Better Educated Americans Have More Debt

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Credit card bills, monthly mortgage payments and loan payments represent big financial burdens for many Americans. And people with a college education are more likely than those with a high school degree or less to be burdened by those debts.

Overall, the researchers found that 27 percent of Americans paid more than 40 percent of their income toward debts, defined as "fixed expenses" in 2008, up from 17 percent who paid more than 40 percent of their income to fixed expenses in 1992. Those with a college education were more likely than less educated counterparts to pay more than 40 percent of their income toward debts. 

The researchers also found that people who said they were optimistic about the economy over the next five years were also more likely to have problems with debt.

"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," said Sherman Hanna, co-author of the research and professor of consumer sciences at Ohio State University. "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.

"If more than 40 percent of your income is going toward debt, you're at a danger point, because if household income drops for any reason, it would be very difficult to keep up all your payments," Hanna said.

Hanna also revealed some interesting facts about the financial crisis of 2008. In particular, he found that 35 percent of renters had a heavy debt burden in 2007, compared with just 21 percent of homeowners.

"We just can’t blame the lenders and say they were exploiting uneducated people who didn’t know better. Many of those who got in over their heads were highly educated," said Hanna, who co-authored the report with Yoonkyung Yuh of Ewha Womans University in Seoul, Korea and Swarn Chatterjee of the University of Georgia. "There’s plenty of blame to go around. There wasn’t just one group of Americans who were at fault."

The research was based on data from six rounds of the United States Survey of Consumer Finances. The surveys were held between 1992 and 2007 and were based on data from more than 25,000 households. The research was based on two studies conducted by Hanna and his colleagues. The research was published in the International Journal of Consumer Studies and the Consumer Interests Annual.

This story was provided by BusinessNewsDaily, a sister site to LiveScience. Follow David Mielach on Twitter @D_M89 or BusinessNewsDaily @bndarticles. We're also on Facebook & Google+.