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Student Loans vs. Mortgages: Which Weigh Heaviest?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Student loan debt has mushroomed dramatically over the last two decades. The total amount of outstanding student debt just passed $1.5 trillion earlier this year, putting it second only to mortgages as the type of loan on which Americans owe the most.

The amount of average student debt per person has also exploded, with a substantial number of borrowers owing mortgage-like sums above $100,000, according to a recent student debt study from MagnifyMoney parent company LendingTree.

But, as the study also noted, this student loan burden isn’t spread evenly across the country.

“Student loan debt varies pretty widely between metros,” said LendingTree senior research analyst Kali McFadden. “With student loan balances shooting up, we wanted to know how these types of debt stacked up against mortgages for people who carry both.”

To find out, we compared student debt to mortgage debt, using borrower data from the 50 biggest metros. Specifically, we wanted to identify cities where borrowers’ student loans are more likely to rival — or even surpass — their mortgages.

Key takeaways:

  • Across all 50 metro areas surveyed, 5.7% of borrowers have a larger balance on their student loans than on their mortgage. The average student loan balance across these cities was $18,435.
  • In just 6 of the 50 metros we reviewed, more than 10% of borrowers carry a larger debt load on their student loans than on their mortgage. The Rust Belt and the South regions dominate the top of this list.
  • A whopping 12.6% of borrowers in Pittsburgh owe more for their educations than they do for their homes. Rounding up the top three are Buffalo, N.Y. (12.2% owe more on student loans) and Cleveland (11.7%).
  • The West Coast occupies the other end of the spectrum. In both Seattle and Sacramento, California, just 1.4% of borrowers owe more in student loans than on their mortgages. Los Angeles and San Diego are tied for third place, at 1.6%.

The 11 cities where student loan debt exceeds mortgage debt

The cities with the highest student loan debt compared to mortgage debt (looking only at borrowers that hold both types of loans) aren’t necessarily just the ones with the cheapest real estate, and therefore the lowest mortgages.

“Clearly, property values pay a part in the ratio of student loan to mortgage debt … [however] we do see that higher student loan balances are a factor where more people owe more for their educations than they do for their houses,” said McFadden.

Of course, the blend of these two influences — heavy school debt and low home prices — is different for each city. However, when student debt balances are high compared to mortgage debt, it does suggest a tough environment for student loan borrowers.

Here’s a look at these top-ranking metro areas.

1. Pittsburgh

People who owe more on student debt than mortgage debt: 12.6%

Pittsburgh tops our list, and for good reason — 1 in 8 borrowers owes more on their student loans than on their mortgage. Specifically, the median ratio of student debt to mortgage debt is 22.3%.

Here, the culprit could be the low median home price of $125,000, as reported by Kiplinger — tied for the lowest of the 50 metro areas we compared. This likely results in lower mortgage balances for Pittsburgh relative to the median student loan balance of $18,927.

2. Buffalo, N.Y.

People who owe more on student debt than mortgage debt: 12.2%

Buffalo joins Pittsburgh at the bottom of the median home-price rankings of the metro areas covered in this study, at $125,000. These borrowers are likely to owe less on their home and also have below-average student debt, at a median balance at $17,256.

It’s no surprise, then, to see that a typical Buffalo borrower’s student loan balance is equal to 21.9% of their mortgage debt.

3. Cleveland

People who owe more on student debt than mortgage debt: 11.7%

Cleveland borrowers have a median student loan balance of $18,743, compared to an average home price of $135,000, according to Kiplinger. With above-average student loan balances and lower home prices, a typical Cleveland borrower’s student loan balance is nearly a quarter (23.2%) of their mortgage debt.

4. Memphis, Tenn.

People who owe more on student debt than mortgage debt: 11.0%

Borrowers in Memphis have the highest student loan balances relative to mortgage debt in any city we studied. In fact, the median $18,866 student loan balance is equal to 24.2% the median mortgage debt. Memphis is also among the cities with lower median home prices, at $137,000.

5. Birmingham, Ala. (tie)

People who owe more on student debt than mortgage debt: 10.2%

One of the main factors putting Birmingham at the top of this list is the high average student loan balance. A typical borrower in this metro owes $20,679, the fifth-highest median student loan balance among any of the cities we surveyed.

This amount is equal to 21.8% of the median mortgage debt balance in Birmingham, where the median home price is $131,000.

