Americans now Hold Over $4.1 Trillion in Consumer Debt: Last Debt Bubble Peak was at $2.5 Trillion.

Americans now hold an incredible $4.1 trillion in consumer debt.  This latest data shows that Americans are now back to having an insatiable appetite for spending beyond their means.  Unlike mortgage debt, consumer debt is not building up any future equity here.  The largest category of consumer debt is student loan debt.  Even at the peak of the last debt bubble, consumer debt totaled roughly $2.5 trillion.  While student debt makes up about $1.4 trillion of the consumer debt here, auto debt is above $1 trillion.  We’ve also seen a large rise in subprime auto debt suggesting that people are borrowing beyond their means to consume.  Delinquencies are also rising suggesting any tiny slip up in the overall economy and this credit bubble can burst too.

Consumer debt surging to record levels

Americans are now borrowing and spending at record levels.  This would be fantastic if incomes were keeping up but many are trying to keep up with the Joneses by spending future income via consumer debt.  This chart sums up the desire to spend:

2016q4

Source:  Federal Reserve

Showing signs of weakness we have over 10 percent of all student loan accounts being delinquent by 90 days or more.  And this is the largest consumer debt segment.  Auto debt delinquencies are also rising suggesting people are having a tough time paying their car loans.

Banks are more comfortable lending money now that we are 10 years passed the excess of 2007.  The Great Recession officially ended in 2009 and while banks have had generous bailouts, it appears that American consumers are being bailed out via access to debt.  If we take a tiny trip down memory lane, we will remember that solvency was the issue during the last credit bubble.  People took on too much debt relative to their ability to pay.  The amount of consumer debt being issued is troubling to say the least.

While auto debt and credit card debt can be discharged via bankruptcy, student debt cannot.  That is very significant.  Many younger Americans are being put into a new form of debt serfdom through going to college and taking out mini mortgages that they simply cannot pay back.

Here is one of many horror stories when it comes to student debt:

“My original debt from 1998 was $25,000. 8 years later I have a debt of $75,000. I am no banker or accountant, but I am assuming this will continue to triple every 8 years if I remain in poverty and thus in default. So am I correct that in 8 more years I may owe $225,000? That in 16 years I will owe $750,000; in 24 years, $2,250,000, and then at retirement time in 32 years I will owe $6,750,000? 6 Million plus? Haha. Now, of course, if this were any other form of debt that became this cancerous I could file for bankruptcy. Not for student loans though. At age 72 I may owe $20,250,000. Heaven forbid that I live to see my eighties. At age 88 I may owe $182,250,000.

I think we are just beginning to see how crazy this is going to get. If my math is correct, in ten years there are going to be a lot of impoverished people, people making less than $20,000 a year, who have these ludicrous million dollar debts.

My heart about exploded when I got the letter saying I owed $75,000. After I recovered, all I could do was laugh. It is so absurdly much that they might as well have told me that I owe a million bucks, and now, upon further reflection, it appears they will be telling me I owe them a million bucks in the not so distant future.

I wonder if people with unpayable student loan debt will due to accumulated stress, loss of work, and an inability to pay for medical needs in old age, have on average shorter lifespans than those who do not? This will make an intersting study in fifty years.”

So an original debt of $25,000 has ballooned to $75,000 in eight years.  Why?  Because the debt compounds with interest and charges are put upon charges.  Of course if someone cannot pay, you see how comical the situation can get in a macabre sort of way.  You can read other stories here.  Does this even sound like a good situation to put young and older Americans into?

Consumer debt being over $4.1 trillion is troubling when student debt, auto loans, and credit cards are leading the way forward.  Apparently we like repeating history and people may like to forget that at the root of the Great Recession was a giant credit bubble.

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18 Comments on this post

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  1. lewis said:

    Obama nated save U.S. BANKRUPT ON ALL PERS.

