The States With the Highest Student Loan Default Rates

The national student loan default rate declined this year, but that’s not saying much, considering 13.7% of borrowers defaulted on their loans within three years of entering repayment. The Education Department released this data over the summer, and while much of the news coverage focused on the drop in the three-year default rate (it was 14.7% in 2013), it’s worth highlighting the states with above-average default rates.

The default-rate-by-state data focuses on a state’s institutions of higher education, rather than its residents (which makes sense — people move, schools do not). For whatever reason, some schools have trouble getting their graduates or former students to repay loans, and the high default rates are a sign something in the financial aid and student loan process needs improvement. Here are the 10 states with the highest three-year default rates, as of July 2014.

10. Oklahoma

Three-year default rate: 15.7%

9. Arkansas

Three-year default rate: 15.8%

8. Texas

Three-year default rate: 15.9%

7. Mississippi

Three-year default rate: 16.3%

6. Ohio

Three-year default rate: 16.7%

5. Iowa

Three-year default rate: 17.3%

4. Kentucky

Three-year default rate: 17.5%

3. West Virginia

Three-year default rate: 18.2%

2. Arizona

Three-year default rate: 18.4%

1. New Mexico

Three-year default rate: 20.8%

On the other end of the spectrum, North Dakota has the lowest default rate, 6.1%. Technically, Guam has the lowest default rate in the U.S. (3.8%), and when you include districts and territories, the Virgin Islands and Puerto Rico are among the top 10 default rates (16.4% and 16.9%, respectively).

Defaulting on student loans is incredibly problematic, not only for borrowers, but also for the economy. People who have defaulted on federal student loans face wage garnishment, calls from debt collectors and terrible credit scores, which may prevent them from effectively participating in the economy.

Ideally, borrowers will avoid default by exploring federal loan repayment options like income-based repayment and loan forgiveness programs. It takes a long time to default on a federal student loans: Your loan is delinquent after 90 days without payment and is considered defaulted after 270 days without payment (it’s 330 days for Federal Family Education Loans).

You have plenty of time between falling behind on loans and actually going into default, so as soon as you know you’re in trouble, reach out to your student loan servicer and ask them to work with you so they can get paid and you can avoid default. The stakes are too high not to. A severely damaged credit score can make it difficult not only to access other credit products but also to rent an apartment, get affordable insurance rates and access utility services without having to pay high deposits. To see how your student loans affect your credit, you can see two of your credit scores for free on Credit.com.

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Christine DiGangi covers personal finance for Credit.com. Previously, she managed communications for the Society of Professional Journalists, served as a copy editor of The New York Times News Service and worked as a reporter for the Oregonian and the News & Record.