Household Debt Reaches New High
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Americans are in more debt than ever before. Collectively, consumer borrowing reached $12.7 trillion in the first three months of 2017, a new high that surpassed the old peak of household debt before the 2008 financial crisis.
Rising debt can be a good sign — people are buying more — but it also reflects ballooning student loans and credit card debt. Too much debt can lead to defaults, much like the ones that helped fuel the Great Recession.
It also shows that even with the recent uptick in the economy, families are still struggling and are using debt to help to make ends meet. This story is familiar to Ebony Brown, who lives with her husband and three children in Elgin, Illinois, outside of Chicago. She grew up poor in Gary, Indiana, but when she went to college she struggled with money. Now, she works hard to save and budget, although her husband is more likely to put things on a credit card.
Rachel Schneider, senior vice president at the Center for Financial Services Innovation (CFSI), studied 235 low and middle income families over one year as they handle their finances, with New York University Professor Jonathan Morduch. They found that families put a premium on stability — and that's getting harder and harder to achieve.
Schneider and Morduch documented their findings in a book, "The Financial Diaries: How American Families Cope in a World of Uncertainty." Schneider says the most surprising stories she found were the ones from the middle class families.