    February 26th, 2017 at 7:49 am
  2. BobC said:

    The example you used is pathetic. Looks to me like they’re waiting for a taxpayer bail out. I hope it never comes.
    It isn’t that they couldn’t pay $25,000 in 8 years, they didn’t want to. What amounts to a car loan could have been paid off in no time with a second part time job. $25,000 for a 4 year education could have been paid off if they worked during summers. What have they drove for the last 8 years? How many vacations? How many stops at Starbucks?
    No pity here.

    February 26th, 2017 at 8:36 am
  3. economy driven solely by dept said:

    skyrocketing inflation driving soaring dept,not spending.Spending flat for the last 8 years,but with soaring double digit inflation,soaring gov’t spending driving taxes,driving fees driving costs through the roof putting squeeze on finances,forcing folks to just keep borrowing

    February 26th, 2017 at 9:36 am
  4. BenefitJack said:

    The post on consumer debt says: “My original debt from 1998 was $25,000. 8 years later I have a debt of $75,000. I am no banker or accountant, but I am assuming this will continue to triple every 8 years if I remain in poverty and thus in default.”

    That is a 14.72% APR, compounded annually. Typo, or misprint, or what? I know of no student loan during the period 1998 to 2005, 8 years, that had a 14.72% interest rate.

    February 26th, 2017 at 9:47 am
  5. BenefitJack said:

    Similarly, individuals are being encouraged by the change during the Obama Administration years NOT to repay their student loans, with the expectation that after 10 or 20 years of making minimal payments (depending on employment), that the remainder of the debt will be forgiven, and assumed by the taxpayers. See: https://studentaid.ed.gov/sa/repay-loans/understand/plans/income-driven

    Or, perhaps the growth in these student loans is in part the result of the Obama Administration’s unprecedented and aggressive actions to have federal government guaranteed student loans
    “forgiven, cancelled or discharged” – see: shttps://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation

    Bottom line. Taxpayers are on the hook for this stupidity – where revised Education Department numbers shows at more than 1,000 schools, at least half of students defaulted or failed to pay down debt within 7 years. See: https://www.wsj.com/articles/student-debt-payback-far-worse-than-believed-1484777880

    There is a reason why more than 40% student borrowers aren’t making payments. It is because of federal legislative student loan stupidity. We’re talking about the potential that millions of students may never repay the hundreds of billions, soon to be trillions of debt. See also: https://www.wsj.com/articles/more-than-40-of-student-borrowers-arent-making-payments-1459971348

    In other words, taxpayers will be on the hook for an ever increasing liability – unless Republicans return some sanity to the student loan racket.

    February 26th, 2017 at 9:55 am
  6. Fatso said:

    The solution is easy. CANCEL all DEBTS public and private. If they can mint money for this purpose they can CANCEL it as well.

    Call it charity and start anew. And you will start out with a BANG again.

    It’s called the Jubilee years and is designed to prevent national bankruptcy and ruin.

    February 26th, 2017 at 4:37 pm
  7. Barry said:

    Don’t take out a loan you can’t pay back or are unwilling to offer up collateral for. Don’t think that as soon as you graduate you will land a job immediately and can pay it back, that’s foolish. Even more foolish is to wait for a government entitie to bail you out because you made a bad choice, maybe some workforce experience should be required so these fools can get a job doing something even if it’s not in the field of study the majored in.

    February 27th, 2017 at 1:13 am
  8. Larry said:

    The student loan situation sounds like the millions of men owing Back child support. There is no relief, the interest just keep compounding and the debt keeps growing regardless of your financial situation.
    The new deadbeat will now be students who are unwilling to pay for their education.

    February 27th, 2017 at 7:16 am
  9. joseph e parsons said:

    mc mustang

    We have lied to 3 generations of young americans!!!!!
    a degree is not a ticket to a good life. when I got my degree in 1969any degree would get you a good job.. With the geometric growth in degrees, it now needs to be the correct degree. Working as a sr recruiting manager for 30 years for top 50 companies it became more obvious . to many degrees in un needed fields.A degree is worthless if no one will pay you for the study. Both of my children have great careers, one with a degree from u tex and the other a non degreed firefighter peramedic,both started with no student loans. My first grand child is starting a full ride academic scholar ship at a private school. Her degree will be a STEM degree.

