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How America shops is shifting in a fundamental way.

Shoppers are turning to discount stores such as Dollar Tree, ALDI, and Big Lots more often, driven largely by spiking inflation, which peaked at 9.1% in June 2022. These days, shoppers are increasingly asking themselves, Why pay more? as they place a higher premium on value.

According to SoFi’s Discount Shopping Survey of 1,500 consumers fielded in August 2023, 81% of respondents are currently shopping at discount stores at least monthly, regardless of their income level.

Surely, the impetus may vary:

•   For many, discount stores are a vital tool when sticking to a tight budget.

•   For others, it might be a way to find splurges, both large and small, at the right price.

Still, though circumstances may vary, a whopping 78% of respondents are laser-focused on snagging the lowest possible prices for items on their list.

While shoppers may have been swayed by ambience and amenities at stores in the past, now it’s all about getting top value for every hard-earned dollar. Sticking to — and stretching — one’s budget is the new black. Also worth noting: Among the ranks of discount shoppers are high-earners pulling in six figures.

SoFi’s proprietary research found intriguing and unexpected facts about just who’s hitting the discount stores, what they are hunting for at these retailers, and why the face of shopping may never be the same again.

Where the Buyers Are: 74% of Respondents Dropped Into Dollar Tree

Curious about which discount retailers are topping shoppers’ lists? According to SoFi’s Discount Shopping Survey, almost three-quarters (74%) of discount shoppers have dropped into a Dollar Tree, where the motto is “Extreme Value Every Day,” over the past year.

It isn’t just those living paycheck to paycheck who are shopping at Dollar Tree:

•   64% of the survey’s highest earners (households bringing in $150,000+) say they’ve bought items at Dollar Tree in the last 12 months.

Discount shoppers are also looking elsewhere to find where the best buys are. Over the past year:

•   65% have shopped at Dollar General

•   42% at Five Below

•   41% at ALDI

•   38% at Big Lots

•   37% at T.J. Maxx

•   35% at Ross Dress for Less

•   35% at Marshalls

Where else are moneywise shoppers queuing up? It turns out that 22% have shopped at HomeGoods, while one in five (20%) has rung up items at brand-name outlets (Nordstrom Rack, for instance).

Discount Stores: The New Social Media Darlings

Reflecting their new status as many shoppers’ go-to destination, discount stores are accumulating hefty followings. As of September 2023, the stats are:

•   ALDI USA has 955K Instagram followers; 184K on TikTok

•   Dollar Tree has 675K Instagram followers; 76.6K on TikTok

•   Five Below has 706K Instagram followers; 214.3K on TikTok

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81% Discount-Shop at Least Once a Month

People aren’t just hitting the discount shops for an occasional find. Rather, SoFi’s discount shopping research uncovered that these retailers are quickly gaining traction as routine destinations for shoppers.

•   81% of respondents shop at discount stores at least once a month.

•   38% — practically four out of ten people — shop at discount stores weekly.

•   14% of respondents say you’ll find them shopping at discount stores several times a week. (These may be people who are saving money daily with their shopping habits.)

Compelling find: Close to half of high-income earners (those making $100,000+ a year) say they shop at discount stores at least weekly.

Inflation Surge Drives Shoppers to Discount Stores

If you’re wondering why discount shopping is surging, consider the economic state of our union. After inflation rates fell month after month for a solid year, July 2023 saw an uptick in prices that surely set some people on edge. (Inflation in July 2023 increased 3.2% from July 2022.)

What’s more, the cost of living is soaring. Social Security recipients enjoyed a cost of living adjustment (COLA) to the tune of 8.7% in 2023, one indicator of how steeply the price of, well, everything has been rising.

Indeed, consider this:

•   Nearly two-thirds of discount shoppers (63%) say inflation and rising costs have prompted them to shop at discount stores over the last 12 months.

•   In addition, nearly half of discount shoppers have ramped things up, with 49% saying they are hitting discount stores more frequently than they did before the inflation surge.

When it comes to defending one’s paycheck against price hikes, bargain-hunting is a smart maneuver. ”Inflation is real for just about all of us,” says David Bakke, a consumer finance expert and writer at personal finance blog Dollar Sanity. “My discount shopping has definitely increased. I find myself spending a lot more time at ALDI, Dollar General, and the like.”

Indeed, inflation is making over the way Americans shop. SoFi’s discount shopping data shows this significant stat:

•   40% of respondents say they “always” search for ways to save on their purchases when shopping.

•   Only 2% said they never search for ways to save.

Here are some of the leading tactics discount shoppers have used to cut costs:

•   41% have used couponing websites.

•   40% have subscribed to company emails.

•   31% have followed a company or brand on social media.

