Ten States With the Most Student Debt

Average student debt levels have skyrocketed in recent years, reaching nearly $30,000 in 2012 from $18,650 in 2004. With debt levels swelling, President Barack Obama has recently addressed the issue, proposing an option to reduce monthly payments to 10% of a person’s income.

In addition to growing debt levels, a larger proportion of students are taking out loans, increasing from 67% in 2008 to 71% in 2012. The states with the highest student debt per borrower also had among the highest proportion of students with debt. Of the 10 states with the highest average student debt, seven also had the highest proportions of students going into debt. Based on data from the Institute for College Access and Success, 24/7 Wall St. examined the 10 states with the most student debt.

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Interestingly, some states with the highest levels of student debt tended to have lower levels of total debt, including mortgage, credit card, and auto debt. This may be due to the fact that higher student debt discourages future borrowing. According to Ann Marie Wiersch, senior policy analyst at the Federal Reserve Bank of Cleveland, “If you look at debt-to-income ratios, it’s not surprising that someone with the burden of student debt faces challenges with purchasing a home or a vehicle.”

States with the highest debt levels in 2012 were disproportionately located in the Northeast, where private schools are more prevalent than in other parts of the country. More prestigious schools with higher tuition on the east coast may lure students who could otherwise attend a less known — but also less expensive — school that provides more financial aid.

The explosion of student debt comes at a time when wages have stagnated, making it difficult for graduates to repay their loans. To make monthly loan payments, graduates have two options: make smaller payments and extend the life of the loans or forgo saving money for emergencies and retirement. Indeed, low 401(k) enrollment is an indicator that recent graduates may be less prepared for retirement than previous generations.

This may not be as big of a problem as people think, however. According to a recent report by the Brookings Institution, monthly student loan payments may account for a smaller proportion of monthly income than is commonly believed, making loan repayment more manageable. Critics of the study argue that the conclusion of the Brookings Institution report may downplay the social costs of student loan debt.

Student loan growth is not the only trend to watch. “The fact that delinquencies and defaults are also rising is a significant factor,” Wiersch said. This creates challenges for certain borrowers who dropped out of school or can’t find a job.

High debt levels also mean that graduates have to spend their money paying off debt rather than spend it as consumers and stimulate the economy. There are also concerns about the impact this may have on future wealth inequality between those who graduated from school with debt and those who graduated without debt. “The average credit score of someone with student debt is lower than someone without debt,” Wiersch said, making it more difficult for indebted individuals to qualify for other loans.

One way student loans interfere with Americans’ long-term financial plans appears to be through the housing market. According to a survey by the National Association of Realtors, student loans were an obstacle to homeownership with 77% of people surveyed.

Using data from the report, “Student Debt and the Class of 2012” published by The Institute for College Access and Success, 24/7 Wall St. reviewed the 10 states where students graduated with the most debt. TICAS also provided data on the proportion of students with student debt in 2012 and in the preceding decade. We also reviewed data on educational attainment and median annual earnings from the U.S. Census Bureau. Unemployment rate figures are from the Bureau of Labor Statistics and are as of April. Student loan default rates come from the U.S. Department of Education. Credit Karma provided other debt figures.

These are the states with the highest average student debt.

10. Michigan
> Class of 2012 average debt: $28,840
> Class of 2012 pct. with debt: 62% (19th highest)
> Median earnings with bachelor’s degree: $46,688 (20th highest)
> Avg. total debt: $51,038 (6th lowest)

Students graduating in Michigan in 2012 had nearly $29,000 in student debt, the 10th highest average amount in the country, and 54% higher than in 2004. Michigan’s unemployment rate for people ages 20 to 24 of 8.2% in 2013 was the eighth lowest in the country and may be indicative of promising employment prospects for that age group. However, the median earnings of Michigan residents with at least a bachelor’s degree were just in line with the national median. Weak job growth in Michigan of less than 1% in the 12 months before April will likely make it harder for many students to repay their loans. Fortunately, Michigan residents have not significantly accumulated other types of debt, as their average debt load was the sixth lowest in the country at roughly $51,000 in 2013.

