Low-income students are half as likely to enroll in selective colleges as compared with high-income students with similar grades and test scores. This is called undermatching. 

These students are often academically talented and likely to be admitted.¹ ² Still, many end up at less-selective colleges, such as lower-cost public colleges and community colleges. Some don’t enroll in any college at all.

Public policy advocates have claimed that very selective colleges are more affordable for low-income students, despite the higher cost of attendance. For example, Matthew M. Chingos wrote in a Brookings Institution article, “For low-income students, these colleges will generally cost them and their families less than a less-selective institution with a lower sticker price but fewer resources for financial aid.” 

But is this true? Does generous financial aid really make selective colleges more affordable than lower-cost colleges? Or are selective colleges just trying to shift blame for their failure to enroll more low-income students? Below, we take a deep dive into the data to answer those questions.

What Is Undermatching At Selective Colleges?

Undermatching is when qualified students from low-income backgrounds shy away from selective or private colleges and universities. 

The table below shows the percentage of undergraduate students receiving Federal Pell Grants and the percentage who are low-income students at the 25 most selective colleges, based on admissions rates.³ It's based on 2019 data from the Integrated Postsecondary Education Data System (IPEDS).

The key takeaway from this table is that most of these colleges are below-average in their enrollment of low-income students and Federal Pell Grant recipients. However, it's clear that there is significant variation in the enrollment rates.

Are Selective Colleges Really Better?

Critics of undermatching often assert that the affected students miss out of key advantages of enrolling at a more selective college. To summarize, the most selective colleges claim three important advantages:

However, the less selective colleges attended by talented, low-income students also claim to offer better quality educations and lower costs for different reasons. Plus, these colleges don't required students to move halfway across the country. Here are their three main draws:

We see that undermatching is not necessarily always a bad thing for the student. Both types of schools have their own pros and cons.

Why Does Undermatching Happen?

Undermatching is caused, at least in part, by differences in college affordability. As we've already mentioned, selective colleges often claim that they're generous financial aid options actually make them more affordable than less selective schools.

But the most selective colleges aren't necessarily less expensive on a net price basis. This is, in part, because they may involve more debt.

The "net price" is the difference between total college costs and gift aid, such as grants and scholarships. The net price is the discounted sticker price, the amount the family will have to pay from savings, income and loans to cover college costs.

A higher net price correlates with higher debt at graduation. Below, we examine several reasons why low-income students tend to avoid colleges with high net prices.

Low-Income Students Have A Stonger Aversion To Student Debt

The prospect of having to borrow more for their education than their parents earn in a year can have a chilling effect on college enrollment by low-income students. To be fair, middle and high-income students don’t necessarily like debt either. But it doesn’t usually stop them from enrolling in college.

For low-income students, on the other hand, debt aversion goes beyond a mere dislike to a palpable fear of debt. And that fear influences college-going behavior. If enrolling in a very selective college involves more debt, low-income students are more likely to enroll at a different, lower-cost school.

"The sticker shock keeps them from applying."

The high sticker price at some colleges can discourage some low-income students from applying. This is even if the net price is lower. Sticker shock stops them from applying. This is a key problem with the high cost/high aid model. Similarly, application fees stop some students from applying, even when fee waivers are available.

Very few colleges meet the full demonstrated financial need of low-income students. Demonstrated financial need is the difference between the annual cost of attendance and the expected family contribution (EFC). Most of the colleges that claim to meet full need do so by including student loans in the financial aid packages. Student loans must be repaid, usually with interest. They do not cut college costs.

Low-Income Students Have Higher Average "Unmet Needs."

Unmet need: The amount by which a student’s financial need exceeds the grants and scholarships awarded to the student. 

The average unmet need for Federal Pell Grant recipients is thousands of dollars higher at very selective colleges than at less selective colleges. This is money that low-income students do not have and are unable or unwilling to borrow.

The next two tables are based on data from NPSAS:16. They show the percentage of students with unmet need and the average unmet need among these students. The first table shows data for Federal Pell Grant recipients.

