The Best and Worst States for Student Loan Debt

August 9, 2016
Jared Kaltwasser

The average dentist enters practice with six figures worth of student loan debt. What about their non-dentist peers? A new report offers insights.

You know the feeling: You mention your profession at a cocktail party or class reunion and people assume you make a lot of money. You grudgingly concede that yes, dentists earn a good salary, but you quickly insert the caveat: You’ve also got six figures of student loan debt.

Though student loans come with low interest rates and are generally considered “good” debt, the fact remains that the personal finances of most new dentists are impacted greatly by the fact that they begin their career lugging a millstone of debt.

The numbers are staggering. According to the American Dental Education Association, the average dental school graduate left school with $247,227 in student loan debt in 2014. That number has more than doubled since 2001, according to the American Student Dental Association, which is working to find ways to curb the increases. One of the major culprits is simply the cost of dental school. The ASDA says in-state dental school tuition is nearly $39,000 per year on average; out-of-state tuition is nearly $54,000 on average.

In an ideal world, the areas with the highest tuition would also have the highest salaries and most job opportunity, thereby best equipping students to pay off their high student debt. Unfortunately, that’s not always the case. A new study by the consumer finance website WalletHub recently looked at the “best and worst states” when it comes to student debt. They found some states, such as West Virginia, have the toxic combination of high rates of student debt and low rates of employment opportunity. On the flip side, West Virginia’s neighbor, Virginia, has relatively low student loan debt and a high level of opportunity.

What follows are the 10 “best” and 10 “worst” states for student debt, according to WalletHub’s report. For each state, we list the state’s rank in two composite categories: student loan indebtedness, and grants and work opportunities.

The “student loan indebtedness” rank is based on a number of factors, including the state’s average student debt, student debt as a proportion of income, and the state’s student loan default rate.

The “grants and work opportunities” category includes factors such as the unemployment rate for people ages 25-34 and the availability of grants and paid internships for college students.

The two composite categories are weighted, with student indebtedness carrying the most weight in the rankings. Note: The composite category rankings are out of 51, with 1 being the best, and 51 being the worst. (The list includes the District of Columbia, even though it’s not a state.)

Read through the list, and share your comments with us on Twitter and Facebook.

The Best States for Student Loan Debt

10. New Mexico

Student Indebtedness Rank: 8

Grant and Work Opportunities Rank: 46

New Mexico has the second-lowest average student debt, and has the fifth-lowest proportion of students graduating with debt. However, those positive marks are counter-balanced by the fact that the state has the third-highest default rate of any state.

9. Hawaii

Student Indebtedness Rank: 10

Grant and Work Opportunities Rank: 16

The Aloha State gets its high marks in part because it has the third-lowest proportion of students graduating with student debt. Unfortunately, those students with debt have the third-highest debt as a percent of average income (adjusted for cost of living).

8. Colorado

Student Indebtedness Rank: 15

Grant and Work Opportunities Rank: 10

Colorado has the fifth-lowest unemployment rate for workers ages 25-34. According to the Institute for College Access and Success, the average Colorado graduate had about $25,000 in student loan debt in 2014.

7. Alaska

Student Indebtedness Rank: 6

Grant and Work Opportunities Rank: 39

Like New Mexico, Alaska students have relatively low student debt, though they face an economy that is one of the least favorable for young workers. On the plus side, the state has its own student loan forgiveness program for healthcare professionals (including dentists) who agree to work in the state for at least three years.

6. Washington

Student Indebtedness Rank: 5

Grant and Work Opportunities Rank: 48

As in Colorado, the average graduate in Washington leaves school with about $25,000 in student debt. About 58% of the state’s graduates will have student loans. The state has also had problems with predatory student loan adjustors. In April, the state attorney general’s office said 346 students would get back an average of $468 from adjustors who collected illegal fees.

5. Virginia

Student Indebtedness Rank: 7

Grant and Work Opportunities Rank: 7

Virginia, which comes is fifth overall, is the one state to score in the top 10 in both composite categories. The state has the fifth-lowest student debt level as a percentage of income.

4. Nevada

Student Indebtedness Rank: 4

Grant and Work Opportunities Rank: 37

Nevada has the lowest proportion of students with debt and the third-lowest average student debt, helping it claim the No. 4 spot on this list. Another sign that the state is doing well is the fact that it has the third-lowest percentage of student loan borrowers among those aged 50 and older.

