2019’s Cities with the Most & Least Student Debt
Post-college debts represent one of the biggest financial burdens to Americans. In fact, student loans make up the second highest form of household debt after mortgages, totaling $1.5 trillion.
But how burdensome are the individual loans? According to one study, the share of students graduating with $50,000 or more in student loan debt has more than tripled since the year 2000. High balances combined with a payoff timeline that lasts into middle age force many graduates to significantly delay or forego other financial goals such as saving for retirement or buying a home.
That’s the unfortunate reality for many student-loan borrowers who cannot keep up with their payments. According to Forbes, 40% of borrowers may default on their student loans by 2023. Surprisingly, though, students with smaller debts are more likely to default than those with larger ones.
Student-loan debts are more unsustainable in some places than others. WalletHub therefore compared the median student-loan balance against the median earnings of adults aged 25 and older with a bachelor’s degree in each of 2,510 U.S. cities to determine where Americans are most overleveraged on their college-related debts. Read on for our findings, expert advice from a panel of researchers and a full description of our methodology.
If you’re considering borrowing money for college or are in danger of defaulting, we advise using a Student Loan Calculator to determine an affordable payment amount and realistic payoff timeline. In addition, you can set up a free WalletHub account to ensure your timely payments are reflected accurately in your credit report and score. Maintaining “excellent” credit will help you minimize unnecessary debt costs and pay your student loans in the fastest time possible.
Main Findings
Student-Loan Debts by City
| Percentile Rank* | City | Median Student Debt | Median Earnings of Bachelor’s Degree Holders** | Ratio of Student Debt to Median Earnings of Bachelor’s Degree Holders** |
|---|---|---|---|---|
Ask the Experts
With tuition rates and other college costs rising every year, many parents struggle to finance their children’s college education. As a result, many students take on debt or forgo post-secondary education altogether. For advice on how to afford college and insight on the impact of student loans on the economy, we asked a panel of experts to share their thoughts on the following key questions:
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What are the most common mistakes people make when financing their post-secondary education?
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What should people consider when applying for student loans?
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What steps should someone take if they find they cannot afford their student-loan payments?
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What impact, if any, does the large and growing amount of outstanding student-loan debt have on the economy as a whole?
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Brad Lindberg
Assistant Vice President for Enrollment and Former Director of Student Financial Aid at Grinnell College
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Robert Kelchen
Assistant Professor of Higher Education, Department of Education Leadership Management and Policy, Seton Hall University
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Paul F. Goebel
CPFM – Director, University of North Texas Student Money Management Center
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Burton Williams
Associate VP for Advancement, Associate Dean, College of Business, Associate Dean, College of Education, Lipscomb University
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Tim Wolfe
Director of Financial Aid & Scholarships, University of Nevada
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Don Hossler
Senior Scholar, Center for Enrollment Research, Policy, and Practice, Rossier School of Education, University of Southern California
Brad Lindberg
Robert Kelchen
Paul F. Goebel
Burton Williams
Tim Wolfe
Don Hossler
Methodology
In order to determine the cities where residents are most overleveraged on their student-loan debts, WalletHub divided the median student-loan balance (based on TransUnion data from October 2018) by the median earnings of adults aged 25 and older with a bachelor’s degree in each of 2,510 U.S. cities. Our sample considers only the city proper in each case and excludes cities in the surrounding metro area.
We then assigned 100 points to the city with the highest ratio of student debt to earnings and 0 points to the city with the lowest. For the cities in between, we linearly extrapolated between the two extremes.
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Student Loan Calculator
Before overextending yourself, it’s important to leverage a Student Loan Calculator, such as the one below, to help you determine your monthly student-loan payment and the time it would take to pay off your debt.
Loan Information
Results
| Month | Interest | Ending Balance |
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Tips
Based on your monthly payment, you should consider this loan only if your annual income is going to be more than at graduation. This estimate assumes that 10% of your gross monthly income will be devoted to repaying your student loan.
Adding extra to your monthly payment would reduce your principal balance faster since more money would be left over after finance charges. Having a lower balance sooner in turn reduces your interest payments, as your interest rate would apply to a smaller amount and compounding would be diminished. In short, you’ll save a lot of money in the long run and get out of debt much sooner – if you can afford to scrimp now. But we know that adding extra to your monthly bills could be a big deal!
Making smaller payments more frequently is a great way to build discipline and improve budgeting efforts. It will also save you money on interest and help you get out of debt sooner. How? By making more than one payment per month, you would reduce your average daily balance – the amount your APR applies to. You would therefore pay less in interest each month. With lower monthly costs, more of your budgeted monthly payment will apply to your principal balance and you’ll be back above water ahead of schedule.
The longer your loan term is, the more you’ll pay in interest. That’s because interest compounds over time, which means a given month’s finance charges are the result of applying your account’s APR to the sum of your principal balance and the interest you were charged the month before (and the month before that, etc.). In order to use this saving strategy, however, one must be able to afford higher monthly payments. You’ll save on interest in the long run; fewer monthly payments simply demand bigger monthly contributions.