DC region ranks highest for federal student loan debt, but that’s skewed

Student loan debt continues to climb to new record highs, and the D.C. region has among the highest in the nation.

A new report from LendingTree’s student lender rate comparison site Student Loan Hero found that, when compared to states, D.C. has the highest federal student loan balances in the nation, with an average of $55,200 per borrower. Maryland ranks second, with an average $43,165.

Virginia ranks fourth for federal student loan balances, at an average $39,551 per borrower.

Why is student loan debt so high in D.C., Maryland and Virginia?

“They are hotbeds for graduate degrees. Folks who are going to school long after undergraduate college. And typically, the longer you spend in higher education, the more you will have to borrow,” said Andrew Pentis at Student Loan Hero.

Across all states, the average federal student loan debt per borrower is between $30,000 and $40,000. While those are big numbers, they are also averages, skewed by big debt held by graduate students. The majority of student loan borrowers, even in the D.C. area, do not pursue postgraduate education.

“Obviously there are outliers. You’ll have borrowers who take out well beyond six figures, for example, those who get a medical degree, or want to become a dentist or lawyer, or pursue their MBA. Those are all degrees with a hefty amount of tuition and fees,” Pentis said.

“What we should be looking at instead in many cases is average student loan debt by degree, or by age,” Pentis continued. “For example, if you looked at D.C., the average student loan debt of borrowers age 25 or younger is significantly lower than their peers of other ages.”

In D.C., only 53.4% of residents with federal student loan debt are carrying balances in excess of $10,000. In Maryland and Virginia, it is less than 50%.

While total student loan debt, counting both federal student loans and student loans from private lenders, continues to set records each year, Student Loan Hero notes the amount of borrowing has been steadily declining for nine straight years.

Borrowers acquired nearly $90 billion in new student debt in the 2018-2019 fiscal year, and $89 billion in the 2019-2020 fiscal year. That number plummeted to less than $77 billion in the most recent fiscal year.

Pentis believes there are several factors in the decline in student loan borrowing volumes. For one, COVID-19 meant fewer students enrolling in colleges. Also, he said colleges and universities have been reworking award packages in the wake of the pandemic, replacing student loans with gift aid options.

And longer-term, the decline can be contributed to lessons learned.

“Families are wising up to the situation around student loans,” Pentis said. “In many cases, you have parents in the home who have five figures of student loan debt and they don’t want their children to end up in the same place that they are. We’re learning from experience and history.”

Parents are increasingly reluctant to add to what may be their own legacy student loan debt, with declines in parent PLUS loan borrowing, debt that often comes at the expense of a family budget or retirement planning.

The pandemic did bring a temporary break to students and parents saddled with student loan debt, with a moratorium on payments since March 2020 that has been extended to May. While the majority of federal student loan borrowers took advantage of the moratorium, those who chose to continue making full or partial payments were paying zero interest as part of the moratorium, meaning any payments have gone directly to paying down principle.

Student Loan Hero’s report on federal student loan debt by state and its analysis is online.

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Jeff Clabaugh

Jeff Clabaugh has spent 20 years covering the Washington region's economy and financial markets for WTOP as part of a partnership with the Washington Business Journal, and officially joined the WTOP newsroom staff in January 2016.

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