•   21% have joined a Facebook group or other online community.

•   18% have followed an influencer on social media who talks about discount shopping.

More Than Half Discount-Shop to Benefit Their Budget

In these challenging economic times, many consumers are embracing budgeting as a way to manage their finances. Almost six out of 10 discount shoppers (58%) say one of the biggest benefits of shopping at discount stores is the ability to stick to a budget.

This holds true for 62% of those with household incomes under $75K, as well as 46% of those pulling in $100K or more.

Other reasons to love these retailers? SoFi’s discount shopper respondents said:

•   Regular availability of discounted products (47%)

•   The convenience and accessibility of discount stores (46%)

•   The ability to find trendy or seasonal items at lower prices (45%)

Another shopping pattern that SoFi’s discount shopping survey uncovered: A significant number of discount shoppers are making most of their purchases from these lower-priced retailers:

•   36% make more than 50% of their purchases at discount stores.

•   Almost one in 10 (9%) of those with household incomes of $150,000 or more do more than 75% of their shopping at discount stores.

First on the Discount Shopping List: Groceries

It’s no secret that food prices can trigger sticker-shock, and that’s not just for luxuries like a pumpkin spice latte. Overall, food prices are ratcheting up 5.9% this year, per the USDA’s numbers, which may explain why consumers are hitting the low-cost stores for items they might otherwise buy at a standard supermarket.

According to the SoFi discount shopping research, groceries are the most common purchase made by discount shoppers: 78% buy groceries at discount stores.

And no wonder: These stores often have an array of staples and snacks, from coffee to cookies, and some are putting a health spin on things, as with Dollar General’s “Better for You” selections. Shopping at discount stores can be a solid way to save money on food.

“I shop at discount grocer ALDI,” says Melissa Cid, consumer savings expert with MySavings.com. “Chips, peanuts, cookies, yogurt, and ice cream are 25% to 50% cheaper than at traditional grocery stores.”

After food, the next most popular items:

•   Fashion and apparel: 58%

•   Beauty and skin care: 49%

•   Home decor: 40%

11% Splash Out When Discount Shopping

Think shoppers are only grabbing cereal, socks, and a bottle of shampoo? Not necessarily.

Yes, many people are hunting for lower-priced essentials at the discount stores, but super-low prices are also leading to big-ticket purchases, for some. According to SoFi’s survey:

•   11% of discount shoppers say the most expensive item they’ve purchased at a discount store in the past 12 months cost $250 or more.

Here is what shoppers say are some of the priciest items they purchased at a discount store:

•   18% say it was a fashion/apparel item.

•   16% say it was an electronic item.

•   13% say it was a home decor item.

“Tech gadgets and home essentials top the list of items that I purchase from discount stores,” explains Thomas Paddock, an Amazon FBA Six-Figure Seller and the founder of Learn Retail Arbitrage, an online selling resource. “These categories often carry substantial markups in conventional retail outlets. Discount stores can offer high-quality items at a more
reasonable cost.”

There is, however, a bit of a gender gap when it comes to shopping for certain items at discount stores:

•   36% of men have purchased electronics vs. 27% of women.

•   67% percent of women have made clothing purchases vs. 44% of men.

•   Nearly 3x as many men (22%) have made sports/outdoor purchases vs. women (8%).

Finding Fashion at Discount Shops? Yes, Says Gen Z

The SoFi discount shopping stats reveal that 67% of young people (aged 16-24) have purchased fashion and apparel items at a discount store within the last year.

Given that Gen Z is broadly recognized as the first digitally native generation, it’s probably no surprise that social media may have led many of them to these style purchases:

•   30% of respondents aged 16-24 have followed an influencer on social media who talks about discount shopping, vs. 18% of total respondents.

And the presence these retailers have on social media channels is significant. On Instagram, as of September 2023, T.J. Maxx has 2+ million followers, Nordstrom Rack has 1+ million followers, and Ross Dress for Less has 537K followers. All three have tens of thousands of followers on TikTok.

Almost 50% of Shoppers Seek Seasonal Wares

Seasonal and holiday shopping is (very) big business in the U.S., with Halloween spending, for instance, totalling $10.6 billion in 2022.

“Here today, gone tomorrow” items are part of the allure of discount stores, where goods can be found at a rock-bottom price. Consider these numbers from the SoFi survey:

•   45% of discount shoppers say one of the biggest benefits of discount stores is the availability of lower-priced trendy or seasonal items.

•   65% of discount shoppers are hunting for clearance or end-of-season items.

•   70% of women look for clearance and end-of-season deals at discount stores vs. 56% of men.

