Georgia is No. 3 in average student loan debt. A look at why that may be.

The average federal student loan debt per person in Georgia has grown to more than $40,000, according to a Chamber of Commerce report.

This puts the Peach State as the No. 3 most student-debt-ridden state in the country, according to the report which gathered its data from the U.S. Department of Education during 2021-2022.

It is surprising that Georgia has the third-highest student loan debt average in the U.S., said Josh Kinsler, department head of economics at the University of Georgia. And it's difficult to understand why that is because, he says, the tuition at Georgia colleges and universities are not that high compared to other states.

"The initial balances in Georgia might not be higher, but it is possible that Georgia residents are paying off their debt more slowly than individuals in other states," Kinsler said.

UGA averages $18,500 per person in federal student loan debt; one of the lower amounts compared to other Georgia universities and colleges, according to the U.S. Department of Education.

Total student debt in the U.S. has nearly tripled in the past 15 years, from more than $619 billion in quarter one of 2008 to more than $1.77 trillion in quarter one of 2023, according to the Federal Reserve.

With this debt rising as average wages have fallen, many borrowers struggle to repay their student loans and are unable to pursue other life goals, such as buying a home or starting a family. Delinquencies and defaults on student loans are also more common compared to other types of debt. Georgia's default rate for student borrowers is currently at 9.3%, according to the Federal Reserve Bank of New York.

The state of Georgia's class of 2020 owes over $27,000 in student loans, according to Federal Student Aid (a department of the Department of Education).

Rob Lora, spokesperson with the Chamber of Commerce, said that knowing the state ranking is useful for several reasons:

• Helps institutions and policymakers understand the burden families face, so they can create targeted solutions;

• Allows potential students to consider costs and financial aid when choosing a college; and

• Provides a metric to gauge the success of programs meant to reduce student debt.

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Another driving factor for why Georgia is ranked at No. 3 may be because educated workers sort themselves into cities, and those cities tip the balance of how much student loan debt a worker is saddled with, Kinsler said."Atlanta is a really big city," he said. "You might expect a lot of highly educated workers to move to Atlanta."

Kinsler noted that highly educated workers, such as attorneys or doctors, may have accumulated a lot of student loan debt and live in cities. However, they are likely to be able to pay off their debt.

"These people have accumulated a lot of debt," he said. "They've built up a lot of human capital. They're working in a thriving market, and they're able to pay these things back, which is the whole point."

To understand whether this is the key mechanism, it would be helpful to know the average or median income levels of debt holders by state, he said.

How do the HOPE & Zell Miller scholarships help student loan rates?

The HOPE Scholarship awards a Georgia high school graduate, or a student that has residency in Georgia, with a 3.0 GPA or higher about $326.34 per credit hour of the tuition and fees at an eligible college or university. The total award amount depends on the hours attempted and the institution.

Lora said that "even with the HOPE Scholarship, college costs have risen sharply, and many students still need to take out loans."

Lora noted that while the HOPE Scholarship helps, it doesn't fully cover costs for most students. There are some other state grants, but not enough to meet demand.

On the other hand, the Zell Miller Scholarship pays the standard undergraduate tuition rate, according to UGA's Office of Financial Aid.

In October, 43 million borrowers resumed payments on their student loans after the government's pause on repayment instituted during the COVID era comes to an end. Borrowers should have gotten a notice of when their payment is due 21 days before the due date, according to Federal Student Aid.

According to a recent survey from U.S. News & World Report, 46% of borrowers do not feel financially stable enough to start paying back student loan debts. The study also found that 85% believe they will face financial hardship because of payments resuming.

"For Georgians aged 50-61 with the most debt, this could really affect their finances as they near retirement," Lora said. "They may struggle to save enough for retirement, pay off other debts like mortgages and even to support kids' education costs."

Here's a look at the amount federal student loan borrowers owe based on age:

How will the federal government help?

While there’s little data available regarding average private student loan debt per year, more than 92% of all student debt is made up of federal loans, according to Federal Student Aid (an office of the Department of Education).

There are a variety of options for receiving federal loan forgiveness, including the Public Service Loan Forgiveness (PSLF) program, Teacher Loan Forgiveness program and Perkins Loan cancellation.

As of June 2023, there have been 3,997,781 PSLF applications processed, according to the Federal Student Aid. On Dec. 6, the Department of Education announced the total approved debt cancellation by the Biden-Harris Administration to nearly $132 billion for more than 3.6 million Americans. This was a result of the changes made by the Biden-Harris Administration that made it easier to qualify for this forgiveness.

The Biden-Harris administration also set up a new plan: the “Saving on A Valuable Education,” or SAVE, plan. The plan caps accruing interest for borrowers who stay on top of their payments and broadly decreases monthly payments. Americans making less than $15 an hour won’t have to make any payments at all, according to the U.S. Department of Education.

So far, 5.5 million student loan borrowers have signed up for the SAVE plan as of Oct. 15, according to a DOE news release.

Biden’s original plan for large-scale student loan forgiveness was undone by the Supreme Court in June. It would have canceled up to $20,000 in loan debt and affected as many as 40 million people, or almost every person with federal student loans nationwide.

After the ruling, Biden said he would employ a committee of stakeholders from higher education, loan servicers and borrowers among them, who would use a process called negotiated rulemaking, or neg reg, to draft a new plan for loan forgiveness.

The committee has met several times already, but its final round of talks began on Monday and will continue through Tuesday.

The Biden-Harris administration has proposed to relieve student loan debt of borrowers who owe more than they initially took out in student loans, and who are low-income or enrolled in plans that align payments to borrowers' income.

A look at the average federal student loan debt for 25 Georgia schools:

This article originally appeared on Athens Banner-Herald: Student loan debt in Georgia: A look at why the state average is high