Just over ten years ago, in 2008, during the financial meltdown, the U. S. Consumer debt reached $13 trillion ($13,000,000,000). This is the amount of debt that accumulated on credit cards, consumer loans, auto loans, mortgages and other types of personal debt such as student loans.
Currently, in the midst of the COVID-19 pandemic, consumer debt has reached $14 trillion and is still climbing. Defaults are increasing rapidly. Student loans totaled $611 billion in 2008, and now they total $1.64 trillion. According to Debt.org, a debt help organization, mortgage debt rose to $9.4 trillion, an increase of $407 billion from 2017. Auto debt rose to $1.3 trillion, an increase of $59 billion from 2018. Credit card debt is now $1.08 trillion, which is the same as it reached during worst part of the 2008 financial meltdown.
The following are some additional miscellaneous facts that reader may find interesting. 189 million Americans have credit cards (the population of the United States is 325 million. The average credit card holder has four cards. Each American household with a credit card averages $8,398 in credit card debt.
The average mortgage (home) debt in California is $335,925. In Florida it is $183.018. In Massachusetts, it is $252,624. In Texas, the average mortgage debt is $166,782, an increase of 28.5% in one year.
Speaking of Texas, just prior to the advent of COVID-19, it had the second best economy in the United States, only exceeded by California. It also had the second fastest rate of job gains.
Texans (as a group) have one of the lowest credit scores in the United States. This appears to be attributable to the lack of statewide consumer protection laws (particularly payday loans). Texas has an average credit card debt of $5,960. San Antonio area has the lowest average credit card scores in the state.
With respect to student loans, federal (not private) student loan borrowers have been placed automatically in “administrative forbearance” which allows them to stop making monthly payments and interest is temporarily zero percent on the unpaid balance of a loan. In addition, wage garnishment has also been suspended. The forbearance period lasts until September 20, 2020. For additional information the website is studentaid.gov.
Student loans now total $1.64 trillion of which $1.515 trillion are federal student loans. The average student loan is $35,397. In Texas, the average is $31.998. In Texas, 6.1% exceed $100,000. Student loans surpass all other forms of debt in the United States including mortgage loans. The student loan delinquency rate is 11.1%.
Banker Phares is a practicing attorney and founding member of the Estate Planning and Probate Law certification by the Texas Board of Legal Specialization. He is the John and Karen Mast Professor at SFA and teaches in the Department of Economics and Finance.