This table shows that average unmet need among Federal Pell Grant recipients is more than $6,100 higher at very selective 4-year colleges as compared with open-admissions 4-year colleges. It's $3,500 higher than at public 4-year colleges and $8,400 higher than at community colleges.⁴

The second table shows data for low-income students with family adjusted gross income (AGI) under $50,000.

So the average unmet need for low-income students is more than $10,600 higher at very selective 4-year colleges than at open-admissions 4-year colleges. It's $7,000 higher than at public 4-year colleges and $12,500 higher than at community colleges.

Thus, Federal Pell Grant recipients and low-income students can save thousands of dollars a year by enrolling at less selective colleges.

Low-Income Students Are More Likely To Face "Admit-Deny" Situations

Even colleges with generous “no loans” financial aid policies may have a higher net price according to the federal definition because they substitute their own definition of financial need for awarding their own financial aid funds.

Many have a minimum student contribution or summer work expectation, even for students with an expected family contribution (EFC) of zero. A minimum student contribution or summer work expectation sets a floor on the EFC and a cap on the amount of financial aid a student can receive. This can make these colleges more expensive than a local public college or community college which relies on the federal definition of financial need.

"But low-income students are already working during the summer – often to put food on the family table."

These colleges say that students can cover the minimum student contribution through work during the summer or student loans. But low-income students are already working during the summer – often to put food on the family table – and can't qualify for private student loans. Thus, many are unable to bridge this gap. They really can’t afford these colleges.

For this reason, many low-income students face an admit-deny situation at the most selective colleges. This is where the colleges admit them but deny them the financial aid they need to be able to afford to attend the college. The colleges don’t provide enough financial support to make their institutions truly affordable to low-income students.

Related: Options To Pay For School If You Don't Have Enough Financial Aid

Low-Income Students Are Financially Incentivized To Choose Less Selective Colleges

Differences in the net price at very selective and less selective colleges demonstrate that very selective colleges are more expensive. And that provides low-income students with a financial incentive to enroll at less selective colleges.

The table below shows how much the net price of less selective schools compares to very selective schools for Federal Pell Grant recipients and students with a family AGI of $30,000 or less.

Low-income students and Federal Pell Grant recipients at very selective 4-year colleges are more likely to have won private scholarships and the average private scholarship amount is higher. But students who haven’t won private scholarships are less likely to enroll at very selective colleges due to a lack of sufficient financial resources.

All of these facts suggests that undermatching is caused, at least in part, by the higher net price at very selective colleges. This is even after accounting for the generous financial aid available to low-income students at these colleges.

In short: Low-income students enroll at public 4-year colleges and community colleges instead of very selective colleges because they're less expensive.

Other Reasons For Undermatching

There are several additional reasons why there's a lack of economic diversity at the most selective colleges. Here are a few more potential contributing factors.

Limited Recruiting

The most selective colleges generally do not recruit in low-income zip codes. This is even though they know which students have top SAT and ACT test scores. 

Direct And Indirect Discrimination

The most selective colleges don’t admit many low-income students. This is partly because the selection criteria tend to discriminate in favor of high-income students, even at colleges with need-blind admissions policies. Colleges with legacy admission policies and policies that favor admission of children of prospective donors provide an admissions preference for wealthy students.

Legacy admissions policies discriminate against first-generation college students, since they're first in their families to go to college. SAT and ACT admissions test scores discriminate against low-income, first-generation and underrepresented students. Low-income students can't afford to pay thousands of dollars for high-quality test prep. 

The Paperwork Barrier

Many of the most selective colleges use the CSS Profile form to apply for their own financial aid funds. The CSS Profile form requires more than twice as many questions as the Free Application for Federal Student Aid (FAFSA), which is already too complicated. These financial aid forms raise obstacles that discourage low-income students and block them from applying for and obtaining financial aid.

Related: How To Fill Out The FAFSA And Why It Matters 

Early Admission Favors Wealthy Students

Low-income students are less likely to apply during early decision periods. The binding commitment prevents them from shopping around for a less expensive college.

