Highly Educated Have Biggest Debt Problems
It’s widely accepted that unscrupulous bankers tricked unknowing consumers into loans they could not afford, leading to the financial crisis. No doubt, plenty of that occurred–underscored Wednesday with a $1 billion federal suit against Bank of America’s mortgage arm Countrywide Financial.
But it turns out the “victoms” were not, by and large, unsophisticated rubes. A new study finds that highly educated Americans were most likely to take on unmanageable debt in the pre-crisis years. What’s more, gross personal financial mismanagement occurred across the population and not just in the mortgage market and not just among the unsophisticated.
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, say researchers led by Sherman Hanna, professor of consumer sciences at Ohio State University.
