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Facing the twin headwinds of high unemployment and the rising cost of education, recent college graduates in Arizona have the highest student loan default rate in the country, according to data from the Department of Education.

Unlike Montana, where the default rate is about three percent, more than 16 percent of student loans are in default in Arizona, reflecting 44,000 students. The national average is about eight percent.

Each year, the Arizona Board of Regents, which governs the state's university system, including the big three colleges, Arizona State, the University of Arizona and Northern Arizona University, reviews the state of funding and tuition.

According to the report, graduate students have faced the biggest increase in tuition.

For graduate students, tuition increases have driven debt sharply upwards, even compared to undergraduate students. In Arizona, undergraduates debt has increased 17.4 percent from about $18,000 in 2006 to just over $21,000 in 2011, but at the same time graduate debt increased 25 percent from just under $36,000 to nearly $45,000. The national average is $24,000 for undergrads and $47,000 for graduate students.

To account for this, many students use loans to cover their expenses, including tuition, books, computers and other needs.

For both undergraduates and graduate students, student loans remains the largest source of funding, according to data from the Arizona Board of Regents. Federal student loans account for almost 48 percent of funding or $824 million for 2011. Scholarships and grants, from the universities and federal grants are about 41 percent and campus employment is about 10 percent or around $173 million.

Private loans, those that come from banks, credit unions, and private funders like Discover, account for $124 million or about seven percent.

Awards have increased by nearly 75 precent or $745 million in the last five years according to Regents, however, that fails to keep pace with tuition increases which have doubled in the same time.

"Tuition has gone up by about two-hundred percent, more than two-hundred percent," said Dan Sullivan, communications director for the Arizona Students Association. "State-based financial aid is nowhere. So the only place that students have to turn is student loans."

However, the universities are trying. Arizona Board of Regents policy requires each university to set aside 14 precent of tuition revenues for need-based financial aid, however, the Regents requested that amount be shifted to 17 percent. The universities have agreed and have set aside an extra $13 million to the 130 million already set aside since 2011.

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About AZ Week Notebook

News and commentary from Arizona Week producer/host Michael Chihak and interns Melanie Huonker and Lucy Valencia.

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