Here’s Why More College Graduates Are Filing for Bankruptcy

The number of college graduates filing for bankruptcy is on the rise in the U.S. as the economic recovery continues to stagnate. Though those who didn’t graduate from college still make up 70% of debtors, the rate of college graduates filing for bankruptcy increased by 20%.

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“While less educated, low-income individuals continue to represent the typical bankruptcy filer, this report underscores a sophisticated evolution of the profile of the American debtor that now extends to disparate age, income and ethnic groups,” Leslie Linfield, executive director and founder of the Institute for Financial Literacy, which conducted the study.

The study included over 50,000 respondents and collected data between 2006 and 2010, tracking the financial status of debtors following the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act. Since 2006, the rate of unemployed Americans filing for bankruptcy increased by 21%, unsurprising given the economic downturn. However, the report showed that more higher income earners were filing for bankruptcy during that time.

In 2006, only 5.5% of debtors participating in the report earned more than $60,000, but by 2010, the number of bankruptcy filers from that bracket increased to 9%. Married people were hit particularly hard. With a 12% increase in bankruptcy filings since 2006, married people now represent more than 60% of all filings.

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When asked why they had filed for bankruptcy, respondents reported that that they were overextended on their credit, had experienced a reduction in income, or had lost their jobs. Meanwhile, other causes ,such as unexpected expenses, the death of a family member, illness, and injury all declined over the five years covered by the study.

For profit education stocks have come under pressure lately as investors are skeptical the costs for college can continue to rise on the back of debt subsidies. Keep your eye on Apollo Group, Inc. (NASDAQ:APOL), Career Education Corp. (NASDAQ:CECO), American Public Education, Inc. (NASDAQ:APEI), DeVry Inc. (NYSE:DV), National American Univ. Hldgs., Inc. (NASDAQ:NAUH), DeVry Inc. (NYSE:DV), Grand Canyon Education Inc (NASDAQ:LOPE), Education Management Corp (NASDAQ:EDMC), Strayer Education, Inc. (NASDAQ:STRA), Bridgepoint Education, Inc. (NYSE:BPI), and Lincoln Educational Services Corp. (NASDAQ:LINC).

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