Academic Talent Is Not Enough

The most selective colleges often engage in holistic admissions which considers more than just academic performance. But low-income students may not have the luxury of participating in extracurricular activities or sports.

They often have to work one or two part-time jobs because they are the primary wage-earners for their families. Add class time and homework to the schedule and that leaves little time to learn an instrument.

Too Much Competition

Many colleges with “no loans” financial aid policies have opened them to all students, not just low-income students. This increases the competition for spots at these colleges.

These policies were intended to attract low-income students. But they often simply end up making it harder, not easier, for these students to be accepted.

Resistance From Parents

Some parents don’t think their children need to go to college. Others are worried about going into debt to pay for college or simply don’t want their children to go to college far from home. Finally, some parents may be concerned about the privacy of information provided on lengthy and intrusive financial aid application forms. 

Solutions To Undermatching

Despite all of the issues discussed above, undermatching is a problem that can be improved. Here are a few suggestions for how to increase the enrollment rate of talented, low-income students at selective colleges.

1. Provide Students With Personalized Information About College Quality And Costs

College quality should be measured based on how well the college matches the student’s academic background, career aspirations and financial need. Financial fit should be measured based on the net price.

The idea of undermatching has led to the creation of programs to enable and encourage low-income students to apply to more selective colleges. Examples include the American Talent Initiative, the Coalition for College Application, CollegePoint, Matriculate and QuestBridge.

These programs try to fight against undermatching be providing low-income and first-generation students with personalized college counseling that introduces them to the more selective colleges.

2. Waive Application Fees For Low-Income Students Up Front

This is much easier than requiring the student to apply for a fee waiver. Colleges could determine which students are low-income by asking:

• Whether the student has income below a specific threshold, or
• If someone in the student’s family is receiving certain means-tested federal benefits.

Or, even better, colleges could just eliminate application fees for all students.

With an average application fee of $44, low-income students and families can be deterred from applying, while middle income and high income families won't blink at the price. And let's face it, a $44 average fee isn't making or breaking any college's financials.

3. Eliminate Other Barriers To College Access

Colleges should ask themselves whether they really need every question they ask on the admissions application. Every additional question reduces the number of students who submit an application. Some of the questions are “blocking questions” that stop some low-income students from completing the form.

4. Provide More Financial Support

Finally, if the most selective colleges really want to reduce undermatching, they need to significantly increase the financial aid they provide to low-income students. This will reduce the net price enough to compete with the lower net price at less selective colleges. 

In particular, selective colleges need to eliminate the summer work expectation and minimum student contribution for low-income students.

Advice For Low-Income Students

Low-income students should shop around for the best college based on a combination of factors. These include: financial fit, academic fit, social fit and environmental fit, as well as proximity to home.

Apply to a balanced mix of colleges based on a comparison of the student’s test scores for each college as listed on College Navigator. Use the Education Department's Net Price Calculator to compare the real cost of each school. Also, apply to a financial aid safety school. These are schools where the student is likely to be admitted and can afford to enroll even if they get no financial aid. 

Remember, academic performance isn’t everything, especially when applying for admission to the most selective colleges. Pick a single hobby or activity and go deep. Depth matters more than breadth.  You can also write an essay about your relationships with other people. Talk about their influence on you and your influence on them.

Finally, don’t worry too much about getting in to every college. If a college doesn’t accept you, it’s their loss, not yours. You can do well wherever you end up. 

¹ Low income has many definitions, which can include an adjusted gross income (AGI) that is less than $30,000 or $50,000. This article uses both, depending on the data source. 
² There are several different definitions of selectivity, such as definitions based on the admissions rate and definitions based on admissions test scores.
³A college’s admissions rate or acceptance rate is the percentage of applicants who are accepted for admission to the college. This differs from the enrollment rate, which is the percentage of accepted students who enroll.
⁴The 2015-16 National Postsecondary Student Aid Study (NPSAS:16) defines selectivity by combining the centile distribution of admissions rates (the percentage of applicants who are admitted) with the centile distribution of the midpoint between the 25th and 75th percentile combined SAT and ACT test score distributions at each college. A separate category, open admission, is provided for colleges without minimal admissions requirements. The very selective category covers about 10% of undergraduate students, while the open admissions category covers about 8% of undergraduate students.

