contact information for a personal reference
  • The Private Education Loan Applicant Self-Certification form, which you can obtain from you school’s financial aid office or the Department of Education

Each lender sets its own requirements, but the majority will want most of the documents on this list. Gathering them in advance will help your application go smoothly.

6. Submit your application for a private student loan

Once you’ve done your research, chosen a lender and gathered your information, the time has come to submit your private student loan application. Most lenders make it easy to apply for a private student loan online.

This process shouldn’t take long, especially once you have all the relevant documents at the ready. You’ll usually start by filling out your personal information, as well as the details for any cosigner. You’ll have to indicate where you’ll be attending school, as well as the loan amount you’re requesting, and likely upload verifying documents, such as pay stubs or tax returns.

Your final step will be acknowledging the lender’s terms and conditions before hitting submit. At this point, most lenders will reach out to your school to certify the amount you requested.

Assuming all goes well, the lender will likely send the funds to your financial aid office. After applying it to your tuition bill, your financial aid office will return any remaining funds to you.

You can use this money on living expenses, or you can return it to the bank so you don’t have to pay interest on it. In fact, you can always prepay your student loan ahead of schedule without penalty.

Note that some lenders will send the funds directly to you, rather than to your financial aid office. In this case, it’s your responsibility to get the loan money and pay your tuition bill.

While you can borrow a private student loan at any time throughout the school year, don’t leave your application until the last minute. The process can take some time, so you want to ensure the money arrives in time to pay your tuition bill before the deadline.

7. Read over the terms of your contract before signing

Once your application has been submitted and approved, make sure to read over your student loan contract before you sign it. Check to see exactly how much you’re borrowing, along with your repayment term, interest rate and monthly payment.

Find out if you need to make any payments while you’re still in school, or if you have a grace period that extends for a few months after you graduate. Use our student loan calculator so you have a clear understanding of the long-term costs of your loan.

Finally, find out if your lender offers any alternative repayment options in the event you lose your job or return to school in the future. For instance, some lenders will postpone payments temporarily if you run into financial hardship or go to graduate school.

Learn about your options beforehand so you don’t make any false assumptions about your private student loan options.

Applying for private student loans doesn’t have to be arduous

Applying for a private student loan might feel daunting when you’re heading to college the first time, but the process will seem easier after you’ve gone through it once. Learn how to get private student loans well before the school year starts, so you won’t be left scrambling when tuition is due.

And make sure you shop around with multiple lenders before choosing one to finance your education. By putting in your due diligence now, you can find a private student loan with the best rate and lowest costs of borrowing.

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

Can You Transfer Private Student Loans To Federal Loans?

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements 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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You might have heard all the buzz about federal student loans being refinanced at lower interest rates by private lenders. That could leave you wondering whether you can accomplish the opposite and transfer private student loans to federal loans.

This would be a great option, since consolidating private student loans to federal debt would allow you to score government-exclusive protections like special repayment plans and forgiveness options. But unfortunately, transitioning loan types only works in one direction.

Still, there are other alternatives to make your private student loan repayment easier, as we’ll discuss below.

Can you transfer private student loans to federal debt?

Private student loans are borrowed from banks, credit unions and online lenders. They’re awarded based on your (cosigner’s) credit history and include perks like potentially lower rates, more repayment term options and, often, better customer service.

Unfortunately, they’re missing one key feature: There’s no way to consolidate private student loans into federal education debt. Once your debt is private, it stays that way.

On the other hand, it is possible to combine your debt into a single loan. Both federal loan consolidation and private refinancing allow you to do this and pay just one monthly bill. But there are significant differences between the strategies, starting with loan eligibility.

 Direct loan consolidationRefinancing
Eligible loansFederalPrivate or federal
LenderDepartment of EducationBank, credit union or online lender
PurposeGroup federal debt at its average interest rate, rounded to the nearest ⅛ of 1% (fixed rates only)Group education debt at an interest rate awarded based on your creditworthiness (fixed or variable rates)
Key benefitsKeep federal loan protections, including income-driven repayment, forbearance/deferment and pathways to loan forgivenessReduce your interest rate to save money, shorten or lengthen your repayment term, and switch lenders
Key costsExtending your repayment would allow more interest to accrue over time, and it could reset the progress you’ve made toward certain loan forgiveness programsYielding the protections (like income-driven repayment) on any federal loans you elect to refinance

So, no, you can’t transfer private student loans to federal loans. You could either consolidate your federal loans into a direct consolidation loan with the Department of Education, or you could consolidate your federal and private loans via refinancing.

The best alternative to consolidating private student loans to federal debt

If you were hoping to consolidate private student loans to federal, consider the next best option: Finding a private lender whose product mimics what you like about federal loans.

No private lender will match every aspect of a federal loan. You won’t find subsidized loans (where some of the interest is paid for you), student loan forgiveness or the ability to switch repayment plans for free and at a moment’s notice. Those options only come from Uncle Sam.

However, there are plenty of federal loan-like features available at banks, credit unions and online lenders, including:

  • Fixed interest rates: Your rate will stay the same for the life of the loan
  • Six-month grace period: Smaller payments or no payment for six months after you leave school
  • In-school deferment: Smaller payments or no payment while you’re in school, usually at least half time
  • Autopay rate reductions: Often a 0.25% discount on your interest in exchange for setting up automatic payments
  • Economic hardship forbearance: Possible pause on repayment if you suffer a hardship such as losing your job
  • Tax-deductible student loan interest: As with federal loans, you can write off the interest paid on your student loan

You might even find an income-driven option in the private marketplace, setting your payment at a fixed percentage of your disposable income. The Rhode Island Student Loan Authority and industry major SoFi make a form of income-driven repayment available to its borrowers — but only in cases of financial hardship.

What to know about student loan refinancing

Because student loan refinancing allows you to potentially lower your interest rate, the eligibility requirements aren’t forgiving.

Typically, you need good-to-excellent credit and a stable source of income — or a cosigner who enjoys both. It also helps to have made full and prompt payments on your loans.

Even if your application is strong enough to gain approval, it might not qualify you for the low end of lenders’ advertised interest-rate ranges. If you need a credit score of 650 to be eligible at Earnest, for example, you’ll likely need a score 100 or more points higher to access the best of its rate offerings.

A lower interest rate makes all the difference. Say you currently have a 9.00% rate on $20,000 worth of private student loans to be repaid over the next decade. Refinancing that five-figure debt to a 5.00% rate would save you nearly $5,000 in interest over 10 years, according to our student loan refinancing calculator.

Still, a reduced rate isn’t the only factor that should nudge you toward refinancing — especially if you’re privatizing your federal loan debt, too. Refinancing is irreversible and would strip your federal debt of its government-exclusive protections.

On the other hand, note some of the advantages a refinanced loan might have over federal debt, such as:

  • Option to apply with a creditworthy cosigner
  • Ability to choose fixed, variable and hybrid interest rates
  • Access to a wider choice of repayment terms, often between five and 20 years

Consider whether student loan refinancing is right for you

Not being able to transfer private student loans to federal debt shouldn’t feel like the end of the world.

After all, at least you retain the option to transition your debt in the other direction — moving your federal (and private) loans to a bank, credit union or online lender that offers low rates or other attractive terms.

While not suitable for every borrower, student loan refinancing gives you the power to press reset and charge forward on your repayment. To gauge its usefulness for your situation, explore the pros and cons of refinancing.

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.

Andrew Pentis
Andrew Pentis |

Andrew Pentis is a writer at MagnifyMoney. You can email Andrew here

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