Since 2006, there has been a 20 percent increase in the amount of college degree holders who have filed for bankruptcy.
Those who hold advanced degrees, such as masters or doctorate degrees, have also filed for bankruptcy at increased rates since 2005, the same year the Bankruptcy Abuse Prevention and Consumer Protection Act was passed.
MU economics professor Peter Mueser said he thinks the economy is the largest factor in this rapidly growing problem.
“This is one of the worst recessions in modern history,” Mueser said.
High unemployment rates might also have had an impact on this upward trend; the Institute for Financial Literacy study states that there has been a 23 percent increase in the amount of bankruptcy filings by unemployed Americans since 2008.
A few years ago there was a much more prosperous job market, Meuser said.
Missouri Department of Higher Education spokeswoman Kathy Love said the number of graduates from Missouri schools who default on their student loans is lower than the national average.
According to a Sept. 14 MDHE news release, Missouri’s overall rate of default on student loans in 2010 is 7.6 percent (an increase from 5.8 percent in 2008) and the rate of default on student loans guaranteed by the MDHE is 6.3 percent (a decrease from 6.6 percent in 2008). The national average is 8.8 percent.
Missouri’s student loan default rate was also lower than the default rates of many of its neighbors including Arkansas, Illinois, Iowa, Kentucky and Oklahoma, which posted default rates of 11.6 percent, 9.1 percent, 11.5 percent, 10.2 percent and 10.7 percent respectively.
This news release is based on information for people whose first loan repayments were due between Oct. 31, 2008, and Sept. 30, 2009, and who defaulted on these loans before Sept. 30, 2010.
The United States Department of Education recently published updated cohort default rates. The cohort default rate for MU increased from 2.4 percent to 2.9 percent, Interim Director of MU Financial Aid Nick Prewett said.
Although the MU Office of Student Financial Aid said it does not have any information about post-graduate bankruptcy filings, they are required to track cohort default rates for the University. Cohort default rates are the percentage of students who put down money toward repayment of their loans during one fiscal year, but then default on their payments before the end of one of the next two fiscal years.
According to Prewett, the financial aid office does not have any data that relate bankruptcy and student loans. But both he and Meuser said the impact of student loans is inescapable.
