4 posts from October 2012

Late for more than just class: Student loan defaults rising

No one needs reminders that it’s a tough job market out there. But more college grads are getting them every month when they have to make a payment—or, more accurately, fail to make a payment—on their student loans.

New data from the U.S. Department of Education show that student loan defaults are rising across the country and the Ninth District (see table). District states have rates that are generally well below the national average; however, every state is following the national trend of steadily higher default rates. Montana and South Dakota saw particularly large increases in the two-year default rate of those entering payment in fiscal year 2010.

  Student default table -- 10-24-12

The student loan default rate measures those entering repayment at any point during one federal fiscal year (Oct. 1 to Sept. 30) and defaulting by the end of the following fiscal year. Student loans are not in default until they are 270 days late. So, by the traditional two-year tracking window, ex-students have just 12 to 24 months to fall more than nine months behind in loan repayments.

A few years ago, Congress decided that window was too short, so it asked the Department of Education to extend the tracking window to three years (see table). This was the first year that the agency officially released three-year default data (for the cohort group entering payment in fiscal year 2009). The data show a trend similar to the two-year default data, only worse, as should be expected given the longer tracking window.

Again, students in district states performed better on loan repayments than the national average, but all saw rates increase rather significantly, with South Dakota’s rate topping 10 percent (see table). For more background, detail and layman’s methodology on student loan defaults in Ninth District states, see the April 2012 articles, College Finance 101: Not all their (de)fault? and The fine print on student default rates.

A long road back for wood products firms

There’s good news for the Ninth District’s wood products industry: After years of retrenchment caused by the housing collapse and subsequent recession, the bleeding appears to have stopped.

Sawmills and manufacturers have reported increased output and revenues this year as the U.S. economy slowly improves, increasing demand for construction lumber and other wood products. After bottoming out in 2010, industry employment in Minnesota, Wisconsin, South Dakota and Montana rose slightly last year, according to government labor figures (see chart).

Wood products Ch 1 10-18-12

The bad news is that the industry has a way to go to recover thousands of jobs lost over the past decade. Montana saw the steepest drop in wood manufacturing jobs; employment fell by more than half between 2001 and 2010. The state’s sawmills were already in decline before the housing crisis, due to rising operating costs and log prices.

Employment in Minnesota and Wisconsin followed a similar downward path after the housing crash as demand sagged for oriented strand board, paperboard and office paper. Wood products workers in South Dakota fared better; during the housing downturn, many firms shifted their focus to the home remodeling market, shoring up sales and preserving jobs. But wood products manufacturers in the state still shed about 250 jobs over the past decade.

It’s questionable whether wood products employment will ever return to the levels seen at the height of the housing boom. In recent years, rising productivity has reduced the number of workers needed to run sawmills, paper mills, particle board plants and other forest products operations. Neiman Enterprises, a large sawmill operation in the Black Hills of South Dakota, has ramped up its lumber production since 2010. But over the same period, investments in automation have allowed the firm to reduce its headcount, said resource manager Dan Buehler.

And in western Montana and the Black Hills, a persistent infestation of mountain pine bark beetles has killed millions of pine trees, threatening to restrict future log supplies. (For much more on the impact of the pine beetle outbreak on the wood products industry, watch the fedgazette website for the upcoming article, “The beetle and the damage done.”)

Research Assistant Dulguun Batbold contributed to this Roundup post.

Beige Book, Minneapolis: Ninth District economy slowly improving

The Ninth District economy expanded modestly during late summer and early fall, according the most recent Beige Book released this week by the Federal Reserve Bank of Minneapolis.

Each of the 12 Federal Reserve district banks drafts a similar report, which in sum are a summary of regional economic conditions across the country, in preparation for the Oct. 23-24 Federal Open Market Committee meeting, where interest rates and other monetary policy issues are decided.

In the Ninth District, improved activity was seen in construction and real estate, consumer spending, tourism and professional services. Energy and mining continued to perform at high levels, while agriculture varied widely, with crop farmers generally in better condition than animal producers. On the softer side, manufacturing activity slowed in late summer, and wage increases remained subdued, although stronger increases were reported in some areas. But labor markets tightened somewhat, and price increases were generally modest.

For those interested in other regional, national or historical Beige Book reports on economic conditions, the Minneapolis Fed offers everything in one spot.

Smarty pants: College attainment, bachelor's degrees conferred mostly growing in Ninth District

It’s widely accepted that a college education is a prerequisite to a better (financial) life. But that sentiment is embraced differently across the country.

In Ninth District states, the percent of population with a bachelor’s degree continues to increase overall. But individual states are performing differently against the national average. For example, Minnesota ranks 11th in the nation for the percent of population age 25 and older with a bachelor’s degree at 34 percent in 2011 (see Chart 1). But its college attainment levels have stagnated a bit in recent years, and its advantage over the national average has shrunk slightly (see Chart 2). 

  Education attainment CH1-2

In contrast, Montana, North Dakota and Wisconsin have historically been below the national average, but that gap has been closing for all three states of late. Each also ranks in the top half of states in college attainment (partially a function of high-population, well-educated coastal states pulling up the national average). South Dakota is the outlier; college attainment has been below the national average. It ranks in the bottom half of states and its achievement gap has widened slightly.

In concert with this trend, the number of bachelor’s degrees conferred also has been rising. But the rate of increase at district colleges and universities in recent years has lagged the U.S. benchmark by a considerable amount (see Chart 3), according to the National Center for Education Statistics. During the 1990s, growth in the production of bachelor’s degrees in Montana and South Dakota surpassed the United States, while other district states posted slower growth. During the past decade, growth slowed in Montana and South Dakota, but picked up in Minnesota. Some of the recent gains in Minnesota’s college degree production are likely due to growth in Minnesota’s private online universities, such as Cappella University and Walden University.

In 2010, Wisconsin colleges and universities conferred 34,110 college degrees, ranking 17th in the nation (see Chart 4). Meanwhile, Minnesota colleges and universities produced 31,952 bachelor’s degrees, ranking 18th. North Dakota, Montana and South Dakota, ranked 44th, 47th and 48th, respectively.

Among district states, North Dakota has the highest number of degrees conferred by colleges and universities relative to the 20-year-old state population (see Chart 4). This suggests that North Dakota has a relatively large capacity to produce college graduates relative to the primary college-age population in the state. All district states have a higher ratio of bachelor’s degrees conferred relative to the 20-year-old population than the nation, demonstrating a relatively strong presence of higher education in the region.

  Education attainment CH3-4