The first data is now available for how student loan borrowers are doing with student loan repayments restarting. 

The U.S. Government Accountability Office (GAO) has published preliminary observations on borrower repayment after the end of the payment pause and interest waiver. Additional historical data was obtained from the Federal Student Loan Portfolio section of the FSA Data Center. 

Although the number of borrowers who are current on their federal student loans is greater now than before the pandemic, the percentage of borrowers in repayment who are current is lower. This is partly because the 12-month on-ramp temporarily suppressed repayment activity by nearly 10 million borrowers and partly because more borrowers have been added to the federal student loan portfolio since the start of the pandemic. 

In addition, more borrowers qualify for a zero payment under the SAVE repayment plan than under the REPAYE plan, because the discretionary income threshold increased from 150% to 225% of the poverty. Borrowers with a calculated payment of zero count as current on their loans. 

Let's dive into the data and see how borrowers are responding to the restart of student loan payments.

History Of The Student Loan Payment Pause And Interest Waiver

Section 3513 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) [3/27/2020, P.L. 116-136] authorized a payment pause and interest waiver on federal student loans. The payment pause was retroactive to March 13, 2020 and expired on September 30, 2020.

The payment pause and interest waiver was extended a total of eight times, two times by President Trump and six times by President Biden. President Trump extended the payment pause through December 31, 2020 and January 31, 2021. President Biden extended the payment pause through September 30, 2021, January 31, 2022, May 1, 2022, August 31, 2022, December 31, 2022 and September 30, 2023.

The January 31, 2022 and December 31, 2022 extensions were identified as the “final” extensions, but were followed by additional extensions. 

Further extensions were blocked by the Fiscal Responsibility Act of 2023 [6/3/2023, P.L. 118-5], which scheduled the restart of repayment for 60 days after June 30, 2023. Interest began accruing on September 1, 2023 and repayment restarted in October 2023. 

The payment pause lasted more than three-and-a-half years, a total of 1,297 days (42 months and 18 days). More than $208 billion in interest was waived during the payment pause.

Student Loan On-Ramp Period

The U.S. Department of Education was concerned about the challenges of restarting repayment after so many years of non-payment, so they implemented a 12-month “on-ramp” to protect borrowers from negative credit reporting if they failed to make payments.

Normally, federal student loan borrowers are reported as delinquent to the three credit bureaus when they are more than 90 days past-due.

During the 12-month on-ramp, however, the U.S. Department of Education implemented retroactive administrative forbearances when borrowers were 90 days past due. Interest continued to accrue during these forbearances, but about 6.7 million delinquent borrowers were shielded from negative credit reporting.  

Fresh Start Initiative

The U.S. Department of Education also implemented the Fresh Start Initiative, which restores defaulted borrowers to a current status without requiring them to rehabilitate the loans by consolidating them or making a number of on-time voluntary payments. Technically, the payment pause counted as though the borrowers had made the on-time payments required by loan rehabilitation. 

The Fresh Start Initiative removed the default from the borrower’s credit history. It also suspended enforced collection methods for defaulted federal student loan debt, such as wage garnishment and Treasury offset of income tax refunds and Social Security disability and retirement benefit payments. 

7.8 million borrowers were in default prior to pandemic. After implementation of the Fresh Start Initiative, 6.0 million borrowers are in default.

Current Status Of Federal Student Loans

The following tables show the status of outstanding federal education loan debt as of January 2024. It's important to note that while student loan repayments resumed in October 2023, loan servicer issues did leave borrowers in administrative forbearance for months.

For borrowers who were current on their student loans, here's what their payments looked like.  

