Everything You Need to Know About Credit Risk

What Is Credit Risk and How Does It Affect Investors?

Credit risk measures the likelihood of incurring a loss if one party to a financial transaction fails to follow through on their obligations.

Credit risk often comes up when in relation lending and how likely an individual or business entity is to pay back money they’ve borrowed. Banks and lenders assume a certain amount of risk when making loans, based on the credit profile of the borrower. If you’ve ever taken out a loan or line of credit, your credit risk was likely one factor that influenced the interest rate that you paid.

Understanding how to interpret this concept is important for investors, as it can affect returns for certain types of fixed-income investments. Here’s a primer on credit risk and how it works.

Understanding Credit Risk

How you define credit risk depends on the circumstances in which it’s being measured.

For instance, when banks or lenders make loans there’s an assumption that the loan will be repaid. Credit risk accounts for the possibility that the borrower will fail to repay what’s owed, leaving the lender with interrupted cash flow, costs to recover the funds, and ultimately a financial loss.

This same principle operates when a vendor extends a line of credit to a business. They’re taking a gamble on the business paying them back on schedule for the services or products they’ve provided.

Credit risk is also linked to other types of risk. For example, counterparty risk represents the probability that one party in an investment, credit or trading transaction will not fulfill their part of the bargain. This is also called default risk, as it measures the odds that a party to a financial transaction will default or fail to make required payments as scheduled.

In terms of investing, another credit risk definition applies when discussing bonds. A bond represents a form of debt. When an investor purchases a bond, they’re effectively lending their capital to the bond issuer for a set time period. During this time period, the bond issuer makes interest payments to the investor. Once the bond matures, the bond issuer pays back the investor’s original principal.

The investment is made in good faith, as the investor assumes the bond issuer will make interest payments and return their principal. But the bond issuer could default on their end of the deal — this is credit risk. Credit ratings help investors determine when a bond investment has a higher or lower level of credit risk.

The Five C’s of Credit

When measuring credit risk, it’s common to turn to the five C’s of credit. These are five factors used to evaluate how likely an individual or business is to follow through on their end of a financial contract.

The five C’s of credit are more often used in business lending than personal lending. If you’re getting a personal loan, line of credit or credit card, for example, lenders are more likely to consider your FICO credit scores. The FICO credit score range runs from 300 to 850, with 850 being the highest score you can achieve.

Recommended: What’s Considered a Bad Credit Score?

With that in mind, here’s how the five C’s break down.

Character

Character is an assessment of a borrower’s background. This can include their level of education, experience operating a business and overall reputation. Lenders may also look at someone’s personal credit history to gauge their character and measure credit risk when granting business loans.

Cash Flow

Cash flow represents the movement of cash in and out of a business. In lending situations, cash flow is often synonymous with the ability to repay what you borrow. Lenders can use business revenues, expenses, and cash flow to determine credit risk.

Capital

Capital is a measure of how much skin you have in the game, so to speak, in terms of how much money you’ve personally invested in your business. The more money you have tied up in a business venture, the less likely you may be to default on a loan and jeopardize the business. That’s a positive in terms of assigning credit risk.

Conditions

Conditions refers to the business’ overall market. For example, lenders will look at how much demand there is for the products or services your business offers as well as your competitors. Your experience with operating this type of business can also come into play.

Collateral

Collateral is used to mitigate credit risk by requiring you to offer some type of security against a loan. For example, if you’re getting a loan to buy equipment the equipment itself could serve as collateral. If you default on the loan, the lender can repossess the equipment and sell it to try and recoup some of its losses.

Credit Risk and Interest Rates

Credit risk has a link to interest rates, both in terms of the rates you might pay to borrow and the rates you might earn from an investment. The relationship is inverse on both sides.

For example, in lending a higher credit score can translate to lower credit risk and therefore, lower interest rates. With investing, a lower credit score could result in a higher credit risk and higher interest rates.

Why This Matters to Borrowers

Credit risk matters to borrowers because it can directly affect what you pay for loans. The lower your credit score, the riskier you may appear in the eyes of lenders. To offset this risk, the lender may charge a higher interest rate.

When that interest is amortized, you typically end up paying more toward the interest versus the principal early on the life of the loan. This allows the lender to collect the bulk of the interest upfront to compensate for the risk that you default down the line.

In that sense, higher interest rates are an insurance policy of sorts for the lender when the perceived credit risk is higher. But what it ultimately means for you is that borrowing money is more expensive.

Why This Matters to Investors

Credit risk and interest rates also matter to investors when trading bonds. Bonds with better credit ratings are likely to have less credit risk, as there’s less potential for the bond issuer to default. But they may carry lower interest rates as a result. On the other hand, bond issuers with lower credit ratings may offer higher interest rates to incentivize investors to purchase them.

It’s also possible to create credit risk for yourself if you’re trading on margin. Margin trading involves borrowing money from a brokerage to invest. So here’s how margin accounts work:

•   You deposit a minimum margin amount ($2,000 under FINRA rules, though some brokerages may require more)

•   Your brokerage allows you to borrow up to 50% of the purchase price of margin securities (this is known as initial margin)

•   Your brokerage requires you to observe a maintenance margin level going forward

Credit risk exists because you’re using borrowed money to invest. If your investments don’t perform as expected, you could lose money, and you’d still be obligated to repay the brokerage. This can happen if your account balance drops below the maintenance margin level and you become subject to a margin call. If you’re subject to a margin call you generally won’t be able to make additional investments until you’ve deposited more funds into your account.

Recommended: What You Need to Know About Margin Balance

How to Assess Credit Risk

The method for assessing credit risk depends on the situation in which it’s being measured. As already mentioned with business lending, lenders rely on the five C’s of credit to gauge a borrower’s credit risk. These five factors, along with personal and business credit score and their overall financial position can help determine how likely a borrower is to keep up with their debt obligations.