More Than Half of Discount Shoppers Spend Serious Time Bargain-Hunting

The new wave of smart shoppers are dedicated bargain-hunters. They will invest hours to get a great deal. In fact, more than half (51%) will spend between one and three hours extra to find savings or specific items at discount stores. A dedicated 4% are willing to spend five hours or more. (Of these, 63% have a household income of less than $50,000.)

Discount Shoppers Also Prioritize Availability

Low prices are the leading reason for the popularity of discount shopping, but availability of desired products is another big incentive:

•   52% head to these retailers for the specific items they know they can find there.

Whether it’s a favorite energy bar or shower gel, items that are part of a person’s usual shopping list are a big draw for discount shoppers.

This is especially true of the deep-pocketed respondents to the SoFi survey. Why spend top-dollar on your favorite matcha beverages or other small luxuries when you can buy them for much less?

•   60% of the highest earners (household income of $150,000 or more) say one of the reasons they shop at discount stores is for specific items they know they can find there.

There are a good number of impulse buyers among the aisles though:

•   Almost one in five (19%) discount shoppers say they don’t go to the stores looking for any particular item. Rather, they “go in without a plan and buy things that speak to them.”

As for the rest of the respondents to SoFi’s survey:

•   More than half of discount shoppers (51%) say they know what they need when they go to a discount store, but are open to buying items not on their list.

•   More than a quarter (26%) say they buy what they need and exit ASAP.

•   Only 3% say they just browse and rarely actually purchase anything.

And the Biggest Frustration With Discount Shopping Is…

Obviously, there is much to love about discount shopping, as detailed above. But, yes, there are a couple of pain points. Here, the two biggest downsides:

•   38% of discount shoppers say the items they want aren’t always available. That suggests that consumers would buy even more at these retailers if they could find everything they are hunting for.

•   22% say that the biggest downside is that the items are of a lower quality.

It seems that getting what you want, when you want it, may matter even more than an item’s quality.

That said, Thomas Paddock of Learn Retail Arbitrage contends that you can find good quality if you shop smart. “Contrary to general assumptions, not every item in a discount store is of inferior quality. Many times, these are overstock products or emerging brands,” he says. “Discount stores can be an avenue to discover value.”

The Takeaway

As inflation increases, shoppers of all income levels are finding that discount stores can serve their needs. Of the 1,500 consumers surveyed for SoFi’s Discount Shopping Survey in August 2023, 81% say they are visiting discount stores (think Dollar Tree, ALDI, and Five Below) at least once a month. Popular purchases are food, fashion, personal care, and home decor items.

What frustrates discount shoppers when seeking their budget buys? Lack of availability first and foremost, followed by lower quality of some goods.

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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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If you’re tackling school debt and looking for ways to maximize your tax refund, one avenue to consider is the student loan interest deduction. This benefit allows you to take a tax deduction for the interest you paid on student loans that you took out for yourself, your spouse, or your dependents. The deduction can lower how much of your income is taxed, which could result in a lower overall tax bill.

However, there’s a limit to how much you can deduct each tax year, and you must meet certain criteria in order to get the deduction. Let’s look at how the student loan interest deduction works and how to qualify for it.

Are Student Loan Payments Deductible?

Typically, when you repay a student loan, your monthly payment goes toward the original amount you borrowed plus origination fees (the loan principal) and the amount a lender charges you to borrow it (interest). With the student loan interest deduction, you are only allowed to deduct the amount you paid in interest, not the full amount of the loan payment.

Is Student Loan Interest Deductible?

The student loan interest deductible allows you to subtract up to $2,500 or the total amount of interest paid on student loans — whichever is lower — from your taxable income. Private and federal loans may qualify for this benefit. The deduction is considered “above the line,” which means you don’t have to itemize your taxes to take advantage of it.

Note that there are income phaseouts based on your modified adjusted gross income (MAGI). A borrower can claim the full credit if their MAGI is $80,000 or less ($160,000 or less if you’re filing jointly). The deduction is gradually reduced if your MAGI falls between $80,000 and $90,000 ($160,000 and $180,000 if you’re filing jointly). The deduction is eliminated for borrowers with a MAGI of more than $90,000 ($180,000 or more if you’re filing jointly).


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Who Can Deduct Student Loan Interest?

Not everyone is able to claim the student loan interest deduction. In order to be eligible for it, you must meet certain criteria:

•   You paid interest on a qualified student loan for you, your spouse, or your dependents in the previous tax year. (A qualified student loan is a loan taken out to pay for qualified education expenses like tuition, housing, books, and supplies. The loan must be used within a “reasonable period” after it’s taken out.)

•   You’re legally required to pay interest on a qualified student loan.

•   Your MAGI in the 2023 tax year is less than $90,000 (or less than $180,000 if you’re filing jointly).

