A report recently released by the Institute For Financial Literacy on 2010 consumer bankruptcy demographics found that over the past five years, bankruptcy rates for individuals with college degrees are on the rise.
The study says that while the vast majority of those who file — 70 percent — did not finish college, the number of debtors with college degrees increased by 20 percent over the past half-decade due to a slow-moving economy. The Great Recession has taken a toll on young people across the board; those under the age of 34 are 30 percent more likely to file for bankruptcy protection than they were five years ago. The study also notes that the number of individuals earning more than $60,000 a year who file is up by about 66 percent.
Using a sample of 52,851 individuals seeking bankruptcy as an option for debt reconciliation, the Institute surveyed the following: gender, age, ethnicity, education, personal income, employment, marital status and cause of financial distress.
The Census Bureau released an American Community Survey this month that says “…there is a clear and well-defined relationship between education and earnings” but was careful to mention that there are an indeterminable number of factors that could impact an individual’s earnings. The study considered statistics from the past four decades.
But institutions that once touted college degrees as safety nets for financial success have been, over the past several years, met with dissidence — even from within in many cases — as government aid allows more and more students to attain degrees.
A study done earlier this year by Rutgers University said that only a little more than half of 2006 to 2010 college graduates interviewed were employed full time. Because the number of college graduates able to find work seems to be in step with falling numbers of employment on the wide spectrum many graduates have opted to work on post-graduate studies as they await a better employment outlook.
In December, Richard Vedder, writing for The Chronicle of Higher Education, penned an article entitled “The Great College-Degree Scam.” In his work, Vedder, the director of the Center for College Affordability and Productivity, essentially concedes that the government push for higher education has saturated the job market and forced more graduate and post graduate degree holders to take jobs for which they are overqualified and/or underpaid.
“…[T]he push to increase the number of college graduates seems horribly misguided from a strict economic/vocational perspective. It is precisely that perspective that is emphasized by those, starting with President Obama, who insist that we need to have more college graduates,” Vedder writes.
The professor also writes that he believes that the degree, having lost its value as a true measure of an individual‘s willingness to struggle in pursuit of knowledge, has become little more than a cheap pre-employment screening device for business, though one that actually costs private sector businesses more than they know.
“…[C]redential inflation arises from a perceived need by individuals to demonstrate potential employment competence through a piece of paper, i.e. a college diploma. Employers are using education as a screening and signaling device, at a low cost directly to them (although not costless because of the taxes they pay to sustain much of this), but at a high cost to the prospective employees and to society as a whole.”
Vedder concludes that, while many institutions and government officials are aware of changing trends and some are simply ignorant of them, they continue to push dated ideas that protect special interests.
“Many of those advocating more access are well meaning and have pure motives, but they are ignorant of the evidence. But higher education is all about facts, knowledge—learning how the world works and disseminating that information to others,” he writes. “Some in higher education KNOW about all of this and are keeping quiet about it because of their own self-interest. We are deceiving our young population to mindlessly pursue college degrees when very often that is advice that is increasingly questionable.”
Vedder’s arguments were based on data collected representative of years between 1992 and 2008.
Evidence from the aforementioned studies demonstrates that data collected in more recent years shows a decline in the value of a college degree as educated job seekers face more competitive markets and are increasingly unable to fend off economic hardship. The Census study, however, focusing on long term trends dating back to the 1970s, determines that while there are unknown factors, college is still the best route to higher earnings.