In investment settings, particularly with bonds, investors can use official credit ratings as a guide. Moody’s , for example, is one of the best-known issuers of bond credit ratings. Altogether there are nine credit rating agencies registered as nationally recognized statistical ratings organizations (NRSROs) with the Securities and Exchange Commission (SEC).

It’s important to remember, however, that credit ratings alone are not a foolproof indicator of risk. You must also evaluate the specifics of the investment itself as well as your own personal risk tolerance to decide if a particular bond is a worthwhile investment. This is all part of performing due diligence, which is important for managing all types of risk, including credit risk.

How Credit Risk Applies to You

This depends on how you invest or borrow money. If you own bonds, for example, you’re assuming a certain amount of credit risk based on the quality of the bonds in your portfolio. A bond with a AAA credit rating, for example, is less of a credit risk compared to a bond with C rating.

Choosing to invest in junk bonds, which carry a higher degree of credit risk, could prove profitable if the bond issuers make good on interest payments. But in exchange, you’re shouldering a greater amount of risk since the bond has a lower credit rating. So understanding your personal risk tolerance is key when choosing investments.

Credit risk also plays a part in borrowing decisions. If you have a good credit score, then getting a loan or line of credit at a lower interest rate may be relatively easy. On the other hand, if you have fair or bad credit that could mean paying higher interest rates. Taking steps to improve your credit score could help you to qualify for more favorable interest rates.

Start Investing With SoFi Today

Understanding a basic credit risk definition is important if you plan to invest in bonds or other fixed-income investments. If you’re ready to start building a portfolio, online stock trading with SoFi can help.

You can use SoFi’s investment app to trade stocks, exchange-traded funds (ETFs), or invest in IPOs. Or if you prefer a more hands-off approach, you can use automated investing to build wealth for retirement in a traditional, Roth or SEP IRA. It takes just a few minutes to open your account online.

Photo credit: iStock/William_Potter


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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What Are Actively Managed ETFs?

Exchange-traded funds or ETFs generally fall into two categories: actively managed and passively managed. Actively managed ETFs, a growing category in the ETF market, are overseen by a portfolio manager.

The goal of an active manager is to outperform a certain market index, which they use as a benchmark for their portfolio. By contrast, passive ETFs simply mirror the performance of a particular market index; they don’t aim to outperform it.

There are two types of actively managed ETFs: transparent and non-transparent. Active non-transparent ETFs are a new option that was introduced in 2019; these funds are sometimes called ANTs.

Keep reading to learn more about the distinction among different ETFs, the pros and cons, and whether investing in actively managed ETFs makes sense for you.

How Actively Managed ETFs Work

Actively managed ETFs employ a portfolio manager and typically a team of analysts who do market research and make decisions to buy, hold, or sell the assets held within the fund. Most ETFs are designed to reflect a certain market sector or niche. They typically measure their success by using a known index as their benchmark.

For example, a technology ETF would be invested in tech companies and potentially use the Nasdaq composite index as a benchmark to measure its performance.

Despite the fact that passive (or index) ETFs strategies predominate in the industry — index ETFs represent roughly 98% of the ETF market — active strategies are gaining ground. That said, it has been historically quite difficult for active fund managers to beat their benchmarks.

Actively managed transparent and non-transparent ETFs are similar to traditional (i.e. index) ETFs. You can trade them on stock exchanges throughout the day, and investors can buy and sell in amounts as small as a single share. Broad availability and low investment minimums are an advantage that ANTs (and ETFs more generally) boast over many mutual funds.

Actively managed transparent ETFs

When exchange-traded funds first appeared some 20 years ago, only passive ETFs were allowed by the Securities and Exchange Commission (SEC). In 2008, though, the SEC introduced a streamlined approval process that allowed for a type of actively managed ETF called transparent ETFs. These funds were required to disclose their holdings on a daily basis, similar to passive ETFs. Investors would then know exactly which securities were being traded within the fund.

Many active fund managers, however, didn’t want to reveal their trading strategies on a daily basis — which is one reason why there have been fewer actively managed ETFs vs. index ETFs to date.

Non-transparent or semi-transparent ETFs

In 2019, another rule change from the SEC permitted an active ETF structure that would be partially instead of fully transparent. Under this new rule, an active ETF manager would be allowed to either reveal the constituents of their portfolio less often (e.g. quarterly, like actively managed mutual funds), or communicate their holdings more obliquely, by using various accounting methods like proxy securities or weightings.

The SEC ruling opened up a new channel for active managers, and since then the number of actively managed ETFs has grown. According to Barron’s, in just the past two years the number of actively managed ETFs has more than doubled. Nearly 60% of the ETFs launched in 2020 and 2021 were actively managed — more than all the actively managed ETFs established in the past decade.

From an investor’s perspective, the most noticeable difference between these two kinds of actively managed ETFs — transparent vs. non-transparent — would be the frequency with which these funds disclose their holdings. Both types of ETFs trade on exchanges at prices that change constantly during trading days; both rely on a team of managers to select and trade securities.

Index ETFs vs Active ETFs

So what is the difference between index ETFs and actively managed ETFs? It’s essentially the same difference that exists between index mutual funds and actively managed mutual funds.

How do index ETFs work?

Index ETFs, also called passive ETFs, track a specific market index. A market index is a compilation of securities that represent a certain sector of the market; indexes (or indices) are frequently used to gauge the health of certain industries, or as broader economic indicators. There are thousands of indexes that represent the equity markets alone, and Well-known indexes include the S&P 500®, an index of 500 of the biggest U.S. companies by market capitalization, as well as the Russell 2000, an index of small- to mid-cap companies, and many more.

