American Households and Businesses Owe Billions Since the Great Recession

Published October 12, 2018

Since the Great Recession a decade ago, the American economy has seemingly been improving. After all, many reports suggest that employment is currently at the lowest it’s been in many years, while economic growth continues to be strong. However, that doesn’t mean that American households and businesses owe less money than they did before.

Quite the opposite is true, in fact: American households and businesses owe billions more than they did before the Great Recession. That means that American debt isn’t likely to decrease anytime soon unless drastic action is taken.

The Current State of Debt in America

According to several studies, up to 80% of Americans have some kind of debt, and 70% of these people said going into debt was a necessary part of their life. This problem exists, even though they’d prefer not to have any debt at all. This debt primarily caused by student loans or medical costs, but it’s also made up of a number of different things, which we’ll get into in more detail in just a little bit.

That being said, though, aside from educational costs, the biggest form of debt for Americans is from the use of credit cards, with The New York Post reporting that Americans have almost $930 billion in credit card debt; although this amount to fluctuates due to fees and interest.

What Is America’s Debt Now Compared to What It Was During the Great Recession?

At the height of the Great Recession, Americans owed about $12.68 trillion, but this has steadily increased over the years, with a reported debt in 2017 of $12.84 trillion. This is in spite of the growing economy and increased employment. Even programs like Medicare and Obamacare haven’t been able to help the average American household bills, even though it did help many who were below the poverty line.

This problem means that the majority of American households don’t have much help in decreasing their debt or being able to access assistance.

How Did American Debt Continue to Climb After the Great Recession?

As we already pointed out, the American economy has continued to get better over the last ten years, but this hasn’t benefited the average American household; as reports suggest, average income has decreased by 13%, meaning that Americans have less spending money now compared to what it was before the Great Recession.

However, even though average wages have decreased in the past decade, it doesn’t mean that the cost of living has also decreased. Quite the opposite, unfortunately, is true; as reports show, the average cost of living has increased by 14% in the last ten years, meaning that Americans are being squeezed financially on both ends.

Because of that, Americans have been forced to use their credit cards more and more, which explains why American credit card debt has been skyrocketing over the past few years.

Where Are Americans Going into So Much Debt?

We’ve already discussed credit card debt a little, but here are a few more specific details. In the second quarter of 2017, overall credit card debt saw an increase of 2.6%. While this may not seem like a lot in theory, in practice it means an increase of $20 billion compared to the previous quarter, leading to an overall American credit card debt of $784 billion.

The latest figures that have been made public are from 2017, so this figure may be slightly different in 2018, although not by much. Let’s look at the fields that have caused American households to go deeper into debt since the Great Recession ended.

Mortgage Debt

One of the other major areas of debt is mortgages. Household mortgage debt is a major concern for individuals and society. As it stands, the American mortgage debt is a staggering $8.69 trillion. This breaks down to an average of $196,014 per household, according to Experian.

That figure can fluctuate drastically depending on where you live, however. For example, homes in cities like New York and San Francisco are costly, so it’s likely that households there have a higher mortgage debt than those elsewhere.

Regardless of where you live, though, it’s likely that mortgage debt takes up a significant portion of your earnings, regardless of whether you have any other form of debt, which most Americans do.

American debt, regardless of whether or not it’s for a business or a household, breaks down in a number of ways, as we’ve already shown.

Student Loan Debt

In total, mortgage debt takes the cake with the most debt owed at $8.69 trillion, but student loan debts come in at a distant second at $1.34 trillion, which is still a huge amount. According to studies, the average 2018 college graduate owes nearly $31,000, up from $29,000 in 2015. This figure ranges from 38% of students in Utah owing an average of $18,871 to over $38,000 representing 51% of those in Connecticut, the state with the most debt. In a CNBC study, it takes an average of 10 years to pay back a student loan, but some take as much as 20 years!

Auto Loan Debt

Another of the biggest areas that American households and businesses owe more now than they did during the Great Recession is car loans. This is unfortunate, as many Americans need a car in order to commute and do their jobs. As it stands now, American auto loan debts total about $1.19 trillion, making it third after the two discussed previously. Auto repair loans from services like contribute a significant part in it and it is an unhidden cost if you own a car.

In total, these top three, along with business debt, which has not been covered, means that the current combined American debt comes to an unbelievable $12.84 trillion, which dwarfs the national debt of most other countries, according to the Federal Reserve Bank of New York. This means that American households and businesses owe billions more than they did during the Great Recession, and it doesn’t look like that number is going to go down anytime soon.

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