A College Degree Is No Guarantee Against Bankruptcy

A college degree, once hailed as the golden ticket to a comfortable middle-class existence, has taken a lot of flak recently. Salaries are actually falling for grads while student loan burdens are growing (as is the rate of defaults), leading some experts to contend that college tuition is a bubble and the value of a degree is over-rated.

Now a new set of numbers offers critics another bat to beat up on college with. Apparently, a degree is no longer a guarantee against bankruptcy. New figures out of a study by the Institute for Financial Literacy released this week that analyzed the demographics of 50,000 people seeking bankruptcy show that:

People with a bachelor's degree represented 13.58 percent of bankruptcy filings last year, up from 11.2 percent in 2006 -- a 21 percent increase.
Those who had some college but had not completed a degree were at an especially high risk of bankruptcy. They accounted for 28.7 percent of filings last year. "This we suspect is because they have all the burdens of school related debt and none of the rewards of an actual degree," according to the study.
Even a graduate degree wasn't enough to protect everyone. The percentage of filers with a postgraduate degree rose from 4.9 percent in 2006 to 6.7 percent last year.

"We're told that if you do go and get advanced education, you're going to be almost guaranteed this economic success," said Leslie Linfield, the group's executive director but "higher education was no guarantee that you weren't going to be at risk."

In other findings, the group also revealed an increase in the rate of bankruptcy among married people and households earning over $60,000. Younger people under 34 were filing less, older folks more.

This is even more gloomy news about the prospects for the college educated, but it's important to keep in mind the reality that, in the current economic conditions, prospects for the average person without a degree are even worse. Last year, 4.9 percent of college grads aged 25-34 were unemployed. The rate for those with only a high school education was 13.7 percent. On average, college grads in the same age group make roughly $20,000 a year more than those without.

You can argue that taking into account student loan debt, college educated young people might be worse off than these numbers suggest. And it's certainly worth looking at whether there are more cost effective ways to get kids job ready than the current college system. But despite the recent drum beat of depressing reports on the financial state and job prospects of college grads, it's still far, far worse on average to face this economy unarmed with a degree.

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(Image courtesy of Flickr user taberandrew, CC 2.0)

Jessica Stillman

Jessica lives in London where she works as a freelance writer with interests in green business and tech, management, and marketing.

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