5. Detroit (tie)

People who owe more on student debt than mortgage debt: 10.2%

Detroit and Birmingham have the same percentage of borrowers who owe more on student loans than they do on their mortgages. However, borrowers in Detroit have a lower ratio of student debt to mortgage debt, at 19.9%.

This reflects both the lower student loan balances in this city, with the median at $18,552, as well as higher home prices (the median is $145,000, per Kiplinger).

7. Atlanta (tie)

People who owe more on student debt than mortgage debt: 9.5%

Atlanta tied with Oklahoma City for the No. 7 spot, due largely to borrowers with some of the highest student loan balances.

The city’s median student loan balance of $22,232 is second only to Washington, D.C. This high level of student debt is due largely to loftier levels of educational attainment among Atlanta residents.

These large student debt loads are high even when compared to Atlanta’s median home price of $190,000. For a typical borrower here, their student debt is about one-fifth (19.6%) of the balance on their mortgage.

7. Oklahoma City (tie)

People who owe more on student debt than mortgage debt: 9.5%

Oklahoma City residents have below-average student debt, with the median balance at $17,278. Overall, this median student debt is equal to 18.4% of the local median mortgage debt.

9. St. Louis

People who owe more on student debt than mortgage debt: 8.9%

The local median student loan balance in St. Louis is a relatively large $19,229, while the local median home price is $155,000, according to Kiplinger. Overall, a typical St. Louis borrower’s student debt is equal to 18.5% of their mortgage debt.

10. New Orleans (tie)

People who owe more on student debt than mortgage debt: 8.3%

The median student debt among New Orleans borrowers is $18,592, about on par with the average across all cities. This debt is equal to 19.0% of the median balance on borrowers’ mortgages.

10. San Antonio (tie)

People who owe more on student debt than mortgage debt: 8.3%

Borrowers in San Antonio have some of the smallest student loan balances overall among these cities in these rankings, with the median at $17,089. However, that balance is still 17.1% of the median mortgage debt for local borrowers who have both.

Cities where student debt is lowest, compared to mortgage debt

A look at the cities where student loan balances are smallest, compared to mortgage debt, also reveals some insights.

Not surprisingly, the list includes cities with some of the highest home prices in the nation. San Francisco, for example, has a median home price of $750,000. Los Angeles homes come in at $605,000, while San Diego’s median home prices is $530,000, and Seattle’s is $417,000, reports Kiplinger.

These significantly higher home prices mean that many local borrowers are taking out mortgages with much higher balances that overshadow their student debt.

But while higher home prices result in more mortgage debt, the high cost of living doesn’t necessarily affect how much local residents borrow in student loans.

In fact, borrowers in these 10 cities also tended to have lower median student loan balances overall. Providence, R.I., for example, had the lowest median student loan balance of the group, at $15,025, and Seattle and San Diego had median student loan balances of $16,003 and $15,984, respectively.

Dealing with high student loan balances

Mortgage debt is still larger than student debt for most Americans, both at the national and individual level. However, the results of this study show that in some places, a relatively large proportion of people face student debt that outweighs even their mortgage, which can be a significant financial burden.

No matter how your own mortgage debt compares to your student loans, you can benefit from taking steps to more effectively manage your school debt. It could be wise to pay off student loans faster, if you can afford to do so. You can also explore options such as student loan refinancing or pursuing student loan forgiveness.

On the other hand, it’s encouraging to see that many borrowers are buying homes while repaying student debt — even when they have enough student loans to eclipse their housing debt. While rising student loans are slowing the financial progress of many, it’s not stopping them in their tracks.

Methodology

We looked a sample of over 90,000 anonymized users who logged into My LendingTree (LendingTree is our parent company) in July 2018 and who had both active student loan balances of any size and mortgage balances greater or equal to $10,000 to calculate the ratio of student to mortgage balances. Median student loan balances were calculated using a sample of users who logged into My LendingTree during Q1 2018, and were originally reported here. These results were then aggregated with the 100 largest metropolitan statistical areas by population. My LendingTree has more than 9 million users. Credit report information is provided by TransUnion.

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.

Elyssa Kirkham
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Elyssa Kirkham is a writer at MagnifyMoney. You can email Elyssa here

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How to Save on Back-to-School Shopping

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Parents often revel in the calm and quiet that comes when kids head back to school, but they aren’t likely to enjoy the excess spending that also accompanies the back-to-school season. According to the National Retail Federation, parents will set a record in 2019, spending an average of $696.70 per household on children in elementary school through high school.

