(Press-News.org) COLUMBUS, Ohio - Before the financial crash of 2008, it was highly educated Americans who were most likely to pile on unmanageable levels of debt, a new study suggests.
Overall, the percentage of Americans who were paying more than 40 percent of their income for debts like mortgages and credit card bills increased from about 17 percent in 1992 to 27 percent in 2008.
But college-educated people were more likely than those with high school or less education to be above this 40 percent threshold - considered to be a risky amount of debt for most households.
The association between more education and higher debt was true even after taking into account the fact that people with more education tend to have higher incomes.
In addition, people who reported being more optimistic about the future of the economy for the next five years were more likely to have a heavy debt burden, the study found.
"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."
Hanna and his colleagues also found that the debt crisis didn't just involve homeowners who took out bigger mortgages than they could afford. In fact, 35 percent of renters had a heavy debt burden in 2007, compared to 21 percent of homeowners.
Overall, Hanna said the research suggests that despite generally held assumptions, it wasn't just uneducated people, and not just homeowners, who precipitated the financial crisis by taking on too much debt.
"There wasn't just one group of Americans who were at fault," Hanna said.
"All types of households, renters and homeowners, educated and not, were taking on more of debt burden than they could bear. And lenders of all types - not just mortgage lenders - seemed to be taking more risks."
Hanna and his colleagues conducted two related studies, one appearing in the current issue of the International Journal of Consumer Studies and the other in the most recent Consumer Interests Annual.
In both studies, the researchers were interested in finding households that were paying more than 40 percent of their yearly income to pay off debt, including rent or mortgage, vehicle leases or loan payments, property taxes, credit cards, student loans and more. These were defined as households with a heavy debt burden.
"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.
In both papers, the researchers looked at data from six rounds of the U.S. Survey of Consumer Finances held between 1992 and 2007, which included a total of 25,889 households. The SCF is sponsored by the Federal Reserve Board and asks detailed questions about families' balance sheets, pensions, income and demographic characteristics.
In the IJCS paper, the researchers found that college-educated people were more likely to have a heavy debt burden, even after taking into account not only income, but also income expectations, as well as their age and other characteristics that may influence debt burden.
"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," Hanna said.
"There's plenty of blame to go around."
The percentage of households with a heavy debt burden increased from 1992 until 1998, but then dropped by 2001, when the United States went into a short recession, before rebounding again through 2007.
"Americans pulled back on their spending slightly during the slight recession of 2001, but after it was over debt levels continued to rise," Hanna said.
The Consumer Interests Annual paper found that the percentage of homeowners who had heavy debt burdens increased from about 15 percent in 1992 to 22 percent in 2007. However, the increase was even more dramatic for renters, going up from 20 percent to 35 percent during that same period.
"The percentage of renters who piled on debt really surprised me," Hanna said.
"It shows that the financial crisis wasn't all about housing speculation. There was too much debt in all parts of the economy."
###
In both studies, Hanna's co-authors were Yoonkyung Yuh of Ewha Womans University in Seoul, Korea; and Swarn Chatterjee of the University of Georgia.
Contact: Sherman Hanna, (614) 292-4584; Hanna@ehe.osu.edu
Written by Jeff Grabmeier, (614) 292-8457; Grabmeier.1@osu.edu
Potential debt problems more common among the educated, study suggests
2012-10-10
ELSE PRESS RELEASES FROM THIS DATE:
Synthetic liver enzyme could result in more effective drugs with fewer side effects
2012-10-10
Medicines could be made to have fewer side effects and work in smaller doses with the help of a new technique that makes drug molecules more resistant to breakdown by the human liver.
Researchers based at Princeton University reported in the journal Science that they created a synthetic enzyme that acts as a catalyst to replace certain hydrogen atoms of a drug molecule with fluorine atoms. This swap stabilizes the molecule and makes it resistant to the liver enzymes that can inactivate a drug or create toxic byproducts.
[More information is available at http://www.princeton.edu/main/news/archive/S34/97/92E16.]
"Putting ...
Mount Sinai School of Medicine study shows vitamin C prevents bone loss in animal models
2012-10-10
Researchers at Mount Sinai School of Medicine have shown for the first time in an animal model that vitamin C actively protects against osteoporosis, a disease affecting large numbers of elderly women and men in which bones become brittle and can fracture. The findings are published in the October 8 online edition of PLoS ONE.
"This study has profound public health implications, and is well worth exploring for its therapeutic potential in people," said lead researcher Mone Zaidi, MD, Professor of Medicine (Endocrinology, Diabetes and Bone Disease, and of Structural and ...
