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Household Debt Explodes And You Don’t Need to Be Smart to Figure Out Why

By on February 16, 2017

The latest data is out from the Federal Reserve Bank of New York on household debt. They observed that overall household debt has substantially increased and is nearing the pre-crash peak of 2008.

Consumer debt issues go in cycles. We have a crash, followed by a tightening, then slow relaxation of credit and a build up of consumer debt again. After that it’s pretty much rinse, lather, repeat.

And if we want a free market economy with little control over Wall Street, this is just the way it’s always going to be.

In the crashes that occur, the average American will get ground up in financial pain. That’s just the way it is.

So what type of debt is exploding? Data shows it is a 1.6% increase in mortgage debt, 1.9% increase in auto loan balances, a 4.3% increase in credit card balances, and a 2.4% percent increase in student loan balances.

Key points in the data:

  • Auto loan balances continued their steady rise and auto loan originations for 2016 reached a new annual record in the 18-year history of this series.
  • Credit card balances increased and the aggregate credit card limit increased for the 16th consecutive quarter.
  • Student loan balances increased – marking an increase in every year throughout the 18-year history of this series.

The early warning signs are showing that both student loan debt and auto loan debt are getting to be more of a concern with creeping delinquency rates.

This is discouraging for people in the debt relief industry since there are not as many good solutions for these types of debt as there is for unsecured credit card debt.

So which flavor of debt is the most desirable to consumers, student loan debt.

I’m certainly not going to tell you the sky is falling but what I will say is a whole lot of good people are going to be chewed up and spit out by the cycle as it plays out. The combination of being house poor, having a big car payment, and overloaded in student loan debt is not going to be pretty to watch.


If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

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About Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

2 Comments

  1. Keith Gumbinger

    March 24, 2017 at 2:32 am

    Aside from the cycle of debt expansion and contraction, it would be interesting to know if there is any kind of “”cascade”” or “”spillover”” effect that can be observed in the delinquency trends for various credit types.

    For example, perhaps a given rise in delinquencies on student loan debt presages a rise in delinquencies in credit card debt, which presages a rise in auto loan delinquencies (then mortgages, home equity, whatever) — or any combination thereof.

    If one is a trigger (or influencing factor) for the next it might allow for some semblance of predictability, not to mention revealing something about how one kind of debt might be less valued than another (i.e. credit cards — a “”necessity in modern life”” being paid on time more often than auto or student loans). This would be most interesting if it could be applied against differing demographic groups, too. Any correlations would make an interesting study, if nothing else.

    • Steve Rhode

      March 24, 2017 at 11:06 am

      I completely agree but this current iteration of debt mix is unique with student loan debt now leading the pack. I did find a recent post by Credit.com interesting. It said the average unpaid balances of debt when people died was “These were the average unpaid balances: credit cards, $4,531; auto loans, $17,111; personal loans, $14,793; and student loans, $25,391.” And “Among the 73% of consumers who had debt when they died, about 68% had credit card balances. The next most common kind of debt was mortgage debt (37%), followed by auto loans (25%), personal loans (12%) and student loans (6%).” – http://blog.credit.com/2017/03/americans-are-dying-with-an-average-of-62k-of-debt-168045/

      There is end to the private student loan debt problem yet. That’s the segment that has the greatest potential to wreak the biggest family budget impact.

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