Because index ETFs simply track a market sector via its index, there is no need for an active, hands-on manager. As a result the cost of these funds is typically lower than actively managed ETFs, and many active and passive mutual funds as well.

How do actively managed ETFs work?

Actively managed ETFs, often called active ETFs, rely on a portfolio manager and a team of analysts to invest in companies that also reflect a certain market sector. But these funds are not tied to the securities in any given index. The ETF manager invests in their own selection of securities, but often uses an index as a benchmark to gauge the success of their strategies.

Transparent actively managed ETFs must reveal their holdings each day.

Actively managed non-transparent ETFs, or ANTs, aren’t required to disclose their holdings on a daily basis. This protects asset managers’ strategies from potential “front-runners” — traders or portfolio managers that try to anticipate their trades. By and large, the cost of these funds is lower than transparent ETFs, and also lower than actively managed mutual funds.

Mutual Funds vs Actively Managed ETFs

All mutual funds and exchange-traded funds are examples of pooled investment strategies, where the fund bundles together a portfolio of securities to offer investors greater diversification than they could achieve on their own. In addition to the potential benefits of diversification, which may mitigate some risk factors, the pooled fund concept also creates economies of scale which helps fund managers keep transaction costs low.

That said, the structure or wrapper of mutual funds vs. passive and active ETFs, is quite different.

Fund structure

Although a mutual fund invests directly in securities, ETFs do not. With both active and passive ETFs, the fund creates and redeems shares on an in-kind basis. So when investors buy and sell ETF shares, the portfolio manager gives or receives a basket of securities from an authorized participant, or third party, which generates the ETF shares.

By comparison, mutual fund shares are fixed. You can’t create more of them based on demand. But you can with an ETF, thanks to the “in-kind” creation and redemption of shares. This means that ETF fund flows don’t create the same trading costs that might impact long-term investors in a mutual fund. And fund outflows don’t require the portfolio manager to sell appreciated positions, and thus minimize capital gains distributions to shareholders.

Pricing

The price of mutual fund shares is calculated once a day, at the end of the day, and is based on a fund’s net asset value (NAV). Investors who place a trade must wait until the NAV is calculated because most standard open-end mutual funds can only be bought and sold at their NAV.

ETFs, by contrast, are traded like stocks throughout the day. And because of the way ETF shares are created and redeemed, the NAV can vary, creating a wider or tighter bid-ask spread, depending on volume.

Fees

The expense ratio of mutual funds includes management fees, operational expenses, and 12b-1 fees. These 12b-1 fees are a type of marketing and distribution fee that don’t apply to ETFs, which trade on stock exchanges.

Thus the expense ratio for most ETFs, including actively managed ETFs, can be lower than mutual funds.

Pros and Cons of Actively Managed ETFs

As with any investment vehicle, these funds have their pros and cons.

Pros

Potentially for higher returns

One advantage of an actively managed ETF is the potential for gains that could exceed market returns. While very few investment management teams beat the market, those who do tend to produce outsize gains over a short period.

Greater flexibility and liquidity

Active ETFs could also provide greater flexibility amid market turbulence. When world events rattle financial markets, passive investors can’t do much other than go along for the ride.

A fund with active managers might be able to adjust to changing market conditions, however. Portfolio managers could be able to rebalance investments according to current trends, reducing losses, or even profiting from panics and selloffs.

Like passive ETFs, active funds also trade throughout the day (as opposed to some mutual funds who only have their price adjusted once daily), allowing investors the opportunity to do things like short shares of the fund or buy them on margin.

Cons

Higher expense ratios

One disadvantage of investing in an actively managed ETF is the potentially higher expense ratio. Active funds, whether ETFs or mutual funds, tend to have higher expense ratios. The costs associated with paying a professional or entire team of professionals combined with the fees that result from additional buying/selling of investments typically adds up to higher costs over time.

Each purchase or sale might come with a brokerage fee, especially if the securities are foreign-based. These costs exceed those of passive funds, resulting in higher expense ratios.

Performance factors

While active ETFs aim to provide higher returns, most of them don’t. It’s a widely known fact in the investment world that the majority of actively managed funds (as well as most individual investors) do not outperform the market over the long term.

So, while an active ETF may have the potential for greater returns, the risk of lower returns, or even losses, can also be greater. The chances of choosing an active fund that fails to outperform its benchmark are greater than the odds of choosing one that succeeds.

Bid-ask spread

The bid-ask spread of ETFs can vary, and while it’s more beneficial to invest in an ETF with a tighter bid-ask spread, that depends on market factors and the liquidity and trading volume of the fund. To minimize costs, it’s wise for investors to be aware of the bid-ask spread.

Investing in Actively Managed ETFs

Once an investor opens an account at their chosen brokerage, they can begin buying shares or fractional shares of actively managed ETFs.

Historically, brokerages have required investors to buy a minimum of one share of any security, so the minimum investment will most often be the current price of one share of the ETF plus any commissions and fees (many brokerages eliminated fees for buying or selling shares of domestic stocks and ETFs in 2019).

Some brokerages like SoFi Invest® now offer fractional shares, which allow for investors to purchase quantities of stock smaller than one share. This option may appeal to those looking to get started investing with a small amount of money.

It’s important to note that many ETFs pay dividends, which are payouts from the stocks held in the fund. Investors can choose to have their dividends deposited directly into their accounts as cash or automatically reinvested through a dividend reinvestment program (DRIP).

Investors with a long-term plan in mind might do well to take advantage of a DRIP, as it allows for gains to grow exponentially. For those only looking for income, DRIP might defeat the purpose of holding securities that yield dividends, however.

The Takeaway

Like mutual funds, exchange-traded funds or ETFs are considered pooled investments and generally fall into two categories: actively managed and passively managed. Actively managed ETFs, a growing category in the ETF market, are overseen by a portfolio manager. By contrast, passive ETFs simply mirror the performance of a particular market index; they don’t aim to outperform it.