Specifically, 14% of all Federal student loan borrowers, or 4.5 million people, had loan payments equal to $0 per month. This also represents 30% of all Federal student loan dollars. The large increase in $0/mo payments is also the cause of an 80X rise in the cost of the student loan program.

Past-due borrowers included borrowers who were one or more days late. Six million borrowers, or 60% of the past-due borrowers, were 91-120 days past due. These borrowers represented most of the 6.7 million borrowers ($186 billion) in the on-ramp who were shielded from negative credit reporting. The breakdown of past-due borrowers were as follows:

• 1 - 30 Days Late: 2.4 million (24%)
• 31 - 60 Days Late: 0.8 million (8%)
• 61 - 90 Days Late: 0.8 million (8%)
• 91 - 120 Days Late: 6.0 million (60%)

Student Loan Repayment Plan Choices

This table shows the distribution of borrowers among repayment plans.

For borrowers in the SAVE repayment plan, here's what the payments look like:

For borrowers in other IDR repayment plans, here's what the payments look like:

Note that only 6.2 million (85%) of the borrowers and $333 billion of the dollars (84%) in the SAVE repayment plan had a scheduled payment as of January 31, 2024, including a zero payment. Likewise, 4.3 million of the borrowers (78%) and $257 billion of the dollars (85%) in other IDR plans had a scheduled payment. 

Overall, 44% of borrowers and 36% of dollars in IDR plans, including the SAVE repayment plan, had a zero monthly payment. 

Status Of Federal Student Loans Compared To Pre-Pandemic

The following tables show the status of outstanding federal education loan debt before and after the pandemic. This compare the repayment status of Federal student loans in January 2020 (from before the pandemic) to January 2024.

Although the number of borrowers who are current increased, the percentage decreased, in part because the number of borrowers in repayment increased by more than 5 million. The number of borrowers in repayment includes borrowers who are current, past due, in deferment and in forbearance.

The number of borrowers who are past due doubled, in part due to the on-ramp. 

The distribution of borrowers by loan status is likely to change significantly after the on-ramp expires on September 30, 2024. Some of these borrowers will start repaying their student loans and some will obtain a deferment or forbearance, with the rest remaining in a past-due status. 

This repayment behavior is better than expected despite the prolonged period of the payment pause.

Only 69% of student loan borrowers have resumed making payments on their student loans, according to a new College Investor survey. This is slightly higher than the first announcement by the Department of Education highlighting 60% of borrowers have resumed making payments.

The student loan payment pause for Covid-19 officially ended on August 31, 2023. Interest resumed on September first, and for most borrowers, their first student loan payment would have be due in October 2023. However, the timeline for student loan repayment restart was skewed for some borrowers as student loan servicers struggled to keep up with the workload - repayment restarts, loan forgiveness changes, and more.

Specifically, student loan servicer errors kept millions of borrowers deferred until payments could be fixed and repayment plan changes processed. This included enrolling borrowers in the new SAVE student loan repayment plan.

Only Two-Thirds Of Borrowers Have Resumed Payments

According to the survey results, 69% of borrowers have resumed their student loan payments. In December 2023, the Department of Education announced that 60% of borrowers have resumed their payments according to their data.

It appears that more borrowers have started making payments on their student loans.

There are several reasons borrowers state they haven't made student loan payments yet. While some are choosing to not make payments intentionally and are leveraging the 12-Month On-Ramp period, most are in administrative forbearance due to loan servicing issues, or didn't know they needed to already. 

Slight Majority Can Feel They Afford Their Student Loan Payment

When it comes to affording their student loan payment, just 53% of borrowers felt they could afford their monthly payment. In our survey before payments resumed, just 45% of borrowers felt financially ready to afford their student loan payment.

The most common reason borrowers say they can't afford their student loan payment is because they are unemployed or underemployed. 

Inflation making other areas of their budget more expensive was also a common concern.

Most Borrowers Are On Their Original Repayment Plan

Given the concerns about affording their student loan payment, we asked if borrowers were changing their repayment plan to the new SAVE plan touted by the Biden Administration. This would help improve the affordability of their loan payments - making some payments legally $0 per month for low income individuals and families.

