Analyst sees confidence behind Minnesota student borrowing

An analyst in Minnesota's Office of Higher Education sees both good news and bad in recently released numbers about student debt.

After Washington, D.C., Minnesota has the highest concentration of student-loan debt in the country. More than 22 percent of Minnesotans carry some amount of student debt. And Alex Friedrich of MPR News reports that the average debt accumulated by each Minnesota student is $29,800 — almost $5,000 more than the national average.

"Even though Minnesota students borrow more than the national average," said Tricia Grimes, "they have lower default rates."

Grimes, a policy and research analyst, said those numbers may mean that Minnesota students are optimistic about their prospects. "One theory is that Minnesotans are borrowing more because they are fairly confident they can get jobs and be able to repay the loans," she said.

She pointed out that unemployment is 2 points lower in Minnesota than the rest of the country, and that Minnesota is among the states with the highest percentage of population in the workforce.

Even so, she said, students here and elsewhere are being forced into debt by college costs.

"Tuition has gone up three times the rate of inflation in the last decade," Grimes said. "It's actually gone up faster than health-care costs. Family incomes have not gone up anywhere near that fast." Pell grants and other kinds of aid are not enough to help students avoid debt, she said.

Students should rein in their borrowing as much as possible, she advised, citing experts who "encourage students to not borrow more than the average starting salary for the occupation they're going into in total. For example, a bachelor's degree recipient would be urged not to borrow more than something in the $35,000 to $40,000 range."

"We always encourage students to live frugally," she said. "The University of Minnesota has a very interesting financial literacy campaign called, 'Live like a student now, so you won't have to later.'" Some students, she said, are tempted to yield to "premature affluence — to live a little bit higher in school than you would absolutely have to, and think, 'I'll worry about repaying the loans later.'

"Actually, it may be more difficult to repay the loans later than some students think."