Americans have slowly been making a financial comeback since the recession, but how is the personal finance climate now compared to to 2008? Surprisingly, when it comes to debt, the outlook isn’t that much different overall.
According to the Federal Reserve, revolving consumer credit rose to $1 trillion dollars in February 2017. They also projected that total household debt will be $12.68 trillion in 2017, which is what the debt was in the third quarter of 2008, according to MarketWatch.
However, the surprising part of these new numbers is how this debt is allocated. While 67 percent of debt is comprised of mortgage lending, people are borrowing more and more money for student loans and auto loans. In fact, home loans are $1 trillion less than they were in 2008, meanwhile, auto loans are up $367 billion. The kicker is student loans though, which have shot up $671 billion since 2008.
So, how does your debt stack up to what the majority of Americans’ looks like?
With mortgages making up the majority of debt (67 percent), the next big expense is student loans, which comes in at 10 percent of overall debt. That figure is closely followed by auto debt at 9 percent. This leaves credit card debt at 6 percent, and other debt at 3 percent. Is it a similar situation with your own debt?
It’s also interesting that student loan debt has nearly doubled since the recession began, likely because people realized that getting at least a bachelor’s degree is important for professional progress. Even more interesting is how student loan debt was barely approaching 3 percent of overall debt back in 2003, before the housing crisis. This shows that over time, consumers have placed a greater emphasis on higher education, even if that means racking up more debt in the meantime.
These figures also show that consumers are being responsible spenders, since the biggest areas of debt are large purchases like homes and cars, as opposed to simple credit card debt.
Previous studies have shown Americans struggle with their auto loans, which often have high rates. Delinquent subprime auto loans that have hit their highest level since 2010. At that time, nearly 6 million people were at least 90 days late on their payments. That is similar consumer behavior to what was seen just before the last recession.
It will be interesting to see how these trends continue as college becomes either more expensive or more affordable, and as people begin to seek education options beyond simply having an undergraduate degree.