Student debt is the second-most common type of debt in the country, with more than $1.34 trillion currently owed to education costs according to the Federal Reserve Bank of New York.
That figure is $34 billion higher than it was months ago, at the close of 2016. With student debt estimates rising across the country – with nearly roughly 11 percent of those debts in delinquency or default – how does Virginia compare to the national average?
Fairly well, according to a study released this week by WalletHub.
Out of the 50 states and District of Columbia, Virginia ranked 42nd overall, and 41st in student indebtedness.
Nearly 60 percent of Virginia students exit higher education with some amount of debt. WalletHub estimates the average student debt statewide is just under $28,000, with 9 percent of that debt in delinquency or default.
Some of the key factors keeping student debt down in the state, according to WalletHub analysts, are the low 3.8 percent unemployment rate of residents between 25 and 34 and the higher availability of student jobs and paid internships.
Not only are unemployment rates down for the target age range but homeownership among those with debt is higher in Virginia than throughout the country, according to WalletHub analyst Jill Gonzalez.
“There is a significant correlation between student debt burden and homeownership rates. As you can see in the graph, states with some of the lowest student debt burden have some of the highest homeownership rates and vice versa, although for most states this is still mixed. The homeownership rate in Virginia is 38.65 percent among individuals aged 25 to 34.”
What can be done to make student debt even lower? Gyan Pradhan, an economics professor at Eastern Kentucky University, said that colleges and universities should spend less of administration, athletics and facilities and focus on their primary function.
“Investment in academic programs should be the single most important priority for academic institutions,” Pradhan wrote in the study. “…Evidence suggests that massive growth in spending in such non-academic areas have contributed significantly to the inordinate growth in higher education spending.”
When students leave colleges and universities with higher-than-average debt, it ultimately impacts their futures for decades, Pradhan states. If a person is paying more money towards educational debts each month, it’s much harder to save for retirement and make major purchases such as a new car.
“This reduction in savings will result in lower living standards in the future,” Pradhan wrote.
Parents of students looking to enter colleges and universities in coming years should also consider indebtedness in states outside of Virginia as WalletHub suggests. The study indicates that future borrowers typically “fare better in strong-economy states with low college-debt-to-income ratios.”
Which states topped the list for highest student debt rates? Ohio, Mississippi, Pennsylvania, West Virginia and New Hampshire took the top five spots, respectively.
Read the full study here.
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This article was published in partnership with WYDaily’s sister publication, Southside Daily.