Although actively managed ETFs make up only about 2% of the ETF universe, owing to regulatory changes in recent years this category has been growing. In fact there are now two types of actively managed ETFs: transparent and non-transparent. These funds offer investors the potential upside of active management, with the lower cost, tax-efficiency, and accessibility associated with ETFs. If you’re curious about actively managed ETFs, you can explore these products by opening an account with SoFi Invest®.

Learn more about investing with SoFi.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).
2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.
3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.
For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal. Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at [email protected] Please read the prospectus carefully prior to investing. Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Fund Fees
If you invest in Exchange Traded Funds (ETFs) through SoFi Invest (either by buying them yourself or via investing in SoFi Invest’s automated investments, formerly SoFi Wealth), these funds will have their own management fees. These fees are not paid directly by you, but rather by the fund itself. these fees do reduce the fund’s returns. Check out each fund’s prospectus for details. SoFi Invest does not receive sales commissions, 12b-1 fees, or other fees from ETFs for investing such funds on behalf of advisory clients, though if SoFi Invest creates its own funds, it could earn management fees there.

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When to Apply For Student Loans

When to Apply for Student Loans: Student Loan Deadlines

If you need a loan for college, you may be wondering whether a private student loan is a right choice for you. And, once you’ve made the decision to take out a student loan, you might want to know the differences between federal vs. private student loans and the deadlines associated with each.

Keep reading to learn all that information and more, so you can determine how and when to apply for student loans.

What Are Private Student Loans?

Private student loans are student loans that are offered by private lenders like banks or credit unions to help people pay for the costs associated with college. Similar to applying for an auto loan or mortgage, private student loans require a loan application and approval from the lender.

Depending on how much money you need for school, you can borrow a set amount from a private lender, but the amount they grant you ultimately depends on financial factors like your income, credit score, and the credit history of yourself and/or your co-signer (if applicable).

Unlike federal student loans with fixed interest rates and terms, the fees, repayment plans and interest rates for private student loans are set by the individual lender. Because of this, it’s important to “shop around” with private lenders until you find rates and terms that meet your financial needs.

Private student loans can help pay for tuition, books and supplies, transportation, fees. Using your student loan for housing or room and board expenses is also an option.

Recommended: Examining the Different Types of Student Loans

Should I Get a Student Loan?

The question of whether or not you should get a student loan is quite personal, and depends on your unique financial situation. In a nation where, in 2020, the average federal student loan debt per borrower was
$36,510
and the average private student loan debt per borrower is $54,921, taking out student loans is clearly a popular decision, but whether it’s the right decision is a different story.

For starters, when deciding whether it’s a good idea to take on college debt, it helps to ask whether a degree would be valued in your desired career.

In addition, there are a few other steps you can take to see if taking out a student loan will be worth it in the long run:

•   Look up the tuition, room, board and other costs of attending your desired college(s)

•   Create a budget to determine whether you can afford those costs after factoring in financial alternatives like scholarships, savings, family help, etc.

•   Use a student loan payment calculator to assess how much you can expect to pay in student loan debt when you graduate

•   Research salary levels in your desired field to see if the expected compensation will cover the cost of student loan payments over time

•   Assess how comfortably you can live at your expected income level, factoring in payment estimates from the student loan calculator

Once you’ve whittled down this information, you should have a better idea of whether taking out student loans is aligned with your long-term financial goals.

Recommended: How Do Student Loans Work? Guide to Student Loans

Other Steps to Take Before Securing Student Loans

Exploring ways to pay for school without taking on student loan debt is the first line of defense in college financial planning.

Since this isn’t always an option, you can minimize your reliance on loans by taking the following steps:

1.    Pull funds from a 529 college savings plan that you or your guardians may have set up for future college costs.

2.    Apply for scholarships and grants to offset the cost of tuition, room, board and other expenses.

3.    Fill out a Free Application for Federal Student Aid (FAFSA®) form to start the process of securing federal grants or federal student loans and use this money to cover as much of your tuition as possible.

4.    Opt for Federal Direct Subsidized Loans and Perkins Loans if you qualify.

5.    Offset your remaining college costs with unsubsidized federal loans.

6.    Opt out of PLUS loans if possible, as their interest rates and origination fees can be steep.

Finally, once you’ve exhausted the six options above, you can turn to a private student loan to cover any remaining costs associated with your college education.

When Is a Private Student Loan a Good Option?

There are some instances where a private student loan might be an option worth considering:

•   You’d like to cover the gap between your financial aid package or scholarship and your college expenses

•   You don’t have specific financial need requirements, but still want help subsidizing the cost of college

•   You’re looking to shop around with lenders to compare multiple loan options before selecting

•   You have strong credit or a cosigner with a strong credit score who could potentially help you qualify for a more competitive interest rate

•   You’re hoping to refinance your student loans in the future

When Should You Apply for a Private Student Loan?

Generally speaking, it’s wise to consider federal student loans first, but if you do decide a private student loan is the right option for you, you might be wondering when to apply for private loans.

You can apply for a private student loan directly from the desired lender’s website. It’s wise to apply after you’ve made your final school decision and once you know how much you need to borrow, so you won’t have to submit multiple student loan applications for all the schools you’re considering.