Interstellar travelers of the future may be helped by MU physicist's calculations
2012-10-10
Former President Bill Clinton recently expressed his support for interstellar travel at the 100 Year Spaceship Symposium, an international event advocating for human expansion into other star systems. Interstellar travel will depend upon extremely precise measurements of every factor involved in the mission. The knowledge of those factors may be improved by the solution a University of Missouri researcher found to a puzzle that has stumped astrophysicists for decades.
"The Pioneer spacecraft, two probes launched into space in the early 70s, seemed to violate the Newtonian ...
Scripps research scientists devise screening method to aid RNA drug development research
2012-10-10
JUPITER, FL, October 9, 2012 – Scientists from the Florida campus of The Scripps Research Institute (TSRI) have developed a new method of screening more than three million combinations of interactions between RNA and small molecules to identify the best targets on RNA as well as the most promising potential drug compounds. This novel technology may lead to more efficient drug development.
The study was published in the October 9, 2012 issue of the journal Nature Communications.
RNA has multiple biological functions, including encoding and translating proteins from genes ...
New interactive system detects touch and gestures on any surface
2012-10-10
WEST LAFAYETTE, Ind. – People can let their fingers - and hands - do the talking with a new touch-activated system that projects onto walls and other surfaces and allows users to interact with their environment and each other.
The system identifies the fingers of a person's hand while touching any plain surface. It also recognizes hand posture and gestures, revealing individual users by their unique traits.
"Imagine having giant iPads everywhere, on any wall in your house or office, every kitchen counter, without using expensive technology," said Niklas Elmqvist, an assistant ...
Patient navigation benefits timely cancer diagnosis, care for vulnerable patients
2012-10-10
(Boston) – Researchers at Boston Medical Center (BMC) have shown that patient navigation services help decrease the time to diagnosis for female patients who have received an abnormal result from a breast or cervical cancer screening. The study demonstrates the importance of patient navigation in helping vulnerable populations get the care that they need in a timely manner and supports the recent standard recommendations for all cancer care centers to provide patient navigation services.
Tracy Battaglia, MD, MPH, director of the Women's Health Unit at BMC and associate ...
Looking out for #1 can make you happy, if you have no choice
2012-10-10
We are, at our core, social creatures and we spend considerable time and effort on building and maintaining our relationships with others. As young children, we're taught that "sharing means caring" and, as we mature, we learn to take others' point of view. If we make a decision that favors self-interest, we often feel guilt for prioritizing ourselves over others.
In prioritizing others, however, we sometimes forego the things that we know will make us happy. This raises an intriguing question: Is there any way to pursue self-interest without feeling bad about it? Can ...
NASA sees brief life of Tropical Storm Olivia
2012-10-10
Tropical Storm Olivia was a three-day tropical cyclone in the eastern Pacific Ocean. It was born on Oct. 6 and faded to a remnant low pressure system on Oct. 9. NASA's Aqua satellite captured an image of Olivia just after it became a tropical storm during its brief lifetime.
On Oct. 6, Tropical depression 15E was born near 14.0 North latitude and 118.7 West longitude, about 845 miles southwest of the southern tip of Baja California. It would later strengthen into Tropical Storm Olivia. On Oct. 6, 2012, at 21:25 UTC 5:25 p.m. EDT, the Moderate Resolution Imaging Spectroradiometer ...
NASA eyes Typhoon Prapiroon intensifying
2012-10-10
Typhoon Prapiroon is the twenty-second tropical cyclone of the western North Pacific Ocean, making for a very active season. NASA's Terra satellite passed over the storm as it was intensifying into a typhoon and noticed very tight circulation with bands of thunderstorms wrapping into the center.
Tropical Depression 22W was born on Oct. 7. On Monday, Oct. 8, the twenty-second tropical cyclone had organized and strengthened into Tropical storm Prapiroon. At that time it was located about 600 miles southeast of Kadena Air Base, Okinawa, Japan. The storm had maximum sustained ...
Leading Futurist and Best Selling Author Marvin Dejean To Headline GMSHRM's Monthly Meeting In November
2012-10-10
Marvin Dejean, a leading professional futurist, and CEO of Gilead Sanders, a business futurist consulting firm in Fort Lauderdale, FL has been chosen to be the keynote speaker at the Greater Miami Society of Human Resources Professional's (GMSHRM) monthly meeting in November. Dejean's topic will focus on: "Retooling your Workforce for the 21st Century: Decoding Human Capital trends for 2013 and beyond" on November, 13th 2012 from 5:00 PM- 8:00 PM at the InterContinental West, 2505 NW 87 Ave. Doral, 33172.
The presentation based on his latest upcoming book, ...