A new WalletHub study ranks borrowers nationwide to see who really has the highest student loan debt burden.
Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…
The interesting study
Defining which state has the highest student loan debt is not as easy as it sounds. States with large populations would obviously have the most total student loan debt. But that doesn’t mean that the student loan borrowers in those states are facing any more of a financial threat than borrowers in states with low populations.
So, with that in mind, the financial experts at WalletHub did a comprehensive study of 11 factors related to student loan debt. Then they used those factors to rank each of the 50 states, plus the District of Columbia.
The big result
If you take all 11 factors into account, these five states have the highest student loan debt burden in the nation:
- South Dakota
- Wes Virginia
- New Hampshire
At the other end of the spectrum, WalletHub’ study finds that these five states have the lowest student loan debt burden:
The fascinating details
To determine the highs and lows of student loan debt burdens, WalletHub looked at 11 different factors:
- Average student debt
- Proportion of students with debt
- Student loan debt-to-income ratio
- Percentage of student loan balances that are past-due or in default
- Percentage of student loan borrowers over age 50
- Unemployment rate of workers age 25 to 34
- Unemployment rate overall
- Availability of student jobs
- Availability of paid internships
- Grant programs available for undergraduates
- Presence of a “Student Loan Ombudsmen” law
Ombudsmen programs are state-run programs designed to help student loan borrowers who are facing challenges. Representatives are there to answer questions and help resolve disputes between borrowers and student loan servicers. Without that type of program, borrowers are left to fight loan servicers on their own without mediation. So, it makes sense that borrowers without access to these types of programs could potentially face bigger challenges.
Unemployment also has a big impact on student debt burdens. If there’s a high unemployment rate in your state or even just a high “youth” unemployment rate, then many college graduates will struggle to keep their loans out of default right after graduation. With most student loans, repayment starts within 6-9 months of when you graduate or leave school. That’s a small window of opportunity to get established in a job to begin repaying one or more student loans.
Finally, the availability of programs that can offset a borrower’s student loan debt burden plays a big role. Students that have more access to grants, student jobs, and paid internships must borrow less to afford their education.
What you can do
“Whether you live in a state with one of the lowest or one of the highest student loan debt burdens, what matters is how much your debt burdens you,” says April Lewis-Parks, Financial Education Director for Consolidated Credit. “The people that really need to pay attention to these types of statistics are high school students and their parents. If you live in a state that has one of the highest student loan debt burdens, you need to double your efforts to offset the cost of continued education.”
“By the time you have a sophomore in high school in your household, you should be talking about what they plan to do after graduation,” Lewis-Parks explains. “Don’t wait for your child’s senior year to start looking into grants, student work programs, and scholarships. Apply for every scholarship you can find and leave no stone unturned. That’s the only way to minimize the risk of student loan debt, especially if you live somewhere that your child may struggle to find a job once they leave college.”
Lewis-Parks also encourages parents with younger children to take this information to heart, as well. Parents need to set up a 529 college savings fund or similar college savings account. The more parents save, the less likely their children are to face problems with student loan debt in their 20s.
“It’s also crucial to avoid the trap of thinking you can’t start saving until you pay off debt,” Lewis-Parks continues. “If you have credit card debt that’s preventing you from making contributions to college savings, then you need to talk to a certified credit counselor. They can help you find a solution that will allow you to start saving sooner.”
Don’t let debt hold you back from achieving your savings goals. Talk to a certified credit counselor for a free debt and budget evaluation.