By Ben Kaufman and Vanessa Garcia Polanco | December 2, 2020
When discussing America’s $1.7 trillion student debt crisis, commentators often fall back on tired clichés depicting student loan borrowers as high-income “elites.” This misleading narrative ignores the growing body of research demonstrating how student debt is now one of the most important challenges facing America’s rural communities, farmers, and people of color. Recent estimates indicate that 6.5 million people in rural areas across the country each owe an average of $35,000 in student loan debt, and that as many as 1.1 million rural student loan borrowers (nearly one-in-six rural borrowers) have fallen into delinquency or default (compared to roughly one-in-seven student loan borrowers nationwide).
Moreover, the student debt crisis is hitting rural states the hardest. For example, borrowers in the five states with the highest proportion of residents that live in rural areas (Wyoming, Vermont, Montana, Mississippi, and South Dakota, as defined by the U.S. Department of Agriculture) have a 3-year federal student loan cohort default rate that is over 25 percent higher than that of borrowers in other states (using an average weighted by the number of borrowers in the state, 12.3 percent v. 9.2 percent).
SBPC calculations based on county-level population estimates from the U.S. Census Bureau, county-level rural/urban designations from the U.S. Department of Agriculture, and state-level student debt statistics for rural borrowers from the Federal Reserve Bank of Philadelphia.
A full table of rural student debt statistics for all states where data is available can be accessed here.
Rural America’s growing student debt burden has consequences for the viability of the agricultural sector as well as for the vitality of rural communities. Concern about these consequences is widespread and bipartisan. For example, when describing the student debt situation in Maine—one of the most rural states in the U.S.—former Republican Governor Paul LePage said in 2018, “High student-loan payments prevent our young people from buying a house or a car or spending their money in local businesses. Many take higher-paying jobs out of state to survive. They simply cannot afford to live in Maine.”
The student debt crisis is holding back small towns and farmers:
- A recent analysis by the Federal Reserve Board indicates that student loan borrowers from rural areas are more likely to leave for metro areas in search of higher wages, and that those student loan borrowers who do stay in rural areas struggle to keep up with their monthly student loan payments:
- Rural borrowers with higher student loan balances are more likely to move away. Only 49 percent of rural student loan borrowers with the highest debt balances are still in a rural area when entering repayment compared to nearly 83 percent of rural borrowers with the lowest balances (measuring relative balance sizes by quartiles). The rest move away toward more urban areas.
- Borrowers who remain in rural areas after graduation struggle more than peers who migrate to metropolitan areas to pay down their student loans. Three years after entering repayment, the average rural borrower who moved to a metropolitan area has made twice as much progress paying back his or her student loans as the average rural borrower who stayed in a rural area (paying off 20.3 percent v. 9.3 percent of their original balances, respectively). After the same amount of time, the serious delinquency rate for student loan borrowers who remained in rural areas is more than 30 percent higher than the rate for rural borrowers who moved to metropolitan areas (10.7 percent v. 8.2 percent).
- Borrowers who remain in rural areas after graduation struggle more than peers who migrate to metropolitan areas in other aspects of their financial lives. For example, three years after entering repayment, 24.6 percent of borrowers who moved from rural to metropolitan areas bought a home compared to only 8.2 percent of borrowers who remained in rural areas.
- A survey conducted by the Young Farmers Coalition indicates that:
- More than half of young farmers are struggling to make their student loan payments.
- One-in-five young farmers is not able to access other credit such as loans needed for his or her farm because of his or her outstanding student loans.
- Almost one-in-three young farmers did not pursue farming or waited to start farming because his or her student loan debt made doing so unaffordable.
- Researchers at the Agricultural & Applied Economics Association found that among borrowers who itemize for their federal income taxes, borrowers in remote rural areas pay almost 10 percent more in interest on their student loans than borrowers in metropolitan areas. Noting—as the authors do—that borrowers who relocate to urban areas may find “stronger economic opportunities,” the authors’ findings suggest that rural borrowers may struggle to pay down their debts.
- Recent research has raised questions of whether rising student debt has led doctors to avoid primary care and rural medicine. In particular, an analysis from the National Institute of Health (NIH) found that “financial incentives” may affect whether medical students—especially those with relatively large student debt balances—choose rural practice. The NIH also found that financial incentives may not be enough to retain heavily indebted physicians in rural areas. These results fit with more general research from Cecilia Rouse, the incoming chair of the Council of Economic Advisers, finding that “debt causes graduates to choose substantially higher-salary jobs and reduces the probability that students choose low-paid ‘public interest’ jobs.”
The dire outcomes depicted in the data are confirmed by harrowing stories from real rural borrowers. The results of the Young Farmers Coalition’s survey, mentioned above, included the following stories of real young farmers with student loan debt:
- “[Wisconsin farmers] Matt and May have the opportunity to buy a parcel of land adjacent to the farmland they rent now. . . . While the owner wants to sell the land to them, their student loans are keeping them from qualifying for the necessary loan. . . . [As Matt describes,] ‘Our student loan debt has forced us to miss payments on other bills, and as a result we have messed up our credit trying to juggle the debt. I’m a ninth-generation American farmer; generation number ten is sleeping in the crib right now. We just hope we can hang on long enough to pass the farm along.’”
- “Meredith and her husband Guy met at their first farm job in Maryland in 2007. . . . While Guy went on to work on farms in Virginia and Massachusetts, Meredith went back to school for a degree in agriculture. In doing so she accumulated over $45,000 of federal student loan debt to add to the $12,000 Guy had left over from his undergraduate degree. [Meredith notes,] ‘When monthly loan payments are added on to other financial demands, including rent, utilities, car payments, and insurance, the results are stifling. . . . Do we save for a farm, or do we save for a family? Our student loan debt does not leave room for both.’”
- “Davon Goodwin is a 25-year old farmer-veteran from North Carolina. When he returned injured from his tour of duty in Afghanistan, Davon lost his sense of purpose and mission. Now he works as a manager at Fussy Gourmet Farms in Raeford, North Carolina, where his mission is to feed his community. . . . But it’s not Davon’s farm. Davon currently owes $9,000 in student loan debt. With his monthly student loan payments, it’s difficult to make ends meet while raising a young family and trying to save for his own farm.”
These narratives and the broader body of research surrounding them underscore that rural communities are at the forefront of the student debt crisis. It’s time for policymakers at all levels to acknowledge that the burden of student debt knows no regional affiliation and address rural borrowers’ unique challenges head on. It’s time to stand up for rural and farmer borrowers.
Read more in our Research Roundup series, including how student loan debt affects public health and how student loan debt affects the small business community.
Ben Kaufman is a Research & Policy Analyst at the Student Borrower Protection Center. He joined SBPC from the Consumer Financial Protection Bureau where he worked as a Director’s Financial Analyst on issues related to student lending.
Vanessa Garcia Polanco is a Federal Policy Associate at the National Young Farmers Coalition. Vanessa is an immigrant from the Dominican Republic, and she brings her identities and experiences to shape her advocacy and research activities. Vanessa is a graduate from Michigan State University and the University of Rhode Island. She has worked with Food Solutions New England, MSU Center for Regional Food Systems, and with the U.S. Department of Agriculture.