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North Carolina Students Default More Than US Average on Student Loans

Students at North Carolina colleges and universities are slightly more likely than those in other states to default on their student loans, according to a study by the U.S. Department of Education.

Thestudy found that 11.6% of students at North Carolina postsecondary schoolswho were scheduled to begin paying their loans in 2013 were in default by the third year of repayment.

The overall U.S. default rate was 11.3%. (See the default rates for all 50 states.)

The study looked at more than 6,000 postsecondary schools in the nation and 143 in North Carolina, including private, public and proprietary (for-profit) schools. Among the largest in the state by enrollment, default rates were:


- Central Piedmont Community College: 20.2%.
- University of North Carolina, Charlotte: 5.4%.
- East Carolina University: 5.2%.
- North Carolina State University: 2.7%.
- University of North Carolina, Chapel Hill: 1.5%.

(Click here to search the federal database for default statistics by school, city or state.)

Nationwide, public community colleges had an average default rate for 2013 of 18.5%, and proprietary schools were at 15%.For four-year public colleges, the average rate was 7.3%, and for four-year private colleges it was 6.5%.

The default rates for community colleges, vocational schools and for-profit colleges tend to be higher because former students are less likely to have completed their studies or see a boost in earnings, and often can’t keep up with loan payments, according to a report in theBrookings Papers on Economic Activity.

>> MORE: Student loan default: What it means and how to deal with it

The new report provides a detailed look at default rates, but it may not show a complete picture of the debt burden on students. While the reporttakes a snapshot of borrowers who are within the first three-year window of their repayment phase, it doesn’t capture thosewho delay repayment until after the three-year measurement window expires.

Wilmington advisor: Debt creates ‘difficult decisions’ after college

People with college degrees earn more, on average, than those with only a high school diploma. In 2014, the median incomeof young adults with a bachelor’s degree was $49,900, compared with $30,000 for people who completed high school, according to the National Center for Education Statistics.

However, excessive student loan debt is a major burden for many Americans. It can significantly hamper borrowers’finances by increasing theiroverall debt burden and cutting into money they could usefor mortgages, retirement and other long-term investments. Total student loan debt was $1.36 trillion as of June, according to the Federal Reserve Board, up from $961 billion in 2011.

We asked Wilmington, North Carolina-based financial advisor Brett Tushingham about how families can integrate student loans into their financial lives.

How can students and families make sure their loans are a good investment in their future?

College will be one of the biggest investments many families make. As withany investment, the price you pay for it will affectyour future return. The price of college includes notonly tuition, room and board, transportation, books and supplies but also any interest paid on student loans. The more yourely on loans to finance youreducation, the greater the risk that the price of yourinvestmentwill increase significantly.

That said, an education has been shown to increase a student’s earning power significantly. Families can use various online resourcesto make income projections and weigh thestudent’s income potential against the cost of borrowing.

How does taking out student loans potentially affect students’ future financial lives?

Student loan payments can have a negative impact on future cash flow. A high-paying job can help lessenthe impact, but those with smaller incomesmay be forced to make toughdecisions. These can include putting off buying a car or house, delaying marriage or not saving for retirement.

College can still be a great investment, but understand all your options for paying for college and don’t just take out the maximum allowable student loans every year. Families can benefit by working with someone who specializes in developing college planning strategies that incorporate college selection, financial aid and tax aid.

What should parents and students keep in mind when taking out student loans?

Making continual on-time payments will help students establish credit, and most students will be able to deduct the loan interest on their tax returns. But loan payments can affectfuture cash flow, and evenin the event of a financial hardship, student loans are very hardto discharge. Families should turn to student loans only after they have made the best use ofall their financial aid options and explored more affordable school choices, such as community colleges.

Lastly, just as student loans can affect a child’s future cash flow, parents need to be certain that loans they take out don’t impede their ability to save for their own objectives, such as retirement.

Brett Tushingham is a financial advisor and the founder of Tushingham Wealth Strategies in Wilmington, North Carolina.

State student loan default ratesThe 50 states ranked from highest student loan default rate to lowest. RankingState Percent defaulting on student loans1.New Mexico18.92.

West Virginia16.23.Kentucky15.54.Mississippi14.65.Indiana14.26.Florida14.17.Arkansas148.Arizona149.Wyoming1410.Oregon13.711.Ohio13.612.South Carolina13.213.Nevada12.714.Texas12.615.Oklahoma12.516.South Dakota12.317.Louisiana12.318.Alabama12.219.Georgia1220.Iowa11.921.Michigan11.822.North Carolina11.623.Alaska11.624.Colorado11.525.Missouri11.526.Tennessee11.427.Idaho1128.Kansas10.729.Washington10.430.California10.431.Hawaii10.432.Maine10.433.Delaware1034.Maryland9.935.Montana9.836.Wisconsin9.637.Illinois9.438.Pennsylvania9.239.Virginia9.140.Utah9.141.New Jersey942.Minnesota8.843.Connecticut8.544.Nebraska8.245.New York846.Rhode Island7.947.New Hampshire7.848.Vermont7.249.North Dakota6.550.Massachusetts6.1

The article North Carolina Students Default More Than US Average on Student Loans originally appeared on NerdWallet.