States Suffering the Most From Student Loan Debt
States suffering the most from student loan debt
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Education has long been considered the path to professional and financial success. It’s true that higher levels of education correspond with lower unemployment and higher earnings. But, a combination of sharp tuition increases and comparatively slow wage growth has created an environment in which many U.S. college graduates struggle to pay off their debt. As the 2020 presidential election approaches, whether or not to make public colleges and universities tuition-free has become a hot topic in the Democratic primaries.
According to data from the New York Fed, student loan debt is at a record $1.48 trillion, making it the second largest consumer debt category behind mortgages. Between 2005 and 2018, median annual earnings for full-time workers over 25 with at least a bachelor’s degree increased by approximately 31 percent. During the same time period, total national student loan debt and the average debt per graduate both increased by more than 270 percent. For these full-time bachelor’s degree holders over 25, student loan debt as a percentage of annual earnings stands at nearly 30 percent. Across all bachelor’s degree holders over 18 (including both full-time and part-time workers), the number is 37 percent.
Perhaps more concerning is that student loans have the highest delinquency rate of any loan category—more than double that for auto loans. The percentage of student loan debt in serious delinquency (90+ days late) skyrocketed in 2012, but fortunately has remained fairly flat since then. As of Q2 2019, 10.83 percent of student loan balances were 90+ days delinquent.
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According to research from the St. Louis Fed, student loan delinquencies increased during the Great Recession because of a weak labor market and increased tuition, especially at private, for-profit colleges. But private colleges aren’t the only institutions contributing to the student debt crisis. Student loan delinquencies over the past 25 years have corresponded with decreases in state and local support for higher education and the increased reliance on tuition to fund operations.
Historically, public universities have been funded through a combination of tuition revenue (paid for by students and their families) and state and local support sources known as “educational appropriations” (paid for by taxes, lottery revenue, mineral and resource extraction revenue, and state-funded endowments). Research conducted for the State Higher Education Finance FY18 report released by the State Higher Education Executive Officers Association (SHEEO) found that educational appropriations per full-time enrollment (FTE) still have not fully recovered from pre-recession levels.
At the state level, there is a statistically significant negative relationship between public higher education funding and student loan debt for graduates living in the state (note: student loan debt per graduate includes all college graduates living in a state, whether or not they attended college in that state). In states with lower levels of public support for higher education, the cost burden is shifted to students and their families who must incur more debt to pay for their education. Ballooning levels of student debt and delinquencies have also triggered fears of another financial crisis.
Politicians continue to debate the best path forward. On the far left of the political spectrum, there are proponents of making four-year public colleges and universities tuition-free by imposing various taxes on wealthy Americans or businesses. But given that public colleges and universities are not run by the federal government, getting individual states onboard with the plan won’t be easy.
More moderate Democrats support tuition-free community colleges and/or making four-year public colleges debt-free for students below certain income thresholds. GOP lawmakers, on the other hand, tend to support measures aimed at helping borrowers stay current on their loans and avoid default. Such mechanisms include lifetime borrowing limits, automatic paycheck deductions (similar to federal payroll taxes), and income-based caps on monthly payments.
While student debt is a nationwide problem, college graduates in some states fare better than others. To find which states have the most and least student debt, researchers at HeyTutor analyzed data from the Federal Reserve Bank of New York Household Debt Statistics report. To gain a more complete picture of college graduates’ financial situation across states, they also analyzed median earnings for all college graduates (full-time and part-time) based on data from the U.S. Census Bureau and public higher education funding statistics from the State Higher Education Executive Officers Association 2018 State Higher Education Finance report. Here’s what they found:
Takeaways
Across the entire U.S., the median earnings for all bachelor’s degree holders is $52,484. However, the average debt per college graduate in the U.S. is $19,593 or 37 percent of annual earnings.
The average debt per graduate varies widely by state, from a high of $31,489 in Mississippi to a low of $12,375 in Hawaii. States with the most debt per graduate are concentrated in the South.
In the states with the most debt per graduate, delinquency rates also tend to skew higher. There’s a significant positive relationship between average student loan debt and delinquency rate.
State and local support for higher education also varies widely by state, ranging from a high of $17,704 per student in Alaska to a low of $3,065 per student in New Hampshire. Students in states with more public support for higher education tend to carry less debt.
