Breaking Down Americans Debt Crisis
$14 Trillion and Counting


Total U.S. household debt has reached it’s highest point in history, topping $14.15 trillion dollars. 

To put that in perspective, if you stacked $1 bills on top of each other, it would reach from the Earth to the Moon over 3 times.

Year-over-year, total household debt has risen by $601 billion.

What is driving this debt? Can it be sustained? Should we be concerned? Is it officially a crisis?

Let’s break down the stats, data and trends behind the numbers.

The Economy

Depending on where you get your news information, you may have heard that America’s economy is strong and has been growing. There a lot of data to back up these claims.

Unemployment rates fell to a 50 year low in 2019, meaning a record number of Americans are working. 

Wages have been increasing. The Bureau of Labor Statistics states that the median income for a full-time wage or salary worker on a weekly basis was $936, or approximately $48,672. This is a 4% increase on the previous year.

Minimum wage has also been on the rise. Eighteen states began 2019 with higher minimum wages. Eight states automatically increased their rates based on the cost of living, and 10 states increased their rates due to previously approved legislation.

The most recent data from the U.S. Census Bureau shows that the average household income in 2018 was 63,179, an increase over 2017 ($61,372).

Over the last 4 years, the stock market has been continually setting record highs.

If Americans are making more money, shouldn’t we be better equipped to pay down our debt, and household debt be decreasing instead of being at an all-time high?

The answer is yes and no.

Fidelity Investments said that the number of retirement savers with at least $1 million in their account hit a record. The average employee savings rate also hit a record high at 8.8%.

One could argue that while the average wages are increasing, if retirements savings rates are also increasing, that could translate into having less money in the short-term for debt repayment.

A stronger economy also increases buying power and encourages consumers to spend money. 

The questions then become, what are we spending money on?

Mortgage Loans

Mortgage debt makes up the majority of household debt at roughly $10 trillion dollars.

Mortgage rates fell below 4% for the first time in 3 years, making mortgages cheap and easier to obtain. This has spurred an increase in the number of mortgage applications and refinances. 

It’s also motivation for younger adults to purchase a house, and in fact, mortgage loans for young adults ages 18 to 29 rose to the highest level since the third quarter of 2007. 

With more people buying and investing in the housing market, and the average initial loan cost rising to over $260,000 it certainly would make sense that there would be an increase in overall debt.

average initial mortgage loan size

Many financial experts will tell you that mortgage debt can be a good debt, and should be considered as more of an asset than a liability. As you pay down your loan, you gain equity, there are tax advantages to home ownership, and home values have historically appreciated at an annual rate of 3 – 5%.

As of the third quarter of 2018, the total value of real estate owned by individuals in the United States is nearly $25.6 trillion. 

Although American hold $10 trillion in housing debt, there’s a net positive real estate of $15 trillion, which is the highest value of home equity Americans have ever seen.

Student Loans

Student loan debt continued to rise in 2019, topping $1.5 trillion, an increase of $51 billion last year over 2018, although this has been trending downward. In 2013 there was a reported increase of $114 billion.

The number of enrolled college students is also increasing year-over-year. 

  • College students in 2019 – 19.91 million
  • College students in 2020 – 19.93 million

College tuition costs continue to rise. Here are the averages as per ValuePenguin.

  • Average Total Cost of Public Colleges: $25,290 (in-state) $40,940 (out-of-state)
  • Average Total Cost of Private Colleges: $50,900
It’s interesting to see that although college costs are rising, and more students are enrolling, the debt increase is still less than projected. This could indicate that with unemployment rates so low, workers are doing a good job overall of keeping up with loan payments.
There is one area of concern, as about 11% of borrowers are 90-plus days delinquent or in default in 2019. This is most notable in the ages of 18 – 29 demographic, which could be holding back young consumers.

Auto Loans

American owe more than $1.2 trillion in auto loan debt.

In May of 2019, the average price of a new car purchased in the U.S. climbed to $36,718, with interest rates hovering around 6%. The average monthly car payment in the U.S. is $550 for new vehicles

Average auto loan term lengths are almost 6 years.

This is a huge “investment” and we should be asking ourselves, is the idea of owning a new vehicle really worth going into years of debt for?

The simple answer is no.

Most vehicles depreciate and lose value at an alarming rate. 

That $30+ thousand dollar car will most likely be worth only one-third that amount when it’s paid off. You also have to consider the additional losses from the amount paid in interest over the life of the loan.

Almost 5% of auto loans are 90 days or more delinquent, which is the highest percentage since 2011.

Although it only accounts for around 10% of total U.S. consumer debt, this is an area that can certainly be improved on with a more frugal mindset.

Personal Loans

Personal loans are the fastest growing consumer debt product, tripling over the past 10 years, and have a total outstanding debt balance of $156 billion.

Over 20 million consumers have a personal loan, and the average new personal loan size in 2019 was $6,382.

Two-thirds of borrowers take out a personal loan to either consolidate debt or refinance credit card debt. Debt consolidation can be an effective way to pay off debt quicker, but one has to wonder what the other one-third of consumers need a loan for.

It’s definitely smarter to take out a lower interest personal loan to replace high interest credit card debt, but then the question becomes, are people taking out loans only to rack up credit card balances again?

The rate of growth for personal loans is certainly something to keep an eye on.

Credit Cards

Credit card debt rose $57 billion last year, reaching an all-time high of $930 billion. 

Credit card delinquency also at an 18-month high, rising to 8.36%, which has been an ongoing trend for years.

Wilbert Van Der Klaauw, senior vice president at the New York Fed, states “Transitions into delinquency among credit card borrowers have steadily risen since 2016, notably among younger borrowers.

New York Fed economist say that rising delinquencies among borrowers in their 20’s and 30’s could be related to high levels of student loan debt.

This is certainly a cause for concern. Given the high interest rate, credit card debt can be difficulty to get out of, and may indicate that borrowers are having some difficulty in affording their bills.


While statistics show a strong economy, one never knows when that may end and start spiraling downward.

The majority of consumer debt lies in investments such as mortgages and student loans (investing in yourself) which can pay off in the long run.

However, it’s important to practice smart money habits like proper budgeting to ensure other debt doesn’t reach a level that is too much to handle.

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