Private vs Federal Student Loans

When it comes to private vs. federal student loans, there are a few features and specifics that can help you make your decision:

Federal Student Loans

Private Student Loans

Funded by the federal government. Terms and conditions that are set by law. Funded by private student loans lenders like banks, credit unions, state agencies, or schools. Terms and conditions that are set by the lender
Payments aren’t due until after you graduate, leave school, or change your enrollment status to less than half-time. Payments can be due while you’re still in school, but deferment is sometimes possible.
The interest rate is fixed, based on the federal interest rate at the time, and often lower than private loans. The interest rate can be fixed or variable and is based on your individual financial circumstances.
No credit check is required to qualify, except for Direct PLUS Parent Loans. Established credit and/or a cosigner may be required to qualify.
Interest may be tax deductible. Interest may be tax deductible.
Loans can be consolidated. Loans cannot be consolidated, but can be refinanced.
You may be able to postpone or lower your payments. You need to check with your lender to see if you can postpone or lower your payments.
There are several different repayment plans. You need to check with your lender about repayment plans (if any).
There is no prepayment penalty fee. There could be a prepayment penalty fee.
You may be eligible for loan forgiveness if you work in public service. Many private lenders don’t offer loan forgiveness.

Deadlines for Federal Student Loans

To apply for federal student loans, students must fill out the FAFSA. There are three separate deadlines to consider:

1. The College or University Deadline

College deadlines for filling out the FAFSA will vary based on the school itself, but typically occur before the academic year begins. Each college will have its own FAFSA deadline, so visiting their financial aid website for this information is an important first step.

To fill out the 2022–23 FAFSA form itself, you can use your 2020 tax information to apply as early as October 1, 2021, and must submit the application by June 30, 2023.

2. The State Deadline

Your home state sets the second deadline when it comes to FAFSA applications. The deadlines are listed on the FAFSA form itself, or you can visit the state deadline list on StudentAid.gov.

3. The Federal Deadline

The U.S. Department of Education sets the final deadline on the list. This entity is in charge of FAFSA and their website will feature the 2022-2023 FAFSA application until June, 2023.

Federal student aid programs have a limited amount of funds available, so the sooner you can submit your application and avoid encroaching on the hard deadlines, the better.

Recommended: FAFSA 101: How to Complete the FAFSA

Deadlines for Private Student Loans

When applying for student loans from a private lender, there isn’t typically a set deadline in place. Still, this doesn’t necessarily mean you want to wait until the last minute, since you’ll need plenty of time before tuition, housing, and other fees are due to secure the funds from your student loan.

Many private student loan lenders can approve your application in a few minutes or less, but it can sometimes take up to two weeks for full approval. That’s why it’s smart to keep your eyes on your school’s payment deadlines and ensure your funds will be disbursed on time.

What Type of Private Student Loan May Be Right for You?

At the end of the day, there are ways to find the right private student loan for your unique circumstances, all it takes is some shopping around.

Considering the following factors can help you determine which type of private student loan makes the most sense for your personal situation:

•   Interest rates and fees

•   Payment flexibility

•   Lender credibility

•   Ability to refinance or release a co-signer

•   Whether the lender sells their loans

•   Repayment benefits

•   Whether the lender is a preferred partner of your college or university of choice (this information is usually found on the school’s website)

Because the rates and terms on a private student loan are determined by the individual lender and are impacted based on the borrower’s personal financial history, finding a private student loan may require a bit of shopping around.

Looking for Private Student Loan Options?

If you’re looking for a private student loan lender who understands the value of your education and thinks no-fees is a normal part of the application process, consider a private student loan with SoFi.

You can check your rate online and select one of four flexible repayment options on a loan that fits your budget.

The Takeaway

There are several factors that determine whether you should get a student loan — from what you can afford after factoring in financial alternatives like scholarships, savings, family help, etc. to how comfortably you can live with your student loan payments after graduation.

Generally speaking, it’s wise to apply for federal student loans first and turn to private student loans once you’ve exhausted other alternatives. This is because private student loans are not required to follow the same rules as federal student loans, and may lack benefits like income-driven repayment plans or the option to apply for Public Service Loan Forgiveness.

Private student loans are offered by private lenders like banks or credit unions to help people pay for college. You can apply for a private student loan by shopping around and comparing interest rates, fees, repayment options, and other features on the lenders’ websites.

The deadlines for federal student loans are based on the college you plan to attend, the federal FAFSA deadline for the academic year you’re applying and your state’s FAFSA deadline.

Find out more about using a private student loan from SoFi to help pay for college.

Photo credit: iStock/insta_photos


SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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woman reading a book

How to Save Money in College – 20 Ways

College is expensive. In the 2020-21 academic year, tuition and fees averaged $38,185 for students at private universities — that’s $152,740 for all four years!

The cost of public colleges for out-of-state students wasn’t much lower, with annual tuition and fees averaging $22,698.

The price tag is a bit smaller for in-state students at public schools (an average of $10,388), but all of these figures have kept climbing every year and show no signs of slowing down.

These numbers don’t include all the other necessary expenses of college life, such as room and board, books, supplies, clothing, and entertainment. At the same time, it’s difficult for college students to earn a lot during these years, given the demands of school.

Plenty of options exist for financing your time in college, including scholarships, loans, and part-time work. But even if you started to save for college early, trimming your expenses while you’re in college can mean owing less in loan repayments (and interest) down the line — and avoiding credit card debt.

Saving Money as a College Student

Luckily, once you adopt a money-conscious mindset, you’ll likely find there are many ways to save money in college. And building the habit of budgeting now can serve you well as you move on to life in the real world. Here are some tips for how to save money in college:

1. Take Advantage of Student Discounts

Lots of businesses and service providers offer special deals to students. You can buy clothing, shoes, and furniture for your dorm or apartment for less at certain retailers with a valid student ID.

Entertainment is another area where you can save. Some movie theaters offer discounts at some locations or on certain days. Some museums and sports events offer discounted access to students, as well. You may also find discounts on certain music and video streaming sites. And you can save on travel with discounts at certain car rental and car insurance companies, as well as on trains and buses.

2. Buy Your Books (and Other Necessities) Used

If you don’t need that new book smell, renting or buying used textbooks is a classic way to save money in college. You can find used books at many campus bookstores or certain online retailers.

