College Graduates and Bankruptcy

Going to college certainly ensures that one will make more money. It doesn’t, however, ensure that graduates can keep and manage it well. According to an article by Ylan Mui in the Washington Post:

College graduates are the fastest-growing group of consumers who have filed for bankruptcy protection in the past five years, according to a new study by a financial nonprofit, which underscores the broad reach of the Great Recession.

The survey by the Institute for Financial Literacy, slated for release Tuesday, found that the percentage of debtors with a bachelor’s degree rose from 11.2 percent in 2006 to 13.6 percent in 2010. The group tracked similar but smaller increases in consumers with two-year associate and graduate degrees. Meanwhile, the percentage of debtors with a high school diploma or who did not finish college declined.

With the economy continuing to sputter, filings for bankruptcy protection have been increasing for the past four years. But it looks like its college graduates who are driving a lot of that increase.

Bankruptcy protections may be rising among college graduates the majority of people who file for bankruptcy are still low income people without college degrees. Some 38 percent of bankruptcy petitioners make less than $20,000 a year. About 33 percent of bankruptcy petitioners have only graduated from high school.

According to the article, the increase in college graduates filing for bankruptcy probably has a lot to do with the particular nature of this recession. Historically people are mostly forced to file for bankruptcy due to credit card and other debts. In this case, it’s falling housing prices and mortgages that fuel a lot of the bankruptcy decisions. Those are the sorts of financial problems that tend to occur even among educated and relatively affluent people.

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer