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Student loans have become an inescapable part of life for many college grads these days. Seven in 10 students are financing part or all of their education and the average 20-something leaves school with close to $29,000 in loans.
As grads head out to find jobs, student debt clusters tend to pop in areas where they’re flocking to the most. San Francisco is a prime example as the tech boom continues to attract millennial job seekers.
According to Credit Sesame data, the average Californian is carrying just shy of $24,000 in student loans.
When we analyzed student loan debt for San Francisco, however, we found that the numbers climbed much higher. With an average salary of $78,000, you’d think that San Francisco residents wouldn’t have a tough time paying down their student loans but the data tells a different story. So what’s the issue?
[Related: San Francisco’s Most Debt-Ridden ZIP Codes]Cost of housing in desirable ZIP codes in SF pushed up by demand
Housing undoubtedly plays a big part. San Francisco has some of the most expensive housing in the country and the five ZIP codes included in our rankings are by no means cheap. They’re among the most desirable areas in the city, particularly for younger people, so there’s a steady stream of demand pushing prices up.
Pricier housing generally translates to a higher cost of living overall, which means everything from food to transportation is going to be more expensive. If you’re living in one of these ZIP codes and making a decent salary, it’s still not going to go that far, especially if you have student loans to deal with.
Richer areas have more student loan debt
There’s also a correlation between income and student loan debt. Credit Sesame’s report on the state of credit shows there’s a trend: more affluent areas tend to have higher levels of student loan debt.
Students are taking on more loans because they anticipate moving to a larger city and earning a bigger salary after graduation. If you look at the United States as whole, the highest concentrations of loan debt tend to be gathered around major cities like New York, Washington, D.C., and you guessed it — San Francisco.
The question is, what can San Franciscans who are stuck in student loan debt do? Finding more affordable housing is one solution for grads who are moving into the Bay Area but that’s easier said than done. Another way to approach the loan issue is by consolidating or refinancing your loans. This way, you streamline your payments and potentially cut down on some of the interest so more of what you pay goes towards the principal.
If San Francisco residents aren’t exploring any of these options, that could explain why their student loan debt is so high. Here’s how the five zip codes where student loans pose the biggest problem to grads’ wallets compare.
5. 94123: Marina District
Snapshot:
Average student loan debt: $39,455
Monthly payments: $454
Estimated annual salary: $54,486
Total interest paid: $15,031
Over the last couple of decades, the landscape of the Marina District has shifted from mostly families and retirees to young professionals who are drawn to the trendy shops, restaurants and bars. They’re paying a high price to live here, however, with the average rent set at $4,313 as of October 2015. Even if you’re living with two or three roommates, that’s still going to put a big pinch on your cash flow each month, which may mean a longer slog out of student loan debt.
4. 94115: Pacific Heights
Snapshot:
Average student loan debt: $39,802
Monthly payments: $458
Estimated annual salary: $54,965
Total interest paid: $15,163
Compared to the Marina District, Pacific Heights is more of a bargain for home-buyers. The area is known for being family-friendly and it attracts plenty of 20- and 30-something couples with young children. Unfortunately, they’re also bringing a decent amount of student debt along for the ride. When you pile on a mortgage, that doesn’t leave a lot left over for chipping away at the loans.
3. 94114: Castro/Noe Valley
Snapshot:
Average student loan debt: $41,357
Monthly payments: $476
Estimated annual salary: $57,113
Total interest paid: $15,755
The Castro/Noe Valley area is one of San Francisco’s most debt-ridden zip codes so it’s no surprise that it made our list for high student loan debt. Housing prices are some of the highest around, especially for renters, but it hasn’t stopped a flood of younger workers from moving into the area to soak up the local flavor. While the Castro and Noe Valley are total opposites in many ways, both are known for their singles scenes, which is something debt-laden grads may find appealing.
2. 94105: SOMA
Snapshot:
Average student loan debt: $49,309
Monthly payments: $567
Estimated annual salary: $68,094
Total interest paid: $18,785
SOMA residents take a pretty big leap up on the income scale compared to those who live in the Castro/Noe Valley area but they’re also stuck with a higher student debt burden. Living in the South of Market area is more affordable as far as housing goes, which is a good thing considering how much of their paychecks millennials are spending on their loans each month.
1. 94133: North Beach/Chinatown
Snapshot:
Average student loan debt: $51,761
Monthly payments: $596
Estimated annual salary: $71,480
Total interest paid: $19,719
The North Beach/Chinatown area has all the things a younger crowd is looking for: diverse neighborhoods, a laid-back culture and plenty of great food. Rental prices are higher but residents earn quite a bit more compared to some of San Francisco’s other zip codes. Still, that may not mean much since they’re carrying an average student loan debt that’s equal to the median household income in the U. S.
Methodology
To formulate our rankings, we drew on Credit Sesame’s internal database of 6 million members to collect information on student loan debt in each of San Francisco’s ZIP codes. We then selected the top five zip codes where the average student loan debt was the highest.
From there, we used information from Indeed to pull the average salary for San Francisco residents, as well as generate estimated salaries for each of our five zip codes. To calculate the monthly payments, we assumed that debtors are spending 10% of their gross monthly income on servicing their loans. The total amount of interest paid is based on those monthly payments and a 6.8% interest rate.
Information for the average student loan debt in California also came from our Credit Sesame internal data. The estimated average student loan debt nationwide was drawn from The Institute for College Access and Success (TICAS). Information on median housing prices came from Trulia while rent information was pulled from Rent Jungle. We took the median household income for the U.S. from the Census Bureau.