Today’s Family Debt

TOO MUCH DEBT helped trigger the 2008 financial crisis. Today, the picture is much brighter. Here’s what the latest statistics tell us:

  • Every three months, the Federal Reserve Bank of New York puts out a report on household debt. Over the five years through September 2008, the amount of debt carried by U.S. families soared 68%, as we hurtled toward the financial crisis. Americans shed debt over the next five years, as they paid back the money they borrowed and also defaulted on loans. Since mid-2013, however, borrowing has picked up again. Result: As of September 2019, Americans were carrying 10% more debt than in September 2008.
  • According to the New York Fed, Americans have an average $51,360 of loans outstanding, including mortgage debt, home equity loans, car loans, credit card debt and student loans. That might seem modest given the large mortgages often needed to buy homes in major East and West Coast cities. But remember, homes are substantially cheaper in many parts of the country, plus the average is influenced by retirees with little or no debt and by the third of American households that don’t own a home and hence have no mortgage.
  • While overall household debt is up just 10% since 2008’s third quarter, student loans have skyrocketed 146%. The money borrowed should help make the U.S. economy more productive and help the students involved earn higher lifetime incomes. Still, this burgeoning debt speaks to the financial sloppiness of the baby boomers, who are providing notably little financial help to their college-bound teenagers, thus compelling their children to borrow more.
  • Just over 77% of American families are in debt, according to the Federal Reserve’s 2016 Survey of Consumer Finances. The most common types of borrowing are mortgage debt, installment loans like car and student loans, and credit card balances.
  • As of 2016, 43.9% of families had a credit card balance, up from 38.1% three years earlier, found the Federal Reserve’s survey.
  • U.S. adults with credit cards owe an average $5,839, says Some 38% of households carry a balance and their total card debt is estimated to be more than $9,000.
  • People without a credit score pay an average 67% more for car insurance than those with an excellent credit score, according to WalletHub.
  • Just 31% of U.S. workers with nonmortgage debt say they’re saving for retirement outside the workplace, vs. 69% of workers with no nonmortgage debt, according to LIMRA. Nonmortgage debt includes credit card debt and car, student and home equity loans.
  • A fifth of Americans have more credit card debt than emergency savings, according to Bankrate. Another 12% have neither credit card debt nor savings, while 58% report having more savings than card debt.
  • Where do the most financially responsible Americans live? According to Experian, one of the three major credit bureaus, the three states with the highest credit scores are Minnesota, Vermont and New Hampshire, while the three states with the lowest scores are Mississippi, Louisiana and Georgia.
  • New Mexico, Louisiana and West Virginia have the highest credit-card debt, relative to their state’s median household income, calculates Meanwhile, Massachusetts, Wisconsin and Minnesota have the lowest.
  • Margin borrowing is often viewed as an indicator of investors’ appetite for risk. As of November 2019, there was $563.5 billion in margin debt outstanding. That’s up 2% from year-end 2018’s $554.3 billion, but down 12% from year-end 2017’s $642.8 billion.

Next: Inflation and Debt

Previous: Borrowing

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