In January 2024, the Department of Education announced that 6.9 million borrowers were enrolled in the SAVE plan. That's roughly 16% of federal student loan borrowers.

Our survey found that just 12% of borrowers had switched to the SAVE plan, while 60% were in their same repayment plan from before the pandemic. The remaining amount didn't know exactly what payment plan they were repaying their loans under.

How To Get On Track With Student Loan Payments

The 12-month on-ramp period for student loan borrowers to resume payments ends in September 2024. Borrowers who still have no started making student loan payments need to take some time to find the best repayment plan for their loans.

Borrowers can see the options by using the Loan Simulator at StudentAid.gov. For borrowers who don't know where their loans are located, they can sign-up for StudentAid.gov, or check their credit report.

Here's a guide to tracking down your student loans.

Methodology

The College Investor commissioned Pollfish to conduct the survey. All figures, unless otherwise stated, are from Pollfish. Total sample size was 600 adults (18 or older), among whom all currently have student loan debt they are responsible for. Fieldwork was undertaken on February 9, 2024. The survey was carried out online and meets rigorous quality standards. 

Don't Miss These Other Stories:

Student loan borrowers are officially set to resume payments on Federal student loans in October 2023. By the time repayment restarts in October 2023, the payment pause and interest waiver will have lasted a total of 42 months (counting March 2020 as a full month).  

During this time, the original payment pause and interest waiver was extended a total of 8 times in order to allow student loan borrowers to be more financially ready to resume payments after the effects of the Covid-19 pandemic rippled through the economy. 

But the real question is: are student loan borrowers really financially able to resume payments? And has this changed since our survey last year before the payment pause was extended? Here's what we found out.

Key Findings

We asked 1,200 student loan borrowers about how their income and expenses have changed since March 2020 (the start of the Covid-19 pandemic in the United States) and how ready these borrowers are to resume making student loan payments when they unpause in 2023.

Here's what we found:

• 55% of student loan borrowers don't feel ready to resume payments in 2023. This is a significant increase from 2022 when only 29% of borrowers didn't feel financially ready.
• Only 42% of borrowers know exactly what their monthly payment is going to be when repayment restarts. This highlights a big lack of communication between borrowers and the Department of Education and the various student loan servicers. It also is adding to student loan borrower anxiety.
• As a result, 82% of student loan borrowers are worried about their loan payments.

So what's changed for borrowers since March 2020?

• 46% of student loan borrowers reported their income increased, but the remainder either had their income decline or stay the same.
• At the same time, 53% of student loan borrowers have reported their monthly expenses increasing since March 2020.
• As a result, 57% of student loan borrowers report using their savings from not making student loan payments to simply cover essentials like food and housing costs. 

Are Borrowers Able To Resume Student Loan Payments?

Student loan payments are set to resume in October 2023. Interest on Federal student loans will be to accrue in September 2023. Given it's been over 3 years since borrowers had to make a student loan payment (and roughly 20% of all student loan borrowers have never had to make a loan payment due to graduating during the pandemic payment pause), we wanted to know how borrowers felt about resuming their loan payments.

While nobody wants to restart their loan payments, we found that 55% of student loan borrowers don't feel ready financially to resume their student loan payments. 

Borrower Knowledge About Their Student Loans

Beyond the individual financial issues facing borrowers, we wanted to know how well borrowers even knew what was happening with their student loans. We've been hearing and reading about a lot of issues borrowers are facing in terms of tracking down their loans, finding their student loan payment, or even knowing what programs they qualify for.

So when it comes to restarting student loan payments this fall, we wanted to see what borrowers knew about their loans (it was a bit shocking).

First, only 42% of student loan borrowers even know what their payment is going to be when student loans restart. That means 58% of borrowers don't even know what their loan payment will be!

As a result, 82% of student loan borrowers are worried about their loan payments. 

Given that the best way to manage student loan repayment is to select a student loan repayment plan you can afford, we wanted to assess borrower knowledge of different repayment plans. We found that one-third of borrowers didn't know there were different repayment plan options for their student loans. 

