Over a third of U.S. states owe more than their entire state budgets in student loan debt.

5 min readMar 3, 2021

Student loan debt in these states exceeds the state budget.

Student loan debt in the United States stands at about $1.8 Trillion. Analysis of the most recent Department of Education data, private student loan estimates, and also the most recent state budget data (2017) compiled by the National Association of State Budget Officers reveals that in 18 states, the citizens owe more in student loan debt than the entire state budget (both federal and state spending).

As a percentage, the states of Georgia (169%), Florida (148%), Missouri (141%), South Carolina (135%), New Hampshire (131%), and North Carolina (126%) are particularly alarming, but the fact that the citizens of any state owe more than that state’s total budget is significant.

When considering only federal student loan debt, which comprises about $1.566 Trillion, or 87% of all student debt, we are still left with 7 states owing as much as- or more than their entire state budgets.

There are 45 million people in the U.S. carrying $1.56 Trillion in federal student loan debt. According to former Education Secretary Betsy DeVos in December 2019, 75% of these borrowers were either unable to make payments, or were paying but their loan balances were increasing. The recently resigned head of Federal Student Aid, Wayne Johnson, said this was closer to 80% just before COVID-19 hit. We also know that the class of 2004 are defaulting on their federal loans 40% of the time, but they were only borrowing a third of what is being borrowed today. Given this, it is not unreasonable to expect a default rate of 75% for current borrowers, if not higher. That is about four times higher than the default rate of sub-prime home mortgage loans.

Over $100 billion in interest alone is charged to student loan borrowers, and typically sent out-of-state, largely to the books of the Department of Education, which owns 87% of all student loans. Incidentally, the colleges take in roughly the same amount every year in federal student loan revenue.

All federal student loan borrowers are determined to be financially needy as a condition for receiving the loans. More than 40% never graduated. Many attended community colleges, and even vocational schools to learn a trade. Before the pandemic, 80% were underwater.

These borrowers span the political spectrum. According to Pew Research, 43% of people with some college identify as republican, and 12% identify as independent. Despite popular misconceptions, there are more people over 50 years old with student loans than there are people under the age of 25, and they owe triple what the younger generation owes. These citizens are hindered from buying homes, starting businesses, families, and pursuing other endeavors. This is badly sapping the vitality of the states- both economically and socially. This is the largest emerging voting block in American politics today.

The Department of Education has been booking upwards of $50 Billion per year in profit from the lending system , and White House Budget data going back decades show that the government has managed to make a profit, even, on defaulted loans- a claim that no other lender can make, and a defining characteristic of a predatory lending system.

The Department (and its contractors) also don’t appear to have intentions of cancelling loans. In fact, the opposite would appear strongly to be the case. They have managed to deny well over 99% of the borrowers trying for the various forgiveness plans in place over years and decades, and leaving them owing far, far more than had they never tried in the first place.

The President has the executive authority to cancel all federally owned student loans (85% of all student debt) by executive order. This could be done without needing congressional approval or appropriation. This could be done immediately at zero additional expense to the taxpayers, and would add nothing to the national debt.

There is a growing chorus of voices- including from conservatives like Wayne Johnson- now calling for both widespread loan cancellation, and immediate reinstatement of bankruptcy protections to the loans. A petition started in March of last year calling for both loan cancellation by executive order, and the return of bankruptcy protections to the debt has amassed 1 million signatures, and leading Senators have echoed that call.

We have heard little or nothing, however, from the governors and legislatures of the worst hit states. Governors, in particular, have a responsibility to protect their citizens against predatory lending, and to strengthen their economies. By being silent about this statewide- and nationally- threatening lending system, they are abandoning those responsibilities.

We urge Governors, and state legislatures of these affected states to call on the President to cancel all federally owned student loans, return bankruptcy protections to the loans that cannot be cancelled administratively, and replace the federal lending system with a more efficient, rationally priced, non-predatory, and state-friendly funding mechanism for higher education in this country.

If this is concerning to you, please Sign the Petition calling on President Biden to cancel all federally owned student loans by executive order, and return bankruptcy protections to the loans that cannot be cancelled administratively.

Contact: Alan Collinge, (202) 594–1120, justice@studentloanjustice.org

To see the source data and methodology used for this analysis, click here