Household debt in the U.S. is the highest it has ever been. According to the New York Fed, total household debt reached $13.67 trillion in the first quarter of 2019, an increase of 0.9% from the fourth quarter of 2018 and nearly $1 trillion above its previous peak in 2008.
These statistics make sense in the larger context of the national economy. In general, household debt decreases during recessions, and increases during economic booms. That’s because banks often tighten borrowing requirements during recessions, making it difficult for consumers to take out loans.
With the U.S. economy more than ten years into its longest-ever expansion, it isn’t surprising that total household debt has increased for 19 consecutive quarters.
Debt isn’t a bad thing in itself, since debt can finance a variety of purchases, like homes, cars and education. But debt can become problematic if the borrower can’t repay the loan. Across all households, the percentage of loan balances in serious delinquency (90+ days late) is currently 4.5% for auto loans, 7.8% for credit card payments, 1.1% for mortgages and 11.4% for student loans.
Delinquencies also follow the ups and downs of the economy. During recessions, more people tend to skip out on their debt repayments; during periods of economic expansion, delinquencies tend to decrease. At the peak of the Great Recession in late 2009, 11.8% of total loan balances were at least 30 days delinquent. Compare that to the beginning of 2019, when that number was just 4.6%.
In other words, more Americans today effectively manage their debt and pay their bills on time.
“The key to managing debt is planning . . . Before you take on debt, you need to know three things: why you plan to take on the debt, how you are going to repay it and the date by which you will repay it,” explains Rod Griffin, Director of Consumer Education and Awareness at Experian.