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9. Ohio
> Class of 2012 average debt: $29,037
> Class of 2012 pct. with debt: 69% (tied-6th highest)
> Median earnings with bachelor’s degree: $47,124 (19th highest)
> Avg. total debt: $52,539 (10th lowest)

Nearly 70% of those graduating in Ohio in 2012 had student debt loads averaging roughly $29,000 at the beginning of their careers. For those who remain in Ohio after graduation, the ability to repay these loans may prove difficult given the 13% unemployment rate for residents aged 20 to 24 in 2013. This was among the higher rates in the country. Additionally, as of 2012, the typical earnings of residents with a bachelor’s degree of $47,124 was below the national median. Slow job growth in the state may mean graduates will have to look for work outside of Ohio. For many recent graduates, the issue of student loans could not be more pressing: Ohio had one of the highest student loan default rates in the country among recent graduates as of last year.

8. New Jersey
> Class of 2012 average debt: $29,287
> Class of 2012 pct. with debt: 65% (11th highest)
> Median earnings with bachelor’s degree: $59,550 (the highest)
> Avg. total debt: $73,613 (11th highest)

New Jersey had the highest median earnings of any state for residents with a four-year college degree, at nearly $60,000 in 2012. One factor that may drive up earnings in the state is its proximity to the major metro areas of New York and Philadelphia. Despite the state’s high earnings, graduates in New Jersey faced an average debt burden of $29,287 in 2012, more than 80% higher than in 2004. Many New Jersey residents also have other kinds of debt. State residents had nearly $74,000 in per capita total debt in 2012, one of the highest total debt averages in the U.S.

7. Maine
> Class of 2012 average debt: $29,352
> Class of 2012 pct. with debt: 67% (9th highest)
> Median earnings with bachelor’s degree: $40,466 (5th lowest)
> Avg. total debt: $75,403 (9th highest)

Students graduating from schools in Maine may have a hard time repaying their loans if they remain in the state. Median income among state residents with a bachelor’s degree was just $40,466 as of 2012, the fifth lowest figure in the country that year. A double-digit unemployment rate among residents ages 20 to 24, coupled with weak job growth of 0.9% during the 12 months preceding April, may also make it challenging for residents to pay off their loans. Maine residents hardly limited their borrowing to student debt. Maine’s consumer debt per capita was ninth highest of any state, and it included the eight highest levels of both credit card and mortgage debts, according to Credit Karma figures.

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6. Iowa
> Class of 2012 average debt: $29,456
> Class of 2012 pct. with debt: 71% (3rd highest)
> Median earnings with bachelor’s degree: $44,862 (25th lowest)
> Avg. total debt: $52,601 (11th lowest)

Some 71% of graduates from Iowa schools in 2012 had student loans, a higher rate than in all but two other states. In addition, indebted Iowa students had one of the highest debt burdens in the country. Still, the average student debt rose by just 22% between 2004 and 2012, less than in most other states. Iowa had relatively low unemployment in each of the last two years and one of the nation’s lowest underemployment rates, at 9.2%. Despite the slower debt growth and the relatively strong job market, many residents struggled to pay off their loans. More than 12% of borrowers who entered into repayment in fiscal 2011 defaulted within two years, one of the highest rates in the nation.

5. Rhode Island
> Class of 2012 average debt: $31,156
> Class of 2012 pct. with debt: 69% (tied-6th highest)
> Median earnings with bachelor’s degree: $52,221 (8th highest)
> Avg. total debt: $65,161 (19th highest)

Four-year graduates from schools in Rhode Island had some of the higher earnings prospects in the country. A typical Rhode Island resident with a bachelor’s degree earned more than $52,000 in 2012. This may have made college students more willing to take on debt, as roughly 69% of 2012 graduates from the state’s schools took out loans. Not only are more students taking on debt, but between 2004 and 2012 average debt burdens increased 60%. If graduates decide to remain in Rhode Island, they may find it more difficult to pay their debt given that the state’s unemployment rate for recent college graduates was 21.5%, the highest rate in the country.

