September 14, 2011
By Kraig Koch
Historically viewed as a stepping stone to financial success, a new study shows that a college degree may now increase your likelihood of going bankrupt.
According to a new study released Tuesday by the Institute for Financial Literacy, college graduates are the fastest-growing consumer population to file for bankruptcy protection over the past five years.
The 2010 Annual Consumer Bankruptcy Demographics Report showed the percentage of debtors with a bachelor's degree rose to 13.6 percent in 2010, up from 11.2 percent in 2006. Debtors with a high school diploma declined during the same period.
Leslie Linfield, the institute’s executive director, spoke with the Washington Times about the survey's findings.
"We're told that if you do go and get advanced education, you’re going to be almost guaranteed this economic success," Linfield explained. After the recession, "higher education was no guarantee that you weren't going to be at risk."
Survey results were collected from 50,000 individuals who filed for bankruptcy in the past five years and had participated in credit counseling, a requirement for filing bankruptcy.
In addition to college grads, the survey showed the number of bankruptcies filed by individuals who were married also increased in the last five years. According to the study, married filers accounted for 64% of bankruptcies in 2010.
In her interview with the Post, Linfield expressed concern about the age of debtors. Consumers filing bankruptcy between the ages of 18 and 34 fell 31 percent in the past five years. Debtors aged 55 and older, on the other hand, increased 25 percent. Those individuals have less time than younger filers to recover financially.
While credit cards and unsecured loans are generally the cause of most bankruptcies, Linfield said that hefty mortgages and falling home values are also contributing to the current rise in filings. More than 70 percent of consumers who have filed bankruptcy attribute their situations to being overextended in credit.
Trends may change this year, according to Linfield, as the overall number of bankruptcies begins to ease. Last month, the American Bankruptcy Institute reported an 11 percent drop in August bankruptcy filings compared with 2010 figures, attributing the decline to a slowdown in spending as consumers balance their personal budgets.