Wisconsin Residents in Default on Student Loans

While most borrowers will not default on their student loans, the steep consequences of doing so makes default one of the most pernicious possible outcomes for student borrowers. To supplement our previous work highlighting school level default rates, this post highlights geographic variation in student loan default across Wisconsin counties. We find that 11% of all Wisconsin student loan borrowers were in default in 2018, but variation across counties is high, with students in rural counties and counties with lower average balances demonstrating the highest rates of default.

Information on borrower’s federal and private loans is reported by their loan servicer reports to major credit bureaus (e.g., TransUnion, Equifax, Experian). The following map draws from the Urban Institute’s Debt in America series, which links credit bureau data with data from the American Community Survey. Linking these sources sheds new light on the geography of debt and default, providing new information about the share of residents with student debt, the share of borrowers in default on their loans, and information about the share of residents from communities of color, the share with at least a Bachelor’s degree, and the average household income of the area. All loan data are from 2018, while all other data are from 2017. Readers can explore the data through the interactive map below:

As the map shows, 11% of all Wisconsin student loan borrowers were in default in 2018. On the lowest end, eleven counties have default rates below 5% while four have default rates above 20%.  Nationally, default rates tend to be higher in rural areas, perhaps as a result of lower population levels: on average, rural counties in have a 15.5 percent default rate, 2.4 percent higher than the average in urban areas. In Wisconsin, rural areas with high default rates are common. For example, Menominee county—the least populous county in Wisconsin, and an area whose population is almost entirely comprised of Native Americans—20 percent of residents have student loan debt, and 27% of borrowers are currently in default on their student loans. Meanwhile, Rusk county, a predominantly White rural community in Northwest Wisconsin, has the second highest default rate. However, not all rural areas face high student loan default rates: both Richland and Price counties have zero-default rates, with about one in ten residents in both areas holding student debt.

The above chart shows all U.S. counties with Wisconsin highlighted in dark blue. Users can explore a number of correlations between default and debt, most notably we see a negative relationship between default rates and median loan balances: higher loan balances are correlated with lower default rates.

In part, these findings may be driven by the existence of federal income-driven repayment plans, which makes it possible for borrowers to repay their loans at an affordable rates—and in extreme cases eliminating required payments entirely. These options can help borrowers with the resources and knowledge to successfully work with their loan servicers and navigate the bureaucratic hurdles necessary to enroll in such a repayment plan avoid defaulting on their loans.

Other characteristics do appear to be correlated with default. For instance, counties with a higher share of residents with a Bachelor’s degree or higher and those with higher average earnings tend to have lower default rates, a finding that is consistent with national trends. For example, Dane county has the highest share of residents with a bachelor’s degree or higher, followed by Ozaukee and Waukesha counties. All three of these counties have above average rates of borrowing, and relatively low rates of default among borrowers. In contrast, Clark county and Adams county have the two lowest rates of Bachelor’s degree attainment among Wisconsin counties, and each have higher default rates than Dane, Ozaukee or Waukesha.

These findings illustrate that about one in ten borrowers are currently in default, but variation across counties is high. The context of each local area should be considered when designing policy solutions for student loan default. For these reasons developing policies and practices aimed at preventing and remedying default can be particularly challenging. What’s more, student loan borrowers who are not in default may still struggle with loan repayment, and understanding the prevalence and magnitude of the issues these non-defaulting borrowers face should be an important consideration for policymakers. Future work in this series will explore repayment rates across Wisconsin institutions, a broader metric of loan outcomes for borrowers.