    I love reading history and philosophy …….as a degree…forget it.

    February 27th, 2017 at 8:31 am
  10. Rachel said:

    I find BobC’s comment sad and ingnorant of the reality of working poverty for millions of Americans, many of whom hold a minimum of a 2 or 4 year degree. I also find BobC’s thinking too common. BobC is so disconnected from reality that he probably doesn’t even know there are people who are homeless yet work the equivalent of at least one full time job if not multiple jobs.

    He is too uninformed to understand that not everyone can afford to pay their bills. Shite happens! People get ill, get into accidents, get laid off or fired. Jobs are being eliminated by computers and forcing other employees to take on heavier workloads. But BobC can’t be bothered to think about these realities, he assumes every delinquent borrower is instead going to Starbucks or tooling around town in a luxury car with a note attached!

    There are millions of working adults who simply cannot afford to pay on their student loans because the jobs (sometimes multiple jobs) they have do not cover rent, food, and student loan payments , if they cover rent and food at all.

    I am not talking about the people who make enough to pay student loans but for whatever reason do not. I am speaking of the millions of Americans, some whom work multiple jobs or even 7 days a week and earn poverty level wages with or without a degree who simply MUST choose between eating and paying a loan or having a roof over their head and paying a loan. I speak of the millions who are doing the right things but not getting ahead, those who don’t have a car loan, cable, etc. I’m talking about the people who have no “extras” and are simply surviving yet, BobC is in an ignorant bubble.

    BobC is so blind that he makes offensive sweeping generalizations. I have seen some of these very people coming into the Foodbank that I’ve worked at. All ages, races, backgrounds. I cannot believe that so many people like BobC suspend their common sense or are simply so disconnected from the AMERICAN reality of poverty.

    Many borrowers in default are simply trying to survive with the odds stacked against them. When they move to low or lower priced housing, the car and home insurance companies raise their rates. If they move to more expensive/less “color” dense/safer housing, they have to pay far higher rates for housing surpassing any savings on their newly lowered insurance rates. When they apply for jobs they are told they are overqualified or under qualified if they hear anything at all. If they get a low paying job just to get any income, they soon become stuck there as they will not be allowed time off to go on interviews for better jobs so they will risk their current low income for a non guarantee of trying to get a higher paying job.

    If they lose one or multiple low paying jobs trying to search for a higher paying job, they will be labeled a job hopper that can’t be trusted. GOD help them if they have a sick parent, child, or other relative, they may be forced to not work for extended periods (far too many women typically bear this burden) and this explanation doesn’t make prospective employers want to take a chance on them either. Yet, this very situation is very common. BobC’s brain can’t process all of these real scenarios, he just spouts off that the borrower did not want to pay.

    It really ticks me off when people make nasty and incorrect assumptions or comments about people in situations the commenter doesn’t understand, has not witnessed, or has never been in. BobC stated that the borrower didn’t want to repay. He has no clue and typed his nonsense in black in white proving that he does not. BobC finishes up with “no pity here.” Yet, it is I who pity him for his lack of awareness and brain!

    February 27th, 2017 at 5:24 pm
  11. madras said:

    “It (the debt) is so absurdly much…” With these writing skills, this person is qualified to serve food, clean hotel rooms, and stock shelves. What most people fail to realize is that almost half of the 43 million Americans with student debt have no college degree.