Along those same lines, we wanted to know if borrowers understood whether they may qualify for student loan forgiveness programs to see if they can eliminate their student loans. Shockingly, only 59% of student loan borrowers knew if they qualified for any type of student loan forgiveness program. 

How Have Borrowers' Finances Changed During The Pandemic?

Repaying your student loans relies on you being able to afford your student loan payment. One of the biggest reasons for the payment pause and interest waiver was due to the harm caused by the Covid-19 pandemic to an individual's income. And the extensions were justified by the lasting damage done to people's income (and lately, expenses due to rising inflation). 

Let's start with income. 46% of student loan borrowers reported that their income has increased since March 2020. At the same time, 30% of borrowers reported their income decreasing, while the rest remained the same.

When it comes to expenses, 53% of borrowers reported that their monthly expenses have increased since the start of the pandemic.

Given that there were significant savings due to the student loan payment pause, we were curious how borrowers were spending that money in general. We found that 57% of borrowers were using the savings to cover necessary living expenses like rent and food. The next category was 24% of borrowers using the savings to pay down other debts, like credit cards. The third most common response was 10% using the money to fund their emergency funds.

Finally, we asked a more subjective question as to why borrowers don't feel financially ready to resume their student loan payments. It's more subjective because borrowers may not "want" to do something but are actually able to do it.

When it comes to why borrowers don't feel financially ready to resume payments, 40% said their expenses have increased, and adding back in student loan payments is unaffordable. Another 37% said that even on the lowest monthly payment repayment plan, their income is too low. 

Another 11% said they simply haven't spent the time to figure out whether they're financially able to resume their payment. And 4% said they just don't want to resume payments - there's no true financial reason as to why.

Final Thoughts

It was interesting to see a significant decrease in the percentage of Americans with student loans who feel ready to resume payments in 2023. When we surveyed 1,200 borrowers in 2022, 71% felt financially ready to resume payments. That number has decreased to only 45% feeling financially ready.

It's also concerning how few borrowers understand what their loan payments will be - with only 42% feeling confident in knowing exactly what their payment will be. Furthermore, one-third didn't know they had alternative student loan repayment plan options, and 41% didn't know about loan forgiveness options. All of these signs point to a failure in communication from the Department of Education and its loan servicers. 

Of course, borrowers won't feel financially ready when they don't know what to expect and what their options are. It's likely a big driver as to why 82% of student loan borrowers are worried about their loan payments.

Methodology

The College Investor commissioned Pollfish to conduct an online survey of 1,200 Americans who had student loan debt as of the date of the survey. The survey was fielded June 16, 2023.

It’s time to start thinking about taxes. Yay. Just like last year, we polled 1,200 Americans to get the latest on what tax software they used and how much they paid to prepare their taxes in 2022.

One of the surprises in the last 12 months that no taxpayer can escape is inflation. It increased 7% in the last few years, compared to just 1.4% in 2021. 

With higher costs for everyday items from gas to milk, stressed-out Americans are looking for a side hustle or cutting expenses where they can. But what about paying for their taxes? 

Here’s what we discovered.

Key Findings

• Cost To File Federal Tax Return: 30% paid $0, while 5% paid over $500
• DIY vs. A Tax Professional: 45% used tax software to file on their own
• We reveal the most popular tax software: 59% used it (sorry, you have to scroll down and see the answer)
• Self-Employed vs. Employee: 60% filed as a W-2 while 27% were self-employed

How Much Americans Paid To File Their Federal Tax Return

The cost of preparing your taxes can vary wildly. Some can file for free every year while others with more complicated financial situations feel more comfortable if they hire a tax professional. 

Here’s what we discovered for how much people paid for both federal and state taxes.

The cost to file a federal tax return:

How much does it cost to file a state tax return:

How People File Their Taxes

Our survey found that 45% of people filed their taxes using a DIY method with TurboTax, H&R Block online, FreeTaxUSA, and Cash App Taxes, to name a few. 