States with the most student loan debt
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1. Mississippi
Average student loan debt per graduate: $31,489
Median earnings for college graduates: $41,706
Debt as a percentage of annual earnings: 76%
Student loan delinquency rate: 18%
Public higher education funding per student: $5,301
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2. Georgia
Average student loan debt per graduate: $27,565
Median earnings for college graduates: $51,915
Debt as a percentage of annual earnings: 53%
Student loan delinquency rate: 13%
Public higher education funding per student: $8,574
Photo Credit: Alamy Stock Photo
3. Ohio
Average student loan debt per graduate: $26,571
Median earnings for college graduates: $51,684
Debt as a percentage of annual earnings: 51%
Student loan delinquency rate: 13%
Public higher education funding per student: $5,698
Photo Credit: Alamy Stock Photo
4. Louisiana
Average student loan debt per graduate: $26,273
Median earnings for college graduates: $48,795
Debt as a percentage of annual earnings: 54%
Student loan delinquency rate: 15%
Public higher education funding per student: $5,339
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5. South Carolina
Average student loan debt per graduate: $24,666
Median earnings for college graduates: $46,928
Debt as a percentage of annual earnings: 53%
Student loan delinquency rate: 13%
Public higher education funding per student: $5,840
Photo Credit: Alamy Stock Photo
6. Kentucky
Average student loan debt per graduate: $23,566
Median earnings for college graduates: $46,881
Debt as a percentage of annual earnings: 50%
Student loan delinquency rate: 16%
Public higher education funding per student: $6,781
Photo Credit: Alamy Stock Photo
7. Michigan
Average student loan debt per graduate: $23,525
Median earnings for college graduates: $51,527
Debt as a percentage of annual earnings: 46%
Student loan delinquency rate: 12%
Public higher education funding per student: $6,150
Photo Credit: Alamy Stock Photo
8. West Virginia
Average student loan debt per graduate: $23,414
Median earnings for college graduates: $43,516
Debt as a percentage of annual earnings: 54%
Student loan delinquency rate: 18%
Public higher education funding per student: $4,712
Photo Credit: Alamy Stock Photo
9. Alabama
Average student loan debt per graduate: $23,297
Median earnings for college graduates: $49,520
Debt as a percentage of annual earnings: 47%
Student loan delinquency rate: 15%
Public higher education funding per student: $5,758
Photo Credit: Alamy Stock Photo
10. Indiana
Average student loan debt per graduate: $23,168
Median earnings for college graduates: $50,294
Debt as a percentage of annual earnings: 46%
Student loan delinquency rate: 14%
Public higher education funding per student: $6,435
States with the least student loan debt
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1. Hawaii
Average student loan debt per graduate: $12,375
Median earnings for college graduates: $50,803
Debt as a percentage of annual earnings: 24%
Student loan delinquency rate: 9%
Public higher education funding per student: $16,937
Photo Credit: Alamy Stock Photo
2. Washington
Average student loan debt per graduate: $14,072
Median earnings for college graduates: $59,662
Debt as a percentage of annual earnings: 24%
Student loan delinquency rate: 9%
Public higher education funding per student: $7,421
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3. California
Average student loan debt per graduate: $15,131
Median earnings for college graduates: $60,940
Debt as a percentage of annual earnings: 25%
Student loan delinquency rate: 9%
Public higher education funding per student: $10,703
Photo Credit: Alamy Stock Photo
4. Wyoming
Average student loan debt per graduate: $15,176
Median earnings for college graduates: $47,546
Debt as a percentage of annual earnings: 32%
Student loan delinquency rate: 11%
Public higher education funding per student: $15,726
Photo Credit: Alamy Stock Photo
5. Utah
Average student loan debt per graduate: $15,276
Median earnings for college graduates: $47,092
Debt as a percentage of annual earnings: 32%
Student loan delinquency rate: 8%
Public higher education funding per student: $7,208
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6. Alaska
Average student loan debt per graduate: $15,423
Median earnings for college graduates: $56,914
Debt as a percentage of annual earnings: 27%
Student loan delinquency rate: 9%
Public higher education funding per student: $17,704
Photo Credit: Alamy Stock Photo
7. Massachusetts
Average student loan debt per graduate: $15,931
Median earnings for college graduates: $62,167
Debt as a percentage of annual earnings: 26%
Student loan delinquency rate: 8%
Public higher education funding per student: $8,965
Photo Credit: Alamy Stock Photo
8. Vermont
Average student loan debt per graduate: $16,740
Median earnings for college graduates: $40,592
Debt as a percentage of annual earnings: 41%
Student loan delinquency rate: 8%
Public higher education funding per student: $3,193
Photo Credit: Alamy Stock Photo
9. Montana
Average student loan debt per graduate: $16,822
Median earnings for college graduates: $40,244
Debt as a percentage of annual earnings: 42%
Student loan delinquency rate: 10%
Public higher education funding per student: $5,879
Photo Credit: Alamy Stock Photo
10. Colorado
Average student loan debt per graduate: $16,917
Median earnings for college graduates: $52,074
Debt as a percentage of annual earnings: 32%
Student loan delinquency rate: 11%
Public higher education funding per student: $4,479
Methodology & full results
The student loan statistics used in this analysis are from the Federal Reserve Bank of New York Household Debt Statistics report. Median earnings for college graduates are from the U.S. Census Bureau 2017 American Community Survey 1-Year Estimates. Public higher education funding statistics are from the State Higher Education Executive Officers Association 2018 State Higher Education Finance report.
For each state, the average student loan debt per graduate was calculated by dividing the total amount of student loan debt by the number of residents with a bachelor’s degree or higher. States were ranked by the resulting statistic.
