College grads are increasingly likely to file for bankruptcy
Despite the financial and employment benefits that typically come with a college degree, recent statistics report that college graduates now make up approximately 55 percent of bankruptcy filers in the United States. Therefore, this means that those who complete more years of schooling are now at a higher risk for bankruptcy, despite having average salaries that are over 100 percent higher than individuals who do not earn college degrees.
Graduates also tend to have lower unemployment rates than those who do not receive a college degree, which should theoretically make them more resilient against debt. However, in the current economy, student loans, credit card debt, and a poor job market are collectively forcing college graduates into bankruptcy.
College students in 2009 had an average credit card debt of approximately $4,000. It has become increasingly common for students to use credit cards to pay for living expenses during school. Lacking financial education, many are unaware that with part-time employment and minimal savings, they will be unable to pay off their credit card debt, and that this debt will quickly accumulate under aggressive interest rates.
Even college students who are able to manage their credit card debt through and after school will likely be saddled with student loan payments after graduation. In 2009, college graduates had an average of $18,000 in student loan debt, which is an increase of 8 percent from a year earlier and a staggering 47 percent from a decade ago.
After graduation, paying off these debts can be difficult, as the economy and job market are making it difficult for new workers to secure jobs with a decent salary. Because of this, many are forced to turn to bankruptcy. However, it is important to note that student loans cannot be discharged through bankruptcy, although a Chapter 13 filing may allow the debts to be placed on a payment plan for more manageable payments.
Source: Bankruptcy Home, “A Correlation Between College Grads and Bankruptcy,” 13 May 2011