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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 December 2019, Americans were carrying 12% more debt than in September 2008.
  • According to the New York Fed, Americans have an average $51,740 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 12% since 2008’s third quarter, student loans have skyrocketed 148%. 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 is proving to be a major problem for many young adults.
  • 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 $5,673, says CreditCards.com. Some 37% of households carry a balance from one month to the next.
  • Where do the most financially responsible Americans live? According to Experian, one of the three major credit bureaus, the five states with the highest credit scores are Minnesota, South Dakota, North Dakota, Vermont and Wisconsin.
  • Margin borrowing is often viewed as an indicator of investors’ appetite for risk. As of December 2019, there was $579.2 billion in margin debt outstanding. That’s up 4% from year-end 2018’s $554.3 billion, but down 10% from year-end 2017’s $642.8 billion.

Next: Inflation and Debt

Previous: Borrowing

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