The Federal Reserve Bank of New York reported that Americans had an outstanding student debt of almost $1.2 trillion in the first quarter this year. The figure is $78 billion higher than the student debt recorded in the same period last year or three times a decade ago.
The amount of student debt is increasing because many are going to college and some people are just accumulating more debt. Some politicians are concerned that the United States is experiencing a growing student debt crisis.
Currently, approximately 11% of all student loans are in default, which means a significant number of college graduates entering the labor market are struggling to obtain a good paying job and repay their student debt.
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It is a fact that obtaining a higher education reduces the risk of joblessness and increases the opportunity to obtain a good paying job. But many college graduates entering the labor market realized that a college degree alone cannot guarantee financial security.
WalletHub noted that location is important factor in determining the value of a college degree. Students must be selective where to pursue higher education to attain financial security. A student should consider not only the potential salary for a certain profession, but also the cost of living in a particular area to ensure that he or she would have extra money for saving and to pay off student debt.
“Student-loan borrowers will fare better in states that produce a combination of lower college-related debt levels, stronger economies and higher incomes,” according to WalletHub.
Overall ranking of best states for student debt
WalletHub used seven metrics to compare and determine best and worst states for student debt. The ten best states include Utah, Wyoming, North Dakota, Washington, Nebraska, Virginia, Wisconsin, Minnesota, Colorado, and South Dakota.
Based the study the top five states with the lowest average student debt include New Mexico, California, Nevada, District of Columbia, and Oklahoma. The states with the lowest proportion of students with debt are Nevada, Hawaii, Louisiana, Wyoming, and Alaska.
The states with the lowest student debt as a percentage of income adjusted by cost of living include Wyoming, Utah, North Dakota, Minnesota, and Iowa. The states with the lowest unemployment rate for people aged 25 to 34 include North Dakota, Utah, South Dakota, Nebraska, and Minnesota.
The top five states with the lowest student-loan balances in past-due or default status are Wisconsin, North Dakota, South Dakota, Utah, and Minnesota. The states with te lowest percentage of student-loan borrowers in past-due or default status are Vermont, South Dakota, Minnesota, North Dakota and Wisconsin.
How to minimize student loan debt
Linda M. Anderson, director of student financial aid at Carnegie Mellon University said it is important to plan early. According to her parents, must save for college while their children are young. Students and parents should also start researching for outside scholarships while in the Middle or High School to minimize the need to borrow.
“Minimizing student debt is dependent upon understanding overall aid grant and scholarship eligibility. If the student and parent understand the net price of a college early on, they will be better prepared to make the right financing choices,” said Anderson.