Students go to college to learn more about the world around them, learn a trade or profession, and the end goal is to get a job that will allow them to pay the bills.
Unfortunately, with the job market in such a dismal state, this is not the reality that is awaiting many recent college graduates. Instead, they are graduating with more debt than ever before and, without a job to help them pay off their debts, many students are now seeking protection from their outstanding debts by declaring bankruptcy.
According to a survey released by the Institute for Financial Literacy, the percent of college graduates who have earned a bachelor’s degree and owe some sort of debt has increased from 11.2 percent in 2006 to 13.6 percent last year. Interestingly enough, the percentage of those who have not finished college or who only have a high school diploma and are in debt has decreased.
“We’re told if you do go and get advanced education, you’re going to be almost guaranteed this economic success,” said Leslie Linfield, an executive director for the Institute for Financial Literacy. However, with the current national recession, we have learned that “higher education was no guarantee that you weren’t going to be at risk.”
So why are many people declaring bankruptcy? A bankruptcy professor at the University of Illinois College of Law, Robert Lawless, feels that it might because many consumers did not feel that they had any other way to continue paying for their everyday lives since lenders have been lowering loan limits and tightening the underwriting standards.
“As consumer credit tightens, people run out of options,” said Lawless.
Linfield thinks that those with a higher level of education are more likely to declare bankruptcy now because they have overextended their credit. Other options include that they are paying high house mortgages and still paying off their college debts.