Used books often come at a fraction of the price of a brand new book, and many are in perfectly good condition. Plus once you’re done, you can try to resell the book.

You can save by buying other items secondhand as well. You might try looking for used clothing and furniture at thrift stores, garage sales, estate sales, flea markets, or on sites like Craigslist, OfferUp, or even Facebook Marketplace.

3. Cook Meals at Home

Food eats up a big chunk of most people’s budgets — in normal times, Americans spend about 10% of their disposable income on food, and an increasing share of that has gone to restaurant meals.

College students with limited cooking skills and small kitchen spaces may be tempted to eat out for every meal. But restaurant tabs can add up quickly.

Shopping wisely for your own ingredients and making simple meals at home can help you save a lot of money — and leftovers from one home-cooked meal can be lunch the next day!

4. Serve as an R.A.

Becoming a resident assistant can not only be rewarding but also help you cut down on living expenses. R.A.s are a sort of big brother or sister in dorms, organizing social events, advising younger students, enforcing rules, and mediating disagreements. Many R.A.s receive free or discounted housing and meals, and some also get a stipend.

5. Cut Out the Extras

One of the best tips to save money in college is to look for areas in your budget where you can trim by choosing a less expensive option.

If you frequent coffee shops, for example, perhaps you can brew your own java a few days a week, or find a less fancy option with free refills.

Instead of always going out to bars with friends, maybe you can take turns hosting wine and cheese nights at your homes. If you belong to a fancy gym, search for lower-cost options on campus, join a sports league, or do your running outdoors.

Instead of a spring break trip to an all-inclusive resort in Mexico, consider camping, hanging out at the local swimming pool, or volunteering. Don’t be afraid to get creative!

6. Pay Your Bills on Time

When you pay all of your bills by the due date, you can avoid unnecessary fees and help keep interest from piling up. If you’re worried about forgetting, you may be able to set autopay through your credit card, the service provider itself, or your bank.

Staying on top of bills not only avoids added costs, but may also help keep your credit report in good shape. That could help you qualify for better terms on loans and credit cards down the line.

7. Take Advantage of Family Discounts

You may have left home, but maybe don’t cut the cord completely just yet. Many phone and car insurance plans are cheaper if you sign up with family members, rather than as an individual. If your family is on board, this can be one of the easiest ways to go about saving money in college.

If you’re under 26-years-old, you should be eligible to stay on your parents’ health insurance plan, which may be less expensive than purchasing your own. And you might also see if your parents will unofficially keep you on various “family plans” by sharing their logins for things like video streaming services.

8. Sign up for Cash Back Credit Cards

If you’ve decided to use a credit card, you might as well earn some cash back while you’re at it. As long as you pay your bill in full each month to avoid fees and interest, you may benefit from a reward credit card. You could earn points that can be applied as a statement credit, sent to you in check form, or put toward merchandise or gift cards.

When signing up for a cash back credit card, look for one with a low or no annual fee that offers the highest amount of cash back possible. And remember, any benefits will likely evaporate if you do not pay your balance in full every single month.

9. Frequent the Library

Instead of purchasing books, look for them at your local or on-campus library. Your library may also offer magazines and movies so you don’t have to spend money on those, either. Many public libraries now offer digital loans you can download and enjoy instantly on your favorite device.

You might also consider using the library as a free and quiet place to study instead of spending money at the local coffee shop. To make your library experience even more enjoyable, invite friends to form a study group.

10. Give Up Your Car

If you live on campus, you may not actually need a car and all its associated monthly costs (insurance, repairs, gas, and parking, to name a few). Look into free campus shuttles and public transportation to get you where you need to go.

If you need to use a taxi or rideshare service, you can comparison shop to find the cheapest option, and if you’re looking to take a longer trip, split the cost of a rental car with friends.

11. Look Into Work-Study Options

Federal Work-Study is a program for students in financial need that provides student-friendly part-time jobs to help cover school expenses. Before enrolling in college, you can ask about different work-study programs that may be available.

Bonus: You’ll benefit from the work experience when it’s time to jump into the job market!

12. Look for Discounted Banking Products

Some banks offer college savings and checking accounts that don’t charge the same types of fees as normal accounts do. There may not be minimum balance requirement, either.

Look into different banks and what kinds of benefits they are offering to college students before making your decision.

13. Take Advantage of Free Campus Activities

Colleges often host a number of different activities for students throughout the week. There might be dances, plays and musicals, sporting events and more, all for free.

By choosing these activities instead of going off campus, you can have fun and save money at the same time.

14. Stay Focused

Though college can be a lot of fun, you also need to keep your eye on the prize (graduation) and stay on top of your schoolwork.

Taking more than four years to graduate could blow your higher education budget and negatively impact your earning potential. Some hyper-focused students even graduate in fewer than four years!

15. Buy in Bulk

This one requires a little price sleuthing, but for nonperishable items you use a lot of, you’ll typically save money buying in bulk. This is true whether you have access to a membership at a bulk goods store like Costco or Sam’s Club, or you’re choosing between package sizes at a superstore like Target or Walmart. If you can’t use or store an enormous quantity of, e.g. toilet paper, consider going shopping with a friend and splitting the goods.

16. Turn in the FAFSA Every Year

Every year, you need to fill out your FAFSA form to qualify for financial aid. If you don’t turn it in, you could be throwing away free money.

Though the form may be confusing, it’s worth asking your parents or college counselors for help filling it out.

17. Sell Your Textbooks

Once you’ve completed your courses for the year, you can take the books you purchased and resell them to get some of your money back.

To get the best possible price, compare quotes from your campus bookstore against the going online sale rate. Websites like Bookscouter.com help you compare prices before you list your books for sale.

