According to the Chicago Tribune, “bankruptcy has struck more educated Americans during the past five years, as financial distress spreads to more of the population with college degrees.”
The Tribune also reports, that “the number of borrowers defaulting on federal student loans has jumped sharply, the latest indication that rising college tuition costs, low graduation rates, and poor job prospects, are getting more and more students over their heads in debt.“
If we take these two pieces of information into account, we have to wonder how the lost generation will fare as we all recover from the great recession.
Some things to keep in mind:
- Students who attend for-profit colleges had the highest overall increase, with an especially sharp increase among students who borrow from the government. Begs the question, are for-profit schools worth it?
- Those who didn't graduate from college make up 70 percent of debtors, but the rate of college graduates filing for bankruptcy increased by 20 percent. So I guess it’s still better to go to college?
- Broke Hipsters aren't the only ones experiencing hard times. Married Americans were hit particularly hard, experiencing a 12 percent increase in bankruptcy filings since 2006.
- Some schools will lose access to government financial aid. Beginning next year, the Department of Education will begin using the figure for how many default within three years to determine which institutions will lose eligibility to enroll students receiving government financial aid.
- There is a light at the end of the tunnel, as The DOE has already begun an income-based repayment plan that caps federal loan payments at 15 percent of discretionary income.
The Great Recession has hit the lost generation particularly hard, considering schools are raising tuition and graduates aren’t finding jobs. Beyond that, many students never even finish the degree they go into debt for.
I know more University of Phoenix and ITT drop outs than I can count, which has always made me skeptical about those schools. Which is why it wasn’t surprising for me to find out that “the default rate at the University of Phoenix chain rose from 12.8 to 18.8 percent, and at ITT Technical Institute it jumped from 10.9 percent to 22.6 percent.”
The best advice I have for my broke hipster friends, is to use debt responsibly. There are no promises in the new economy, and the American dream may be more than you can afford.
Read more about Debt and Bankrupcy here: