During the recent financial crisis, it was the very people you’d think would KNOW BETTER who went most deeply into debt–the BETTER EDUCATED consumers!
Overall, the percentage of Americans who were paying more than 40% of their income for debts like mortgages and credit card bills increased from about 17% in 1992 to 27% in 2008, when the economic crash hit (NOTE: Subscribers can still listen to this show). And college-educated people were more likely than those with high school or less education to be above this 40% threshold, which is considered to be a risky amount of debt for most households.
Consumer expert Sherman Hanna says, "People who piled on debt may have been too optimistic about their economic future, but you can’t blame that on a lack of education." Actually, the fact that they WERE better educated may have been what gave them the sense of optimism that prompted them to borrow for the better future they felt sure was coming.
And we didn’t learn from experience: according to Hanna, "Americans pulled back on their spending slightly during the slight recession of 2001, but after it was over, debt levels continued to rise. The financial crisis wasn’t all about housing speculation. There was too much debt in all parts of the economy (NOTE: Subscribers can still listen to this show too).
"People with college educations may have thought they were immune to any economic problems. But when people stop believing things might go bad, that’s when they get in trouble."
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