Today’s Family Debt

TOO MUCH DEBT HELPED trigger the 2008 financial crisis. Some 16 years later, 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. Borrowing had soared ahead of 2008’s financial crisis, only for American families to shed debt in the years that followed, as they paid back the money they borrowed and also defaulted on loans. Recent data are more reassuring. Today, families are carrying 52% more debt than a decade ago, outpacing the 32% inflation rate for the same period, but not to an alarming degree.
• According to the New York Fed, Americans have an average of $61,040 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.
• For years, student loans were the big worry. But the past decade paints a more comforting picture, with student loans outstanding up 48%, versus 52% for all household debt.
• As of 2022, 77.4% of American families were in debt, according to the Federal Reserve’s Survey of Consumer Finances. The most common types of borrowing are mortgage debt, installment loans like car and student loans, and credit card balances.
• The Federal Reserve’s 2022 survey found that 45.2% of families had a credit card balance, up from 38.1% nine years earlier. Among those carrying card debt, the mean amount owed was $6,120, while the median was $2,700.
• Where do the most financially responsible Americans live? According to WalletHub, the three states with the highest credit scores are Minnesota, New Hampshire and Vermont, while the three lowest-scoring states are Mississippi, Louisiana and Alabama.
• Margin borrowing is often viewed as an indicator of investors’ appetite for risk. As of December 2023,  there was $701 billion of margin debt outstanding, up from $607 billion a year earlier.

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