- 4 min read
- US household start 2018 with over $13.15 trillion in debt
- Mortgage debt is still below the peak level of Quarter 2, 2008.
- Student loans and auto loans are each over $1 trillion.
Household Debt is Growing
Debt, debt, and more debt. Are you also facing growing debt levels? Are you able to maintain your monthly payments? How does your debt level compare with the rest of the nation?
In order to get a perspective of the US Household Debt situation in 2018, check out data that relates to the amount of debt (housing and non-housing) and how households are coping with the situation.
Amount of Debt 2018
According to the NY Federal Reserve’s 2017 Q4 Household Report, published on February 13, 2018, American household debt increased for the 14th consecutive quarter. They estimate that,
As of December 31, 2017, total household indebtedness was $13.15 trillion, a $193 billion (1.5 percent) increase from the third quarter of 2017.” ... Overall household debt is now 17.9% above the 2013Q2 trough.
In order to get a perspective of rising debt levels check out the following graph, based on the NY Federal Reserve data:
However, not all debt has grown at the same rate. The previous total debt high was in Q4 2018, at $12.67 trillion. Following the Great Recession, debt levels dropped to $11.153 trillion.The following graphs illustrates the differences of debt for four levels.
Here are some major takeaways:
- Housing Debt hasn’t reached the pre-recession debt level. Due to foreclosures, modifications, refinances and drop in sales prices, housing debt as of 2017 Q4 household debt is currently about 7% less than the peak year, 2008 Q3. However, due to better economic situation and rising home prices, housing debt has increasesed since Quarter 2 2013 by about 11%.
- Student loan debt has mushroommed and is now about $1.4 trillion. Most of that debt is now federal loan and any changes in any Income Repayment Program can have serious consequences on the economy.
- Auto loans, including sub-prime loans have been marketed heavily and now total balances are over $1.2 trillion.
Are Households Making Debt Payments on Time?
Although economic conditions have improved, there are still many households struggling to make their monthly payments. In order to maintain an excellent credit score it is important to keep current on all of your accounts.
There are different categories of delinquency ranging from: 30 days late, 60 days late, 90 days late, 120 days late, to severly deragotary. While there total amount of deliquent balance has greatly dropped since the 2008 Great Recession, total debt, as of Q4 2017, in a delinquent status is around 4.7%.
Late payments vary quite a bit based on the type of debt. Traditionally, households prioritize their mortgage payments. With the boom of lending to sub-prime auto borrowers, it is not so surprising that the delinquency rate for auto loans has risen. In addition, many student loan borrowers are struggling with their monthly payments.
Check out the graph to see the Percent of Balance 90+ Days Delinquent by Loan Type:
Household Debt: Not Evenly Spread over States
Do you live in one of the areas that housing prices have not rebounded? Is it hard to find a job?
It comes as no surprise that household debt levels and delinquency rates are not the same across all of the United States. Home prices in some of the harder hit areas have still not recovered. Homeowners in areas that are economically distressed are still having trouble making their payments. Therefore, you can see that some states like New York and Nevada have a substatially higher rates of delinquent mortgages 90+ days late.
However, overall it is clear that things have greatly improved. The high levels of mortgage debt (annual) 90+ Days late during the peak of the crisis was close to 9% in Q1 2010. Nevada recorded an astonding 21% and Nevada about 17%.
2018: Get a Debt Game Plan
Are you planning on taking on more debt? Perhaps you are thinking of buying a home and taking out a mortgage? Or maybe considering your refinancing your home? Do you want more affordable monthly payments (stretch out your mortgage), or build up your equity (shorter term mortgage)? Or maybe, you need extra cash to do home renovations, or consolidate debt.
In order to effectively deal with debt (link to new debt guide) start by checking your budget and overall financial situation. Then research your options. If you are looking for a new loan, then shop and compare.
Struggling with Debt? 2018 Debt Solutions
Looking for ways to get out of debt? Check out Bills.com Debt Navigator to find a personalized debt relief solution.
Dealing with debt
If you are struggling with debt, you are not alone. According to the NY Federal Reserve total household debt as of Quarter Q2 2022 was $16.15 trillion. Student loan debt was $1.59 trillion and credit card debt was $0.89 trillion.
According to data gathered by Urban.org from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.
Collection and delinquency rates vary by state. For example, in Pennsylvania, 19% have student loan debt. Of those holding student loan debt, 7% are in default. Auto/retail loan delinquency rate is 3%.
Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.