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Highly Educated Have Biggest Debt Problems

It’s widely accepted that unscrupulous bankers tricked unknowing consumers into loans that they could not afford, leading to the financial crisis. But it turns out the “victims” were not mainly the unsophisticated population. A new study finds that it was the highly educated Americans that took on unmanageable debt of housing. This occurred not in just the mortgage market, but in all gross personal financial management- or should I say mismanagement. (Of course, there was mismanagement across the whole population too)

The study draws a line at the point where monthly payment on household debt equals 40% of income. That’s where default or bankruptcy becomes most likely should the household experience a decline in income. Overall, the percentage of Americans exceeding this 40% threshold jumped to 27% in 2008, from 17% in 1992. College graduates were more likely to be in this group than those without a degree. It was because they described themselves as optimistic about their economic future.

Although, it is mainly the banks of foul play that hustled so many unsuspecting people, it is also the homeowners fault for signing loan papers without reading them. Those with higher education do not necessarily know what they are doing with their money or just feel immune to it. Financial ignorance afflicts all classes and leaves us vulnerable to another financial crisis at any time.

A very overarching theme here is the cascade that going to college means you will get a job that pays well enough or a job at all. The state of the world at this point believes that if you go to a good college you will make a lot more money. The Payoffs is that you will get a better job. Albeit, this is true but far too many believe they will get a job far better than reality. They shoulder debts much higher than they should and in this article buy houses based on their view of the future, not present possibilities. This choice has many possibilities that affect the probability of a good payoff or a world in state “good.” To be clear, I think everyone should go to college, but everyone needs to understand the debt that will arise from this decision. The private signals everyone receives is based around their environment – perhaps family, friends, society, etc – they see that going to college is a good thing. The younger generation sees everyone’s decision and must make their own decision based off that. But nowadays, it seems like people go to college because that is just the thing to do. They don’t realize the gravity of their decision. I know many people that only finished paying off their debt at the age of 45. The cascade of going to college created by our society is a good one, but they need to know the consequences that arise from that choice. People with college educations need to know that they are not immune to any economic problems.





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