•   Your filing status is anything except married filing separately.

•   If you’re filing taxes jointly, neither you nor your spouse can be claimed as a dependent on someone else’s tax return.

Your eligibility may be impacted if your employer made payments on your student loans as part of a work benefit.

What to Know About the Student Loan Interest Deduction Form

If you pay $600 or more in interest on qualified student loans during a tax year, your loan servicer should send you IRS Form 1098-E. This student loan tax form is usually sent out around the end of January.

If you don’t receive a 1098-E form, you should be able to download it from your loan servicer’s website. To find out who your loan servicer is, log on to the Federal Student Aid website, and the information will be listed in your dashboard. You can also call the Federal Student Aid Information Center at 800-433-3243.

Keep in mind that if you didn’t make payments on your federal student loans because of the Covid-related payment pause — or if you didn’t pay $600 in interest during the tax year — you may not get a 1098-E form. However, you can contact your servicer to find out how much interest you paid during the year if you’re planning to report it on your taxes.

Recommended: How Student Loans Could Impact Your Taxes

Additional Education Tax Breaks

The student loan interest deduction isn’t the only benefit worth knowing about. You may also want to see if you qualify for certain education tax credits, which represent a dollar-for-dollar reduction in your overall tax burden. They can directly lower the tax amount you owe. Here are two to consider.

American Opportunity Tax Credit

The American Opportunity Tax Credit (AOTC) is a credit for tuition and other qualified educational expenses paid during the first four years of a student’s college education. The credit is worth up to $2,500 per eligible student. Once your tax bill hits zero, you could earn 40% of whatever remains (up to $1,000) as a tax refund.

You must meet certain requirements in order to qualify for the AOTC. You must:

•   Pursue a degree or other recognized education credential

•   Be enrolled at least half time for at least one academic period beginning in the tax year

•   Have no felony drug convictions at the end of the tax year

•   Haven’t claimed the AOTC for more than four tax years

As with the student loan interest deduction, your income matters. To claim the full credit, your MAGI must be $80,000 or less ($160,000 or less if you’re filing jointly) in the 2023 tax year. The credit amount begins to decrease if your MAGI falls between $80,000 and $90,000 (over $160,000 but less than $180,000 if you’re filing jointly). The credit is eliminated if your MAGI is over $90,000 ($180,000 if you’re filing jointly).

Lifetime Learning Credit

The Lifetime Learning Credit (LLC) works a little differently. The credit is worth 20% of the first $10,000 of qualified educational expenses, or a maximum of $2,000 per year. Unlike the AOTC, which only applies to the first four years of a student’s college education, the LLC includes undergraduate, graduate, and professional schools, and courses needed to acquire job skills. There’s no limit to the number of years you can claim it.

However, the LLC has a lower income limit, which means it could be more difficult to qualify for. For instance, in 2022, the credit amount gradually decreased if your MAGI fell between $80,000 and $90,000 ($160,000 and $180,000 if you filed jointly) in the 2022 tax year. The credit was eliminated if your MAGI is $90,000 or more ($180,000 or more if you filed jointly).

Strategies to Lower Monthly Student Loan Payments

Borrowers looking to save beyond tax time may want to explore ways to lower their monthly student loan payments.

One option to consider is a Direct Consolidation Loan. This loan is offered through the Department of Education and lets you combine different federal student federal loans into a single loan, resulting in one monthly payment. It can also lower your monthly payment amount, allow you to switch from a variable to a fixed interest rate, and help set up loans that are eligible for forgiveness.

Another strategy to think about is refinancing your student loans with a private lender, resulting in one new loan, hopefully with a lower interest rate. Just realize that if you refinance a federal student loan, you will lose access to federal protections and programs, such as the Covid-related payment pause, the Public Service Loan Forgiveness program, and income-driven repayment plans. And if you’re refinancing to get a lower monthly payment, know that you may pay more interest over the life of the loan if you refinance with an extended term.

Recommended: 7 Tips to Lower Your Student Loan Payments

The Takeaway

The student loan interest deduction can lower how much of your income is taxed, which could result in a lower overall tax bill. Depending on your income, you can deduct up to $2,500 of the interest paid on your loans. If you earn more than $90,000 a year (or $180,000 if you’re filing jointly), you are not eligible. Education tax credits, like the American Opportunity Tax Credit and the Lifetime Learning Credit, could also help lower your tax bill. Like the student loan interest deduction, you must meet certain criteria to be eligible.

There are different strategies that may help you lower your monthly payments so you can save outside of tax time. A Direct Consolidation Loan, for example, lets you combine multiple federal loans into a single loan and switch from a variable to a fixed interest rate.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

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SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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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.

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.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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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