One of the nuances that often gets lost in discussions about student debt is that the biggest borrowers aren't necessarily the riskiest borrowers. There are many people who take out modest loans but have trouble paying them back, either because they fail to graduate or because their degree doesn't open many doors in the job market.

A statistical case-in-point: According to the Federal Reserve Bank of New York, 17 percent of all student borrowers are 90 days delinquent on their payments, yet only 11.2 percent of all loan balances are that far behind. That gap suggests there are lots of small-time debtors in trouble these days.

Looking at the geography of student borrowing teaches us a similar lesson. As part of its most recent report on household credit, the NY Fed has produced a neat pair of maps detailing which states have the highest education debt burdens and which have highest delinquency rates. The two pictures overlap less than you might expect.

As shown below, student borrowers in the mid-Atlantic, parts of New England, the Southeast, Illinois, and California tend to have above-average balances compared to the rest of the country.

NYFed_Average_Student_Loan_Map.png More

Yet they also have a superior record of paying them back. Delinquency rates in Massachusetts, New York, Pennsylvania, New Jersey, Connecticut, Delaware, Virginia, Illinois, and Washington, D.C. are lower than average, even though their debt levels are high. Meanwhile, borrowers in low-debt states like Nevada, New Mexico, and Idaho have some of the worst payment records in the country.

NYFed_Student_Loan_Delinquencies.png More

What's going on?



It's possible that students are paying lots of money for private schools in high-debt, low-delinquency states that equip them well enough to handle their loans. Graduates of elite schools also tend to congregate in and around the Beltway, which would help explain the debt levels in Maryland, Virginia, and D.C. itself.

Then there's the job market. If you borrow cautiously for your education, but end up in a state like Mississippi or West Virginia with a high unemployment rate, you might end up in bad spot with your loans. That's straightforward enough.

Another factor may be the echoes of the housing bust. This is often missed, but it's not young student borrowers having the most difficulty paying off their debts. It's 30-to-49-year-olds, who may also be coping with other financial obligations gone sour. Foreclosure and mortgage delinquency rates in Florida and Nevada -- two big student loan trouble spots -- are still quite high. And, I don't think coincidentally, more than a quarter of delinquent student borrowers are also more than 90 days behind on house payments. They're not just sinking in education debt. They're sinking in debt, period.

And finally, it might be a matter of staying in school. When you talk to higher-ed policy folks, one of the first things they'll tell you is that student debt delinquencies or defaults don't just happen because students borrow too much. Often, it results from a lack of information. When students drop out of school -- which, at many institutions, is the norm rather than the exception -- they usually don't get an exit interview from an administrator explaining their debt repayment options, such as income-based programs. So they end up trying to pay it back too quickly and fail. I wouldn't be surprised if that scenario were replaying itself often in low-debt, high-delinquency states.

In any event, the point remains: When it comes to the student loan mess, it's not just the size of the debt that matters.









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