Student Loans Conditions Vary Across the Country

Student loan debt reflects the cost of an investment in human capital. The typical return on this investment is characterized by both higher wages and a more stable employment. College graduates and those with some college experience tend to have higher wages and lower unemployment rates than their counterparts with a high school degree or less. However, failure to repay student loan debt could impair a borrower’s access to other forms of credit restricting their ability to buy a home or a car.

Recent research from the Federal Reserve Bank of New York focuses on the geographical distribution of student loan debt. Higher than average student debt per borrower typically occurs in states along the coastal states of the country, while the majority of the country, especially those located in the middle of the mainland, tend to have lower than average student debt. The one exception is Illinois (i.e. Chicago).


Counter-intuitively, with the exception of Florida, Mississippi, and Louisiana, states with higher than average student debt per borrower tend to also have an average or below average percent of student loan balance that is seriously delinquent (90 or more days late). The majority of the states that have above average serious delinquency rates are also states with lower than average student debt per borrower.


Earlier research by the Federal Reserve Bank of New York illustrates that borrowers who are seriously delinquent on student loan are less likely to secure mortgage credit. However, the underlying reasons behind serious delinquency in student loan debt are not immediately clear. Some states that have a high share of seriously delinquent student debt also have an elevated unemployment rate or low employment growth. Conversely other states with strained employment indicators have below-average student delinquency rates. At the same time, some states with higher than average seriously delinquency rates also suffered the worst of the housing bust, but this is not the case across the 50 states, the District of Columbia and Puerto Rico. Moreover, the link between student loan delinquency and access to mortgage credit may not be causally related if those that are seriously delinquent on student debt tend not to apply for mortgage credit. Given the potential implications of student loan debt repayment for future housing demand, additional research on this topic should seek to establish the sources of student loan delinquency.

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