Who Carries the Most Debt in America?
The latest debt research is showing a troublesome trend – young Americans carry more than one trillion dollars in debt. Those aged 30 and younger carry the most debt out of all age groups, a 2018 New York Federal Reserve Consumer Credit Panel suggests.
Breakdown of Average American Debt
Out of the one trillion dollars, student loans contribute to the highest amount of overall debt – 167 billion dollars. Credit card debt follows with a total of 58.6 billion dollars.
The average person in the 25 to 34 age group has debt totaling 42,000 dollars. The sum is slightly lower for those in the 35 to 49 group – 39,000 dollars. Baby boomers carry a debt average of 36,000 dollars and those in the gen Z category (ages 18 to 24) have average debts of 22,000 dollars.
The massive increase in student loan debt is what financial experts believe to be the most troublesome trend. Since 2009, the average student loan debt amount has increased 102 percent.
Having young consumers carry so much debt can result in profound, long-lasting negative effects on the economy. A University of Michigan survey shows that home ownership has been affected the most. New mortgage rates grew to 36.2 percent in 2018, which is a much lower percentage than the peak value of 43.1 percent in 2004 and 2005.
What Are the Main Causes of Massive Debt Accumulation?
Economists are attempting to identify the reasons for the accumulation of so much debt in the US. While it’s normal for younger people to carry loans as they struggle to achieve financial stability, being in so much debt cannot be considered a normal occurrence linked to youth.
According to experts, the mindset of the millennial generation could be contributing to debt accumulation.
Unlike previous generations, millennials haven’t had to face a significant financial crisis, recession or depression. As a result, they probably like the saving and financial discipline skills enabling their parents and grandparents to pay loans in a timely manner.
The Great Depression isn’t spoken of that often and younger millennials have probably also forgotten about the Great Recession. At the time, many of these individuals were in school or college, meaning that their parents had to address the financial burden.
New technologies could also be contributing to the accumulation of large debts.
Today, consumers don’t even need to leave the house in order to purchase things or access services. Knowing how much one’s spending in the world of online shopping becomes a challenging task, especially when the lax financial discipline is added as a contributing factor.
Is It Possible to Get Rid of Debt?
Financial analysts believe that people in their 30s can still pay off debt and enjoy stability, regardless of the massive sums amassed.
The good news is that people in their 30s have more time to pay off debt or seek debt relief measures than those in their 50s or older. In addition, people in their 30s tend to earn more than younger individuals.
Millennials are yet to hit their earning peak, which is another positive factor bound to promote financial stability. College-educated individuals continue enjoying a salary increase well into their 40s and sometimes even beyond that age.
Certain types of debt are also relatively easy to control. Credit card debt is one of them. A simple change of mindset (refraining to spend money you don’t have) will minimize monthly credit card payments significantly, allowing a younger individual to turn to a more significant outstanding amount.
The introduction of new student loan forgiveness programs, contracted spending and dedicated debt repayment are also anticipated to start turning the troublesome trend around.
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