4. Minnesota
> Class of 2012 average debt: $31,497
> Class of 2012 pct. with debt: 70% (tied-4th highest)
> Median earnings with bachelor’s degree: $50,065 (14th highest)
> Avg. total debt: $66,595 (16th highest)

Minnesota had one of the most well-educated populations in the nation as of 2012. More than 92% of the state’s population aged 25 and over had at least a high school diploma, one of the highest rates in the U.S., while roughly a third of adults had at least a bachelor’s degree, also among the highest figures nationwide. Yet in order to pursue an education, many of the graduates from Minnesota schools had to take out large amounts of debt. Seventy percent of the class of 2012 graduated with student loans, among the highest rates in the nation. Student debt totals rose by 61% between 2004 and 2012, from an average of $19,580 to an average of $31,497.

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3. Pennsylvania
> Class of 2012 average debt: $31,675
> Class of 2012 pct. with debt: 70% (tied-4th highest)
> Median earnings with bachelor’s degree: $48,200 (17th highest)
> Avg. total debt: $58,026 (22nd lowest)

Like many states on this list, Pennsylvania’s average total debt level was below the national average. An average student loan, on the other hand, far exceeded the national average of $29,400. Student debt has increased dramatically, ballooning 62% between 2004 and 2012. High average student debt, and low median earnings for residents with bachelor’s degrees may discourage recent graduates from taking on other forms of debt. Average debt for all types of loans was just $58,026, lower than most other states. With an unemployment rate above the national average, and particularly high jobless rates among recent college graduates, former students may find it difficult to stay in the state after graduation. If students decide to remain in-state and repay their student loans, Pennsylvania’s economy could feel the pinch as graduates allocate money to repayment rather than consumption

2. New Hampshire
> Class of 2012 average debt: $32,698
> Class of 2012 pct. with debt: 74% (2nd highest)
> Median earnings with bachelor’s degree: $50,525 (13th highest)
> Avg. total debt: $53,818 (15th lowest)

While graduates from New Hampshire’s higher education institutions faced the second highest debt levels in 2012, the state’s economy may be well-suited to help students shrug off their debt burden. Nearly 35% of the population 25 and older had at least a bachelor’s degree in 2012, one of the higher figures in the country. Moreover, median income of those with a four-year degree was above the national median. In addition, the state had one of the lower unemployment rates among 20-24 year olds in the country, as well as strong recent job growth, both of which indicate that recent college graduates who remain in New Hampshire are likely to find quality jobs. Additionally, the state had the third lowest default rate among those with student debt, likely due to the availability of jobs and high incomes.

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1. Delaware
> Class of 2012 average debt: $33,649
> Class of 2012 pct. with debt: 56% (19th lowest)
> Median earnings with bachelor’s degree: $49,550 (15th highest)
> Avg. total debt: $71,294 (12th highest)

Graduates from colleges and universities in Delaware began their careers with the highest debt burden in the country in 2012. Student debt increased 128% between 2004 and 2012, more than in any other state during that time. Moreover, the proportion of students who took on student loans had risen 11 percentage points over that time, the largest such increase in the country. Above-average job growth has helped keep the general unemployment rate low in Delaware. However, the unemployment rate among 20 to 24 year olds, which includes recent college graduates, was 15.6% in 2013, one of the highest nationwide. Further, Delaware’s total debt level of more than $71,000 per capita was one of the higher debt burdens in the country. With median earnings for those with a bachelor’s degree trailing behind the national average, graduates may find monthly loan repayments difficult.