Possible reasons Minnesota students are among the biggest borrowers

Borrowing: It's just how we roll.

You may be familiar with today’s national news about this years Project on Student Debt report that says the average American college student graduated with more than $25,000 in debt last year.

In Minnesota, it’s even worse.

The average debt of new college grads here went up more than 5 percent last year to $29,000 — the fourth-highest debt load among American students at public and private colleges.

Minnesotans are also more likely than average to take out student loans. More than 70 percent do, giving them the fifth-highest rate in the nation.

I called up policy analyst Tricia Grimes at the state Office of Higher Education, who said those numbers match what she’s been seeing.

But the impact of such borrowing isn’t as dire here as it has been in other states, she said.

She told me:

“Even though a larger percentage of Minnesota students borrow than is true nationally, we also are in the lowest quarter of the states in default rates. So they do seem to repay their loans successfully.”

So why is Minnesota near the top (or bottom, if you prefer) of the debt ranking?

Grimes wasn’t sure, but she had some hunches. (She said she still needs to get data to check her ideas, though.)

1) Tradition. Minnesotans might borrow more frequently because students here got into the student loan program earlier than those in many other states. So the tradition of borrowing — and not defaulting — is there. We’re about 2-2.5 generations into borrowing, she said:

“Their parents borrowed, had student loans and successfully repaid them, so that makes them sort of more willing to do it themselves.”

2) Work ethic. People in Minnesota “tend to work hard and repay things they borrow, and things like high median income here and the relatively low unemployment rate here would tend to go along with that. People tend to have jobs that allow them to replay their loans.”

3) Home ownership. It’s higher here than the national average. That could be seen an an indication that people here understand the difference between “good debt” (investments in the future, such houses and college) and “bad debt” (consumer- and luxury items). She said:

“Minnesotans are pretty willing to borrow for things like education and homes.”

But those are all untested theories, she said. And the vast differences between states make it difficult to prove such ideas.

Midwestern and northeastern states may have higher student debt because a higher proportion of students there attend more expensive private, nonprofit colleges, she said, something the authors of the report also noticed. In the West, by contrast, the percentage of private-college students is lower.

Grimes cautioned between drawing too many conclusions from debt rankings among individual schools. Grads from the University of Minnesota – Duluth, for example, had the highest average public-school debt in the state with about $30,000. In the private-school sector, Minneapolis College of Art and Design students topped the chart at $44,000.

“Sometimes there’s only $1,000 or $2,000 difference between somebody who’s in 7th place and somebody who’s in 17th place.”