Student loan debt is higher than ever, and shows no signs of going away anytime soon. However, some parts of the country are being hit harder than others by the rising debt levels. For a variety of reasons, such as high unemployment, low wages, or a high cost of living, borrowers in some places are having a tough time making their loan payments.
Schools.com recently tabulated a list of the worst states for repaying student loans, based on factors such as average salaries, cost of living, student debt-to-income ratios, and default rates.
Here are the five worst states for repaying student loans, and some of the reasons that each one ranks so poorly.
5. New Jersey
The Garden State has one of the highest costs of living in the U.S., making it tough for many residents to find disposable income to pay student loans. Not only is housing particularly expensive in New Jersey, with the average home listed for more than $411,000 (fourth highest in the U.S.), but property taxes are the highest in the nation, averaging 1.89% of the home's value per year.
Although New Jersey's average annual income of $52,800 is well above the national average of $46,400, it is simply not enough to keep up with the high cost of living there.
More residents carry student loan debt that in most other states, and those who do have rather high debt. According to data from the Project on Student Debt, 65% of college graduates in New Jersey have debt and the average debt load of $29,287 ranks eighth nationally.
4. New Hampshire
New Hampshire has one of the highest rates of student debt in the U.S., and those who graduate with debt owe more than most. In fact, the state ranks second in the U.S. in terms of the proportion of students who graduate with debt (74%) and the average debt load ($32,698).
Cost of living is also very high, with expensive housing and a property tax rate that is a close second to New Jersey's. When you combine all of that with the fact that New Hampshire has one of the worst debt-to-income ratios in the nation, it's no wonder residents tend to have trouble paying back debt.
Iowa has one of the worst student loan default rates in the country (17.3%), which might be surprising since the cost of living in the Midwest is much lower than in the Northeast.
However, two very significant factors work against student loan borrowers in Iowa. First, the average debt load is $29,456, which is sixth in the U.S., and 71% of the student population graduates with loans. Second, incomes are relatively low, at just over $40,000, well under the national average.
2. Rhode Island
Rhode Island has one of the highest costs of living in the country, with a cost of living index of 120.9 (100 is the average). Rhode Island incomes also don't really make up for the higher costs, with an annual average of about $49,000, just over the national average.
That leaves little money left after covering basic living expenses. In addition, the average debt load is pretty high at $31,156, which ranks in the top five nationwide.
Maine takes the top spot here for a combination of negative factors. A below-average income level of $41,440, or about 11% less than the national average, combined with a cost of living index of 109.7, means Maine is an expensive place to live, but a tough place to make money.
With an average debt load of more than $29,000, it's surprising the student loan default rate of 12.8% in Maine isn't even higher.
A couple weeks ago, we also examined the five best states for repaying student loans, and found that with one exception, all were in the western half of the country.
In direct contrast, all but one of the states on this list (Iowa) are in the eastern half of the country. Generally, the East Coast has a high cost of living and tuition. But incomes generally aren't proportionally higher. So what you have is high payments on mortgages and other expenses without much more income, leaving less money to pay student loans.
However, all the information about these states is very general. For example, there are certainly many people in Maine who earn more than enough money to cover all of their expenses, including their loan payments. And, conversely, there are undoubtedly people in Utah (No. 1 on the "best" list) who are struggling to make ends meet.
The point is that, overall, the costs versus the potential earnings in the best states, combined with other factors like the cost of living, give borrowers the best opportunities to successfully manage their debt.