18. Consider Printing Expenses

You may already pay for use of on-campus printers with your student fees. Don’t spend additional money on printers, ink, and paper if it’s cheaper to utilize the printing resources at the library or other places around your campus.

19. Look Into Local Restaurant Deals

To enjoy a nice meal out while saving money, keep your eye out for deals at local restaurants. Many establishments offer happy hour specials or special discount nights.

Apps like Groupon and Yelp can offer discounts on local dining with just a few taps.

20. Find the Free Food!

You can’t get cheaper than free. Departments and organizations on campus will often offer free food like pizza and sandwiches to entice students to attend their events.

Keep an eye out for signs around campus. You could score some free dinner and you might find some interesting people or a new hobby while you’re at it!

Other Ways to Finance College

Saving can get you far. But when it comes to actually paying for college, you have a few options if you or your parents haven’t saved enough to cover the costs in full. One of the most advantageous is to land scholarships or grants that will fund all or part of your tuition.

These are available through state and federal governments, universities, non-profit organizations, and corporations, and many are tailored to students of specific backgrounds or intending to enter certain fields. You can search for some opportunities on FastWeb , FinAid , and Scholarships.com .

One of the most common ways to pay for school is to take out federal student loans. You can apply by filling out a Free Application for Federal Student Aid (FAFSA®), which will help the government and your school determine the amount of federal aid you qualify for.

Private student loans can help fill the gaps in financial aid.

Federal student loans are a likely part of the federal student aid package you receive. They come with fixed interest rates and certain benefits, such as a six-month grace period after graduation, income driven repayment plans, and options for pausing or reducing payments while you’re in school or facing an economic hardship.

The Takeaway

It’s wise to exhaust all your federal grant and loan options before taking out private student loans, since they typically offer less flexibility and fewer borrower protections compared to Federal student loans. However, if you need to fill gaps in paying for school, you can look into private student loans from various financial institutions.

When you apply for a private student loan with SoFi, the process is straightforward and fast. You can choose from several flexible payment options, and there aren’t any fees.

Qualifying for the loan, as well as the interest rate and terms you receive, depend on your credit history (or that of your co-signer) and other factors. You can check your rates before applying — in just minutes.

Looking for ways to make college affordable? Explore your private loan options on SoFi today.


SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s
website
.

Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Average Student Loan Debt by State

Average Student Loan Debt by State in 2022

Student loan debt nationwide increased by 8.28% in 2020, the largest increase since 2013, according to the latest report from EducationData.org. That spike was most likely fueled by rising unemployment and 3.2 million new federal student loan borrowers.

Student loan debt is now the second highest consumer debt category in the country behind only
housing debt
. Nationwide, nearly 40% of college attendees report some type of educational debt, and 65% graduate with student debt, the report showed.

A recent report from EducationData.org details the average student loan debt per borrower (based on all student loan debt, not just that owed by undergraduate borrowers) in each state. Overall, residents of Washington, D.C., have the nation’s highest federal student loan debt at more than $55,000 per borrower when looking at the total student loan debt owed by individuals in the state. Of every state, North Dakota has the lowest average federal student loan debt, with residents there owing an average of just $29,446.

Student Loan Debt in Each State

Read on for an overview of what student loan debt looks like across the country according to EducationData.org . This data is reflective of all borrowers, not just undergraduate students.

Alabama

Average borrower debt: $37,348
Total student loan debt: $23.1 Billion
Everything you need to know about student loans & scholarships in Alabama

Alaska

Average borrower debt: $34,431
Total student loan debt: $2.3 Billion
Everything you need to know about student loans & scholarships in Alaska

Arizona

Average borrower debt: $35,454
Total student loan debt: $30.7 Billion
Everything you need to know about student loans & scholarships in Arizona

Arkansas

Average borrower debt: $33,525
Total student loan debt: $12.8 Billion
Everything you need to know about student loans & scholarships in Arkansas

California

Average borrower debt: $36,937
Total student loan debt: $142.7 Billion
Everything you need to know about student loans & scholarships in California

Colorado

Average borrower debt: $37,120
Total student loan debt: $28.2 Billion
Everything you need to know about student loans & scholarships in Colorado

Connecticut

Average borrower debt: $35,448
Total student loan debt: $17.1 Billion
Everything you need to know about student loans & scholarships in Connecticut

Delaware

Average borrower debt: $37,338
Total student loan debt: $4.6 Billion
Everything you need to know about student loans & scholarships in Delaware

District of Columbia

Average borrower debt: $55,077
Total student loan debt: $6.4 Billion

Florida

Average borrower debt: $38,481
Total student loan debt: $98.2 Billion
Everything you need to know about student loans & scholarships in Florida

Georgia

Average borrower debt: $41,843
Total student loan debt: $67.2 Billion
Everything you need to know about student loans & scholarships in Georgia

Hawaii

Average borrower debt: $36,575
Total student loan debt: $4.4 Billion
Everything you need to know about student loans & scholarships in Hawaii

Idaho

Average borrower debt: $33,100
Total student loan debt: $7.1 Billion
Everything you need to know about student loans & scholarships in Idaho

Illinois

Average borrower debt: $38,071
Total student loan debt: $61.1 Billion
Everything you need to know about student loans & scholarships in Illinois

Indiana

Average borrower debt: $33,106
Total student loan debt: $29.6 Billion
Everything you need to know about student loans & scholarships in Indiana

Iowa

Average borrower debt: $30,848
Total student loan debt: $13.2 Billion
Everything you need to know about student loans & scholarships in Iowa

Kansas

Average borrower debt: $33,130
Total student loan debt: $12.5 Billion
Everything you need to know about student loans & scholarships in Kansas

Kentucky

Average borrower debt: $33,023
Total student loan debt: $19.5 Billion
Everything you need to know about student loans & scholarships in Kentucky