 

“It was interesting to see the across-the-board increases in spending levels,” said Mark Mathews, vice president for research development and industry analysis with the NRF. “Elevated levels of consumer sentiment, healthy household balance sheets, low inflation and recent wage gains all seem to be contributing to a confident consumer who is willing to spend money on back-to-school supplies.”

If you’re planning a trip to the store before classes start, there are a few ways to curb the spending and save some bucks.

Plan ahead

No parent should set foot out the door for back-to-school shopping without first taking stock of what they already have. Plenty of old supplies from previous years might still be usable, especially arts and crafts items like crayons, pencils and pens, as well as more expensive things like backpacks, lunch boxes and calculators.

Crossing a few items off your list is a good first step when it comes to saving, but learning how to budget is also important. It’s tempting to run down the back-to-school aisle and grab every colorful notebook and snazzy pencil case in sight, but it doesn’t make a lot of financial sense. Create a realistic budget based on the items you actually need, and try your best to stick to it. If possible, do most of your shopping online, since it’s easier to keep a running tally of how much you’re spending as you shop.

Be smart about sales

Although you’re bound to run into many back-to-school sales this time of year, you don’t need to buy 12 notebooks just because they’re cheaper right now. In fact, you shouldn’t assume the sales price is the best price at all, said consumer savings expert Andrea Woroch. Instead, always comparison shop.

“Run a quick Google search online or on your phone to see if another store is selling the same or a similar item for less,” she said. “Most big box stores will price match, so you won’t even have to drive to another store to get the better deal.” For example, Target, Staples and Walmart all have price matching policies.

Clip coupons and shop discount stores

Coupons have definitely made a digital comeback, with countless apps and websites dedicated to listing all your options in one place. “Spending a few minutes looking for coupons can help you get a better discount,” Woroch said. “Use apps like CouponSherpa, for instance. Or, use the Honey browser tool, which automatically searches and applies relevant coupons to your online order.”

Many stores also offer discounts to valued customers who sign up for their rewards program, like Walgreens and CVS, while craft stores like Michaels regularly offer discounts. Don’t knock purchasing basics like paper and writing supplies from the Dollar Tree, either — you might be surprised by what you find, and those types of items are often the same quality wherever you buy them.

Tax advantage of tax-free holidays

On select dates throughout the year, different states offer state sales tax holidays, or days where you can purchase items without having to pay sales tax on them. You can find a full list of the 2019 state sales tax holidays here, but some upcoming ones include:

  • August 18-24: Connecticut, clothing and footwear
  • August 17-18: Massachusetts, specific items costing less than $2,500 per item

Split bulk purchases

You can usually save money by buying certain items — like construction paper, pens, pencils and folders — in bulk, but you can save even more by splitting those bulk items with other families. Not only is this a great way to share savings, Woroch said, but you can earn rewards faster by charging everything on your card and then having the families pay you back.

Redeem your rewards

If you have a cash back credit card, now’s the time to use it. “Most credit cards give you the best redemption value when you opt for statement credit or have the cash rewards deposited into your bank,” Woroch said. “You can set this money aside for back-to-school shopping.”

Alternatively, Woroch suggested checking to see if your particular card allows you to redeem points for gift cards to retailers where you plan to shop.

Use discounted gift cards

Besides redeeming credit card points for retailer gift cards, you can also scour the web for cheap gift cards online. Planning a trip to Target? Scan websites like Raise, Cardpool and CardCash first. These sites buy and sell unused gift cards at a discount, meaning you can save on purchases you were planning to make anyway.

Consider having your kids contribute

Depending on your child’s age, back-to-school shopping might be the perfect time to start having them contribute to their own goods, especially if they earn an allowance or have a job. Talking to your kids about money at a young age — whether about budgeting, saving or spending — will help them develop solid money habits that will pay off in the future.

Parents already seem to be catching on to this idea. “It was surprising to see how much of their own money kids are contributing towards the back-to-school bills,” Mathews said. “Teens and pre-teens will be spending $63 of their own money, which works out to $1.5 billion overall. This is significantly higher than the levels we saw a decade ago.”

Although the news about increased spending on back-to-school supplies may be alarming, these days there are more ways than ever to save. A little ingenuity, resourcefulness and research can go a long way.

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.

