Michigan is 2021's 8th state with most student debt, study finds

Not all states are equal when it comes to the burden of student loans

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Michigan is the 8th state with the most student debt, per new report.

Michigan is the 8th state with the most student debt, per new report.

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With the average student loan debt reaching $37,000 per borrower, the personal-finance website Wallethub yesterday released its report on 2021's states with the most and least student debt.

Michigan is the 8th state with the most student debt nationwide.

Source: WalletHub

Clearly, not all states are equal when it comes to the burden of student loans. 

The growth of student loan debt affects the entire economy. In short, it delays the time people can buy a home, save for retirement and even start a family. These all have large economic consequences, according to University of Michigan Professor of Social Work William Elliott III. 

As far as tips for students looking to minimize the amount of debt they take out for higher education, Elliott suggests starting off at a two-year college. However, if your grades and career objectives lead you to a four-year college you might think of taking some electives at a two-year college instead. Just make sure the credits will transfer.

Another cost reduction strategy is to choose in-state college over out-of-state. Tuition is often a lot cheaper for in-state students, according to Elliott.

"Because of student debt, college has become a risky proposition for students and their families who too often take on a large share of the debt and carry it late in life," Elliott said in a statement. "This is not an education system designed to be the great equalizer in society, instead, it is part of a system that places some people at the top and others at the bottom."

Additionally, since becoming president in January, Joe Biden has cancelled more student loan debt than any other president, according to a Forbes article. When Elliott was asked if he agrees with Biden's plan to cancel $500 million in student loan debt, he said he supports the plan.

"I do support Biden’s plan and would probably go further," Elliott said in a statement. "What we know of debt, when we compare people who graduated from college, one with debt and one without debt, the kids with debt do worse in building assets. This is a question about equity and the ability of education to serve as an equalizer. No doubt, on average, getting an education is better than not getting an education regarding wealth accumulation. But, this comparison is not about education acting as the great equalizer, it speaks to whether education is worth it in the first place."

"Saying that to avoid real concerns about just having to provide another bailout again a decade or two from now, this policy needs to be married together with policies that seek to avoid reliance on debt in the first place. To some degree, Biden does do this through policies that would make two-year college free. I would suggest they go a step further and develop a long-term strategy, as well. One that would not only help people pay for a college of their choice (in contrast to two-year college policy which will only help those who are prepared to go to college and likely will push qualified poor students out of four-year college and into two-year college where the outcomes are not as good) while helping them prepare for college so they can go when the time comes. The policy I would suggest is Children Savings Accounts (CSA) coupled with a Baby Bond-like investment into the accounts."

The methodology behind the report is as follows: 

Two key dimensions, including 11 metrics, were used to determine the states that are friendliest toward student-loan debtors. Those dimensions were "Student-Loan Indebtedness" and "Grant & Student Work Opportunities" which included metrics like the average student debt and unemployment rate among population aged 25 to 34. 

Each state was ranked on a 100-point scale, 85 of which went to the student-loan indebtedness dimension and 15 of which went to grant and student work opportunities. Data used to create this ranking came from the U.S. Census Bureau, the Bureau of Labor Statistics, the Institute for College Access & Success, the Federal Reserve Bank of New York, Council for Community and Economic Research, the U.S. Department of Education College Affordability & Transparency Center, Internships.com, LendEDU, The Pew Charitable Trusts and Indeed.