Virginia would seem to have the biggest student loan problem of almost any state: The average student borrower owes $28,467, third most in the country.
But a new analysis from the left-of-center think tank Center from American Progress finds that Virginia and other states with high college graduation rates face less of a student-debt problem than states with poor graduation rates, even though they might have higher overall debt.
Virginia has a very high share of college graduates — 41 percent of adults have at least an associate’s degree — who are better prepared financially to manage debt than dropouts, who don’t get the economic benefit of a diploma. Virginia has just $13,785 in student debt per graduate, according to the think tank, which is the 11th best in the country.
Debt per graduate is a helpful way to quantify the student debt problem, according to Ben Miller, the Center for American Progress scholar who wrote the analysis, because the majority of problems repaying student debt are borne by people who did not graduate.
“The point of student loans is to borrow against your future income, and we know that people who successfully graduate tend to fare much better in repayment than those who do not,” Miller told the Washington Examiner.
The fate of non-graduates is a top concern of analysts tracking the rapid rise of student debt in the U.S., which now eclipses $1.1 trillion. Default rates also have shot up, but it’s not graduates who are defaulting. The vast majority of defaulters failed to graduate or received some kind of certificate, rather than an associate’s or bachelor’s degree.
Using state-level data on student debt and borrowers from the White House and statistics on graduates from the Census Bureau, Miller came up with the debt per graduate metric, an admittedly rough gauge of the student debt problem in each state.
By that measure, Louisiana performs the worst of any state, with $21,917 in debt per graduate. Only 26 percent of adults between ages 18 and 65 in Louisiana have an associate’s degree or higher. As a result, its debt per graduate is not far from its debt per borrower, which is $26,250.
Mississippi is not far behind, with $21,910, and then Georgia, with $21,066.
On the flip slide, Hawaii’s debt burden per graduate was roughly half that, at $10,181. Wyoming, Washington and Utah also had under $12,000 in debt per graduate.
Miller said the point of the ranking was to “introduce the concept that student loans are not inherently bad.” If they finance education, graduation and higher earnings, they can be a useful tool.
Louisiana’s challenge, he said, is less a student debt problem than a college completion problem.
Some economists, such as Federal Reserve Chairwoman Janet Yellen, have raised the possibility that high levels of student debt might be harming economic growth in more ways than just causing overburdened borrowers to default. There is some evidence that people with lots of student debt might be postponing purchases of cars or homes and otherwise delaying major life decisions.
Miller acknowledged those concerns, but said that his paper was meant to address the immediate problem of borrowers defaulting.
