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How Mapping Student Debt Changes the Debate

Rich Legg | E+ | Getty Images

Only recently have economists begun to connect the student debt crisis to problems in the wider economy, from lack of spending to the slow housing recovery. Now a report from the New York Federal Reserve shows how the debt crisis in turn is rooted in the fallout of the recession.

The report, released Tuesday, details how student debt is distributed by state and which states have the largest numbers of delinquent borrowers. As the maps below show, there are clear regional trends: Borrowers in the best shape reside in relatively wealthy areas around the nation's capital, and the highest average debt loads and the highest rates of delinquency are in low-income states hit hardest by the foreclosure crisis, including Nevada and Florida.

The highest average debt is held by residents of Washington, D.C., with more than $40,000 per borrower, and Maryland, with $28,000. Both also are in the nation's top five for income, and in neither area are residents having much trouble paying back their loans.

By contrast, delinquency hot spots such as Louisiana, South Carolina and Mississippi have some of the lowest average incomes. In West Virginia, No. 49 for income, has the highest percentage of borrowers—18 percent—at least 90 days behind on payments.

But income is not the only predictor of who borrows most and repays least successfully, or who should be given a loan. Upper Midwesterners borrow freely: The share of residents with a credit report (the study is based on Equifax data) who have a student loan is well above average.

Yet these steady Midwesterners borrow relatively little and repay consistently. Why? It could be because these low-delinquency leaders—Wyoming, the Dakotas, Iowa and Minnesota—are middling in income but have among the lowest rates of unemployment.

While soaring college tuition and low barriers to borrowing have been widely blamed, the New York Fed's maps indicate that the worst employment environment in a generation has had a powerful effect. In fact, those states with high delinquency rates on student loans are having trouble with all kinds of debt. The regions on the map with the most red ink—the Deep South and Southeast—also have the highest consumer bankruptcy rates, according to the American Bankruptcy Institute.

The Fed's report further connects the dots between the student debt crisis and the nation's overall financial health. It also gives policymakers contemplating a bailout something to think about. While forgiving the debt of the most delinquent borrowers may encourage irresponsibility in debtors and lenders alike, the college grads swamped by debt may be victims of forces greater than their willingness to pay.

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