Cheryl Lock
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Cheryl Lock is a writer at MagnifyMoney. You can email Cheryl at [email protected]

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Survey: Most Americans Have Raided Their Retirement Savings

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Successfully saving for retirement requires dedication and self-restraint, but more than half the country admits to robbing their future selves in order to satisfy today’s spending needs, according to a new survey by MagnifyMoney. While the economic pressures bearing down on workers today make their actions understandable, the hard truth is that many Americans are turning an already-difficult task that much harder by tapping into their retirement savings early.

Key Findings

  • Approximately 52% of respondents admit to tapping their retirement savings account early for a purpose other than retiring: 23% have done so to pay off debt, 17% for a down payment on a home, 11% for college tuition, 9% for medical expenses, and 3% for some other reason.
  • About 29% say there are some scenarios where it is a good idea to withdraw money early from a retirement savings account.
  • Around 60% of respondents do not know exactly how much they have saved for retirement. Just 40% know the exact amount, while 45% have a rough idea, and 15% have no clue.
  • Almost 25% are unhappy with their retirement savings. 47% are happy with the amount saved, and about 28% are neither happy nor unhappy.
  • Finally, 27% have never thought about how much money they’ll need in retirement.

Why are Americans tapping their retirement savings early?

The two main reasons respondents cited for withdrawing money from their retirement savings are as American as apple pie: home ownership and personal debt. According to the survey, 23% of those making an early withdrawal did so to help pay down non-medical debt, while 17% needed the money for a down payment on a home.

Although the housing market appears to be cooling off compared to just a few years ago, a down payment on a home still requires a significant chunk of change — experts recommend a down payment equaling 20% of the total mortgage to optimize your mortgage payments.

Personal debt, from credit cards to student loans, remains a fixture of everyday economic reality for millions of Americans. In other words, the stressors that cause workers to raid their retirement funds don’t look like they will decrease appreciably in the foreseeable future.

Which Americans are withdrawing money the most?

Breaking down the demographics, older savers are less likely to withdraw money from their retirement fund than younger savers. 54% of millennial savers say they’ve taken an early withdrawal from a retirement savings account, compared with 50% of Gen Xers and 43% of baby boomers. This stands to reason considering that many millennials have now entered the stage of life where they are getting mortgages, starting families and taking on bigger financial obligations while also being decades away from the traditional retirement age. Millennials are also more likely to say that raiding your retirement fund is justified under certain circumstances, as seen in the chart below:

Just one of many bad retirement savings habits

Tapping into retirement funds — whether an employer-sponsored 401(k) or a traditional IRA — before the appropriate age almost always comes with a financial penalty in the form of additional taxes and fees. What is more, you’re diminishing the principle that fuels the compound interest you need to meet your retirement savings goals.

Unfortunately the survey reveals early withdrawals are just one of the many bad habits Americans engage in when it comes to retirement savings. This list of less-than-ideal practices includes:

  • 35% of Americans are not currently saving for retirement. Of those who are, 37% started saving at age 30 or above, and 12% started saving when they were older than 40.
  • 60% of Americans do not know exactly how much they have saved for retirement. Just 40% know the exact amount, while 45% have a rough idea and 15% have no clue.
  • Nearly 1 in 5 Americans don’t contribute enough to their employer-sponsored retirement account to get the maximum company match. Maximizing a company match is one of  your best ways to maximize your retirement savings. Among those with an employer-sponsored retirement savings plan, just 17% of respondents contribute 10% or more of their take-home pay. Almost 5% contribute nothing at all, and nearly 6% are unclear about how much they contribute.

  • Approximately 42% of respondents have made the mistake of withdrawing their entire balance from an employer-sponsored retirement plan when changing jobs without rolling it over – and nearly 15% have done so more than once. A little more than 47% of millennials admit to this faux pas.

The most damning finding of all is that 27% of those surveyed have never thought about how much they’ll need in retirement. And while “ignorance is bliss” may hold true when it comes to some things in life, this expression should not apply to your retirement plans.

Methodology

MagnifyMoney by LendingTree commissioned Qualtrics to conduct an online survey of 1,029 Americans, with the sample base proportioned to represent the general population. The survey was fielded June 24-27, 2019.

Generations are defined as:

  • Millennials are ages 22-37
  • Generation Xers are ages 38-53
  • Baby boomers are ages 54-72

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.

James Ellis
James Ellis |

James Ellis is a writer at MagnifyMoney. You can email James here