• From these companies that also offer full-service virtual help, 11% took advantage of it
• 27% used a full-service accountant or CPA. 
• Surprisingly, 15% took to pen and paper to get their taxes done.  

What Tax Software Did Americans Use?

There are so many options—don’t forget that we have extensive reviews of many of them on The College Investor. Here are reviews for The Best Tax Software and Free Tax Software.

So which one did our respondents use? 

• TurboTax—a whopping 59%
• H&R Block came in second place, with 13%
• Cash App Taxes at 6%
• FreeTaxUSA at 3%
• Jackson Hewitt at 2%

What Matters Most When Selecting Tax Software?

So what’s so great about TurboTax and why did 59% choose it? 

The number one reason people choose one tax service over the other is due to ease of use. An overwhelming 71% of respondents said this was the most important factor when choosing one tax software over the other. 

This finding stayed consistent with last year’s survey. When asked if they were going to use TurboTax again for their taxes in 2022, 83% said they would.

Just like last year, 66% said that price was the second most important reason when picking a specific software.  

How Did Americans Receive Their Tax Refunds?

Direct deposit was the most popular method (73%) of how respondents said they prefer to receive their refunds. It’s the easiest and quickest way to get your money. All you have to do is select it as your refund method through the tax software. 

Then, provide your bank account number and routing number. Or if you’re using a tax service, tell your tax preparer you want direct deposit. 

Eleven percent of filers chose to get their refunds by waiting on a paper check in the mail while another 11% preferred their refund in the form of a prepaid debit card. 

When asked why this group doesn’t use direct deposit, 14% said they don’t have a checking account while 56% said they simply prefer a prepaid debit card. 

Surprisingly, 21% admitted they didn’t know direct deposit was an option.

How Did Americans Prepare Their Taxes?

From our survey, 14% filed as head of household, 52% filed as single, while 27% filed as a married couple. 

Only 5% are married, filing separately. A benefit of going this route is if there's a big disparity in a couple’s incomes. For example, if the spouse who doesn’t make as much is eligible for a lot of itemizable deductions, it could be worth going this route.

If you’re married, you can use a higher standard deduction, which is twice the amount of a single person's deduction. For 2021, the married standard deduction was $25,100. (In 2022, it increased to $25,900.) This is the amount you can deduct from you and your spouse’s income.  

Income Sources and Claims

Income sources are also an important part of tax filing costs and is the foundation for the way tax software sets their pricing structure. For example, if you have self-employment income, or investment income, you could be forced to use a "higher tier" of tax software.

The majority, 60%, had W-2 wages while 27% identified as self-employed. Remember, self-employment also applies to side hustle income.

Being claimed as a dependent on someone else’s taxes (like your parents), can also affect your taxes. From our survey, 68% said they would not be claimed as a dependent, while 31% said they would. 

‘Free’ Tax Software Isn’t Really Free

With inflation on the rise, it makes sense to want to cut costs where you can, but be careful when it comes to your taxes. While many tax companies such as TurboTax and H&R Block offer free or low-cost options for filing, not everyone qualifies. 

You may start off using the free version, but then quickly realize you need to upgrade in order to complete your taxes. 

The only fully-free software for filing your taxes is Cash App Taxes, previously known as Credit Karma Taxes. However, there are limitations. The IRS also has a free way to file, as long as you have a total adjusted gross income of $73,000 or less. 

Use Direct Deposit And Open A Checking Account If You Don’t Have One

This year’s survey revealed a few shockers, including 21% saying they did not know direct deposit was an option. The other surprise was that 14% completely lacked a checking account. 

Perhaps this is the year to open a checking account, there are so many free options to choose from. There’s absolutely no reason to have to wait around for a paper check in the mail when you could receive your refund lightning fast from direct deposit. These are our best picks for free checking accounts. 

Don’t forget to check out the best tax software from The College Investor—where we review TaxAct, TaxSlayer, Cash App Taxes, FreeTaxUSA, Tax Hawk, and more.