    February 28th, 2017 at 4:03 am
  12. BobC said:

    Rachel, I understand what your saying but have to disagree. I have 6 kids and 14 grandkids. Let me talk about the grandkids for a minute.
    Out of the 14, 7 are young adults out of high school. Only one went to college and worked 2 jobs for over 2 years to pay off their $16,000 in student loans. I wanted to write a check and my daughter flat out said no. She also had the money to pay it off and refused to stating it would teach the wrong lesson.
    Two have great jobs with mid size companies and have earned at least one promotion a year. They go to work with the right attitude and really work to improve the companies they work for. None of them walk around with a negative attitude or think they are owed anything.
    Three have started their own business, two in the trades and the third in ecommerce. All three are barely making it but all have the never give up attitude that makes me believe they will be successful.
    Of course there’s the problem child that just like in the world you live in thinks they’re owed a good job with great pay just because they live and breath.
    Your right, I don’t know or understand the world you live in. I don’t want to. If I found myself there I’d move in a heartbeat.
    Something you should read:

    http://www.firstpeople.us/FP-Html-Legends/TwoWolves-Cherokee.html

    February 28th, 2017 at 7:02 am
  13. BobC said:
  14. BobC said:

    http://fortune.com/2017/02/27/wendys-self-ordering-kiosks/

    Oh no Rachel!
    1-3 thousand “just show up to work and collect minimum wage jobs” gone!
    But remember, all Americans, heck even non Americans have the same opportunity to take the most out of a totally free K-12 education system. Heck. Show up and we’ll even feed you!
    You should also consider that someone had to design these. Someone has to build them, someone has to program them, someone has to sell them. Someone has to install them. Someone has to service and repair them, and then someone has to replace them as they age.
    Yes, some of those positions will command a higher salary then others.
    Only you can determine which job you want. Only you can decide to take advantage of opportunities as they come up.
    Pick a career, try something really strange like visit a library. Read a book a week on that position and in one year you’ll know more then any expert.
    Or I guess you can choose to join others at the food bank, demanding $15 an hour for an obsolete job worth nothing. Maybe demand somebody pays for your “job training”.
    America is still the land of opportunity. But you have to work for it.

    February 28th, 2017 at 8:36 am
  15. FWG said:

    BobC is right about a few things, unfortunately his posts are thinly-veiled attacks on people not quite as fortunate as himself. Those kiosk-building jobs….do you think they’re open to anyone with an IQ less than 115 or so? What do you do about those who don’t have the mental aptitude to be a kiosk programmer?

    I find it condescending when you imply those who work at Wendy’s just show up and collect minimum wage without doing anything. There is dignity in work, and we should respect those who show up at a job (they probably hate) and work hard.

    And yes, you can research jobs and learn a lot, but if you don’t have that expensive degree, it won’t do you a bit of good in the hiring line.

    March 1st, 2017 at 3:25 pm
  16. Rachel said:

    I hit a nerve did I BobC? I speak of the people I’ve personally seen and spoken to when I worked at a Foodbank and folks I’ve known well when in college. I ask you to read or re-read paragraphs 3 and beyond. These are just some of the real reasons that contribute to student loan and other debts.

    March 1st, 2017 at 8:20 pm
  17. BobC said:

    It really comes down to how each of us view the ‘less fortunate’ doesn’t it? I don’t see them as victim of anything but their own thinking and maybe the encouragement from society to stay that way. We all feel good tossing them a couple of bucks don’t we?
    Does the government teach them what they want them to learn and force them to learn no more or do the less fortunate decide on their own to stop reading and learning? How many truly understand compounding?
    Does the government assign them a job and force them to stay in that job only?
    Does the government disallow anyone, especially when young to work a part time job as well as a full time job to get out of debt and maybe start investing? Or do the less fortunate choose to sit on their butt and waste away hours on whatever?
    Does the government force then to finance everything, stealing from their own future so they can feel as successful as their parents and friends?
    Does the government force them to stay in an area with low employment and little money to be made or do they chose to stay in depressing surroundings with a group of friends reinforcing the no hope conversation?
    We all pick our own destiny. Encouraging them to stay poor by rewarding them with handouts is doing society a great disservice.
    I think a good example is the so called illegals that come to our country from a poverty stricken area and see the opportunity and work their ass off to take advantage of everything America has to offer. They can work and prosper while young spoiled Americans sit around and demand more handouts.
    Look around and you’ll see it too.

    March 4th, 2017 at 5:09 am
  18. BobC said:

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