College grads go bust

A college education doesn’t appear to ward off bankruptcy, as the rate of degree holders filing bankruptcy increased by 20 percent, according to a new study by the Institute for Financial Literacy.

The percentage of bankruptcy filers with a bachelor’s degree jumped to 13.6 percent last year, up from 11.2 percent in 2006. Filers with a graduate degree jumped to 6.7 percent in 2010 from 4.9 percent in 2006, reports The Post’s Ylan Q. Mui.

 “We’re told that if you do go and get advanced education, you’re going to be almost guaranteed this economic success,” Leslie E. Linfield, the Institute’s executive director, told Mui. “But the recession proved that “higher education was no guarantee that you weren’t going to be at risk.”

The rising bankruptcy filings among graduates should give pause to those taking on massive amount of debt to attend college.

Millennial Money Worries

Only 18 percent of 20 to 29 year-olds, whose adult lives began amid the recent recession, are confident they will have enough money to live comfortably when they are ready to retire, according to a survey by PNC Financial Services Group.

Only 23 percent of young adults describe themselves as "totally financially independent." Forty percent of survey respondents said they rely on two or more sources of income. This includes part-time jobs (57 percent), full-time jobs (28 percent) plus help from mom and/or dad (21 percent).

So what can these young folks do to help themselves become financially fit?

DailyFinance.com has some tips.

First, develop good habits, such as setting aside some savings before paying any other bills, including rent. And say no to credit card offers.

Todd Barnhart, senior vice president at PNC Bank, advises millennials not to worry too much.

"The two keys to financial independence for 20-somethings in today's economy are: Don't panic now and plan for the future," Barnhart said. "At a young age, time is on your side and you can take full advantage if you manage your spending, start saving and chip away at any debt."

I want to hear from you. Here are the Color of Money Questions for this week: Are you still supporting your adult child in some way? How does that make you feel? Send your comments to colorofmoney@washpost.com. Please put “Millennial Money Worries” in the subject line. Be sure to include your full name, city and state.

Downward Mobility 

Unfortunately, the bad economic news keeps coming.

Two recently released reports indicate that many people are in a difficult spot, financially speaking.

A report by the Pew Charitable Trusts found that nearly one in three Americans who grew up middle-class has slipped down the income ladder as an adult.

 

As Michael A. Fletcher of The Washington Post reported, the study focused on people who were middle-class teenagers in 1979 and who were between 39 and 44 years old in 2004 and 2006. And the report defines people as middle-class if they fall between the 30th and 70th percentiles in income distribution, which for a family of four is between $32,900 and $64,000 a year in 2010 dollars.

Here’s something to consider. Downward mobility is most common among middle-class people who are divorced or separated from their spouses, did not attend college, scored poorly on standardized tests, or used hard drugs, the Pew Report found.

Pew researchers said the study did not address whether upward mobility has become more difficult through the years. Nonetheless, some economists point to growing income inequality and widely stagnating wages as evidence that the American Dream is slipping out of reach for many people.

That brings me to a second troubling report. This one addresses the poverty rate in the U.S.

Nearly one in six Americans was living in poverty last year, the Census Bureau reported Tuesday.

“The report portrays a nation where many people are slipping backward in the wake of a downturn that left 14 million people out of work and pushed unemployment rates to levels not seen in decades,” Fletcher wrote in another article earlier this week.

The Census Bureau says the nation's official poverty rate in 2010 was 15.1 percent up from 14.3 percent in 2009 ─ the third consecutive annual increase in the poverty rate. There were 46.2 million people in poverty in 2010, up from 43.6 million in 2009.  That makes for the largest number in the 52 years for which poverty estimates have been published.

As these reports demonstrate, it’s bad out there for a lot of people.

 Responses to “Going back home to roost”

For last week’s Color of Money Questions, I wanted to know “If your adult children have moved home or if you’re the adult that had to move back, how’s it working for everyone? What steps have you found helpful to deal with the situation?”

John Jowers of Knoxville, Tenn. says he’s willing to lose his “man cave” to help out his children.

“As parents, we are going to be there for them,” he said.  “We respect them as adults. However, they understand what is expected of them. The only understanding we have to reach is that our purpose in helping them is to assist them in getting their financial house in order and not become a relief place from personal responsibility. We do not intend to end up financing their irresponsibility.”

Sarah Troxel of Gaithersburg, Md. had to move back home with her parents when she became pregnant.

“My goal was to save money and avoid the stress of moving during pregnancy and the newborn stage,” Troxel said. “I was somewhat apprehensive about the situation but didn't have much of a choice at the time. But I have found that I so enjoy the support of my parents and the stability, both emotionally and financially, that living with them have afforded us. I have no plans to leave any time soon. By staying at my parents longer, I can save more towards a home purchase and be in a better financial position when we do move. My parents also are enjoying the special bond they've developed with their granddaughter. The dynamic is certainly different but in a positive way. I think in many other cultures it is normal and traditional for grown children and their kids to live with parents. I think my daughter will benefit from having the love and wisdom of my parents in her daily life.”

Suzanne M. Thomas of Detroit, Mich. had to move in with her daughter for five years because of the economy.

“I invested in going back to school to get a Bachelor's Degree in Business Administration and so far it has not paid off,” she wrote. “In fact, I am making less money than I was five years ago so now I am sharing a place with my son. My grandmother lived with my family, until I was 13 years old so I am pretty used to the ‘sandwich generation.’”

Debt Defeaters 

Has zero become your new hero? If so, I want to hear your Debt Defeater story.

Write to me about how you got out of debt. Send your story to colorofmoney@washpost.com. How much debt have you paid off? How long did it take and what sacrifices did you make to get that monkey off your back? Include a statement describing your debt relief. Put “Debt Defeater” in the subject line.

You will receive a free T-shirt if I read your story during my live video chat.

Upcoming Events

Tonight, I’ll be speaking at the Women’s and Girls Fund of the Mid-shore fundraising at 7 p.m. at the Avalon Theater in Easton, Md. This event raises money to provide grants to non-profit organizations that provide a number of services to women and girls in several counties in Maryland. Tickets are still available. You can call 410-770-8347 or pay online.

Next month, on Thursday, Oct. 6th, I will be honored with the Bridge Builder Award at the 18th anniversary dinner and auction for The Training Source. This is a fundraising event for The Training Source, a great non-profit organization in Prince George's County that, among other services, provides training and employment placement assistance, leadership training for at-risk youth, and free professional clothing for job candidates.

The event will be held at Newton White Mansion at 2708 Enterprise Rd. in Mitchellville, Md., from 6 p.m. to 9 p.m. For more information about the event, go to www.thetrainingsource.org.

Tia Lewis contributed to this e-letter.

 You are welcome to e-mail comments and questions to singletarym@washpost.com . Please include your name and hometown; your comments may be used in a future column or newsletter unless otherwise requested. 

 

 
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