Louisiana

Average borrower debt: $34,683
Total student loan debt: $22.1 Billion
Everything you need to know about student loans & scholarships in Louisiana

Maine

Average borrower debt: $33,352
Total student loan debt: $6.1 Billion
Everything you need to know about student loans & scholarships in Maine

Maryland

Average borrower debt: $43,219
Total student loan debt: $35.5 Billion
Everything you need to know about student loans & scholarships in Maryland

Massachusetts

Average borrower debt: $34,549
Total student loan debt: $30.4 Billion
Everything you need to know about student loans & scholarships in Massachusetts

Michigan

Average borrower debt: $36,295
Total student loan debt: $50.7 Billion
Everything you need to know about student loans & scholarships in Michigan

Minnesota

Average borrower debt: $33,822
Total student loan debt: $26.3 Billion
Everything you need to know about student loans & scholarships in Minnesota

Mississippi

Average borrower debt: $37,080
Total student loan debt: $16.0 Billion
Everything you need to know about student loans & scholarships in Mississippi

Missouri

Average borrower debt: $35,706
Total student loan debt: $29.3 Billion
Everything you need to know about student loans & scholarships in Missouri

Montana

Average borrower debt: $33,953
Total student loan debt: $4.2 Billion
Everything you need to know about student loans & scholarships in Montana

Nebraska

Average borrower debt: $32,138
Total student loan debt: $7.8 Billion
Everything you need to know about student loans & scholarships in Nebraska

Nevada

Average borrower debt: $33,863
Total student loan debt: $26.3 Billion
Everything you need to know about student loans & scholarships in Nevada

New Hampshire

Average borrower debt: $34,353
Total student loan debt: $6.4 Billion
Everything you need to know about student loans & scholarships in New Hampshire

New Jersey

Average borrower debt: $35,730
Total student loan debt: $41.7 Billion
Everything you need to know about student loans & scholarships in New Jersey

New Mexico

Average borrower debt: $34,237
Total student loan debt: $7.7 Billion
Everything you need to know about student loans & scholarships in New Mexico

New York

Average borrower debt: $38,107
Total student loan debt: $91.9 Billion
Everything you need to know about student loans & scholarships in New York

North Carolina

Average borrower debt: $37,861
Total student loan debt: $48.0 Billion
Everything you need to know about student loans & scholarships in North Carolina

North Dakota

Average borrower debt: $29,446
Total student loan debt: $2.5 Billion
Everything you need to know about student loans & scholarships in North Dakota

Ohio

Average borrower debt: $34,923
Total student loan debt: $61.8 Billion
Everything you need to know about student loans & scholarships in Ohio

Oklahoma

Average borrower debt: $31,832
Total student loan debt: $15.2 Billion
Everything you need to know about student loans & scholarships in Oklahoma

Oregon

Average borrower debt: $37,251
Total student loan debt: $20.0 Billion
Everything you need to know about student loans & scholarships in Oregon

Pennsylvania

Average borrower debt: $35,804
Total student loan debt: $63.9 Billion
Everything you need to know about student loans & scholarships in Pennsylvania

Rhode Island

Average borrower debt: $32,212
Total student loan debt: $4.5 Billion
Everything you need to know about student loans & scholarships in Rhode Island

South Carolina

Average borrower debt: $38,662
Total student loan debt: $27.5 Billion
Everything you need to know about student loans & scholarships in South Carolina

South Dakota

Average borrower debt: $31,858
Total student loan debt: $3.6 Billion
Everything you need to know about student loans & scholarships in South Dakota

Tennessee

Average borrower debt: $36,549
Total student loan debt: $30.8 Billion
Everything you need to know about student loans & scholarships in Tennessee

Texas

Average borrower debt: $33,123
Total student loan debt: $116.8 Billion
Everything you need to know about student loans & scholarships in Texas

Utah

Average borrower debt: $32,781
Total student loan debt: $9.9 Billion
Everything you need to know about student loans & scholarships in Utah

Vermont

Average borrower debt: $38,411
Total student loan debt: $2.9 Billion
Everything you need to know about student loans & scholarships in Vermont

Virginia

Average borrower debt: $39,472
Total student loan debt: $41.9 Billion
Everything you need to know about student loans & scholarships in Virginia

Washington

Average borrower debt: $35,521
Total student loan debt: $27.6 Billion
Everything you need to know about student loans & scholarships in Washington

West Virginia

Average borrower debt: $32,258
Total student loan debt: $7.2 Billion
Everything you need to know about student loans & scholarships in West Virginia

Wisconsin

Average borrower debt: $32,272
Total student loan debt: $23.1 Billion
Everything you need to know about student loans & scholarships in Wisconsin

Wyoming

Average borrower debt: $30,246
Total student loan debt: $1.6 Billion
Everything you need to know about student loans & scholarships in Wyoming

The Takeaway

The average amount of debt held by borrowers varies from state to state. The five states with the highest average amount of student loan debt per borrower are; Washington D.C., Maryland, Georgia, Virginia, and South Carolina. The five states with the lowest average of student loans per borrower are; South Dakota, Oklahoma, Iowa, Wyoming, and North Dakota. North Dakota is the only state where the average borrower owes less than $30,000.

For millions, student loans are a necessary part of paying for college. When federal aid and savings aren’t enough to pay for school, some borrowers turn to private student loans. While private lenders are not required to offer the same benefits or protections as federal student loans, they can be helpful for borrowers who have exhausted all other options and are looking to fill in gaps in funding. Student loans with SoFi have no hidden fees and borrowers are able to choose from four repayment plans.

Find out more about private student loans available from SoFi.

Photo credit: iStock/FangXiaNuo


SoFi Loan Products
SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license # 6054612; NMLS # 1121636 . For additional product-specific legal and licensing information, see SoFi.com/legal.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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