3. North Dakota

Student Indebtedness Rank: 3

Grant and Work Opportunities Rank: 31

North Dakota has the third-lowest student debt as a percentage of income. It also has the third-lowest unemployment rate among young people and the second-lowest percentage of borrowers with past due payments or defaults.

2. Wyoming

Student Indebtedness Rank: 2

Grant and Work Opportunities Rank: 47

Wyoming ties with Nevada for the lowest proportion of students with debt. It also comes in first place for the lowest student debt as a proportion of income. However, when it comes to total average debt, the state doesn’t crack the Top 5.

1. Utah

Student Indebtedness Rank: 1

Grant and Work Opportunities Rank: 21

Utah has the lowest average student debt, the second-lowest debt-to-income ratio, and the lowest unemployment rate for people ages 25-34.

The Worst States for Student Loan Debt

10. Ohio

Student Indebtedness Rank: 43

Grant and Work Opportunities Rank: 20

Ohio ranks in the upper half when it comes to work and grant opportunities for students and recent graduates. Unfortunately, students graduated with about $29,000 in student loan debt, on average, in 2014, according to the Institute for College Access and Success. That level of debt helps land Ohio in the Bottom 10.

9. Mississippi

Student Indebtedness Rank: 40

Grant and Work Opportunities Rank: 34

Mississippi has the second-highest rate of student loan borrowers with past due balances or defaults. About 60% of its graduates leave school with student loan debt.

8. New Hampshire

Student Indebtedness Rank: 47

Grant and Work Opportunities Rank: 8

New Hampshire lands in the Bottom 10 despite a very good economy, including the fourth-lowest unemployment rate for young adults. The reason? For one thing, the state has the highest proportion of students graduating with debt, among the 49 states for which data were available. It also has the third-highest percentage of people aged 50 and older who still carry student debt.

7. South Carolina

Student Indebtedness Rank: 44

Grant and Work Opportunities Rank: 42

South Carolina residents have the fourth-highest debt as a percentage of income, and their relatively weak economy means the state lands in the bottom 10 in both composite categories. The average student there graduates with a bit more than $29,000 in student loan debt.

6. Vermont

Student Indebtedness Rank: 48

Grant and Work Opportunities Rank: 4

You can say this about Vermont: They pay their bills. The state has the lowest overall percentage of borrowers with past due balances of defaults. That may be due in part to their strong economic scores. However, the state also has the highest percentage of borrowers over the age of 50.

5. Pennsylvania

Student Indebtedness Rank: 45

Grant and Work Opportunities Rank: 29

Pennsylvania has the third-highest average student debt and the fourth-highest proportion of students with debt. The Institute for College Access and Success says the average student in 2014 had more than $33,000 in student loan debt.

4. Maine

Student Indebtedness Rank: 46

Grant and Work Opportunities Rank: 40

Maine graduates had about $31,000 in student loan debt in 2014. The state is keenly aware of the problem. It recently passed a law that created a new tax credit for students who graduated from a Maine college of university and continue to live in the state. Click here for a worksheet Maine taxpayers can use to calculate their tax credit.

3. Oregon

Student Indebtedness Rank: 50

Grant and Work Opportunities Rank: 15

Oregon has the highest student debt as a percentage of income of any state (though the District of Columbia has the highest overall rate). The state stands out for its geographic location. Seven of the 10 “best” states for student loans are in the West. Oregon is the only state west of the Mississippi in the bottom 10.

2. West Virginia

Student Indebtedness Rank: 49

Grant and Work Opportunities Rank: 50

West Virginia has the third-highest unemployment rate for people ages 25-34. In fact, according to the Bureau of Labor Statistics, only 49.7% of the state’s population was working last year, the lowest rate of any state. It also has the highest percentage of student loan borrowers with past due balances or defaults.

1. Washington, DC

Student Indebtedness Rank: 51

Grant and Work Opportunities Rank: 6

Though Washington, DC has plenty of opportunities to find work and grants, the district’s residents have racked up some of the highest student loan balances of anywhere in the US. In fact, despite the district’s relatively high salaries, Washington, DC, has the highest debt-to-income ratio of any area on the list.

To view WalletHub’s full list, click here.