Let’s face it, debt in the United States is a problem. Of our public debt student loan debt, and consumer debt. Debt in the United States is a problem at all levels. Why?
I firmly believe that it all starts with a lack of knowledge on the topic. Only 17 states require high school students to take a personal finance course. But even in states that teach financial literacy, debt is still a problem.
Maybe it’s YOLO or my best lifestyle that leads to our obsession with overspending. Perhaps this is the instant gratification we seek and hit the “Like” button on social media every day. Either the fact that we let 17 and 18-year-olds make the most important financial decision (going to college) without special guidance, or the impact of taking on a student loan could have years on them.
Or maybe it’s a role model trap that has gotten debt out of control in the United States. We’re just watching the herd. Damn it, our government is 22 trillion in the red.
Whatever the reason, we need to return debt control In the United States. The sooner we start, the better. Let’s delve deeper into some of the categories of debt and why we fell out of the wagon of debt.
Government debt in the United States
Popular quiz. Did you know the United States had no government debt last year?
Back in January 1835, America had no interest debt – for the only time in its existence. history… By the end of that year, the United States national debt had dropped to $ 33,700, or less than $ 1 million in 2019 dollars. Published reports from the US Treasury date back to 1790, but US debt began even before that date with the Revolutionary War.
Since 1835, debt in the United States has fluctuated, but overall it has increased. Peaking for the first time in a billion dollars in 1863 and a trillion dollars in 1982.
The US government’s national debt is currently over $ 22 trillion… In less than 30 years, we have more than twenty-two times more debt. It seems that there is no braking either. The US national debt is expected to grow by an average of $ 1.2 trillion over the next ten years. Growth occurs when Congress spends more than it earns from tax revenues, and I wonder why the American people have debt problems.
Government debt statistics
- By 2029, the national debt is estimated at $ 28.7 trillion.
- Government debt is 69 140 dollars for each living in the USA
- Government debt is now greater than our gross domestic product
- The national debt is $ 178,691 for every household in the United States.
RELATED: 17 shocking personal finance statistics you need to know
US consumer debt
Well, Americans are almost as bad as our leadership. Consumer debt, which is classified as credit cards, mortgages, car loans, payday loans, and student loans, is $ 13.5 trillion. Ouch! Let’s leave student loans for now. This deserves a separate discussion.
Often when discussing consumer debt, the concept of good and bad debt comes up. Good debt is usually something that has a future value. Bad debt is something that you don’t need immediately or can cost you more over time. Mortgages, for example, are often considered good debt.
A home is not something that most people could afford to pay in full upfront. A mortgage is required to make a purchase, and, as a rule, real estate becomes more expensive over time. The house also provides a place to live by paying for it. It can finally be sold to pay off the mortgage. Target real estate investment justice must be increased.
On the other hand, credit card purchases that are not paid in full each month are considered bad debt. For example, if you used your credit card to buy a new TV but did not pay in full within a month, interest will be charged. The TV now costs more than its original purchase price due to the monthly interest charged by the lending company.
At the end of 2018, total U.S. credit card debt reached $ 829 billion. Now consider an interest rate of 10% on that amount, and we pay out $ 82.9 billion in interest per month. Someone got rich out of our inability to live within our means.
Considering my home state of New York, behold total debt:
- Average credit card debt: $ 6,800 ($ 700 less than the national average)
- Mortgage debt: $ 34,000 (average among all residents with a credit history)
- Bankruptcy: Highest number of applications filed – 107,480 in 2015
- Credit Ratings: Consumers in New York State are rated higher than the national average of 675.
- Payday loans: illegal in New York City due to high interest rates and short repayment periods.
No state is immune from the debt crisis. Some do it better than others. Debt in the United States does not differ by age. People 35 years old and younger, up to 75 years old and older have debts. The 45-54 age group has the most average debt at $ 134,600.
It is clear that love lives beyond its means.
US Student Loan Debt
Over the past twenty years, outstanding student loans have more than doubled, from $ 49 billion in 1998 to over $ 1.4 trillion in 2018.
The federal government took over the management of the student loan program in 2010, replacing previous administrator Sally Mae. The move helped cut costs and made it easier to access education assistance. The fact that interest rates were lowered to encourage higher education led to an increase in borrowing.
On average, about two in three (65 percent) college graduates who graduated from public and private nonprofit colleges in 2018 had student loan debt… These borrowers owed an average of $ 29,200, two percent more than the 2017 average.
A snapshot of Connecticut’s total student debt:
- Has the highest average student debt at $ 38,650.
- 59% of college students are in debt
- CT students have a total of $ 17 billion in student loan debt.
Why are we letting 17-18 year olds make such important financial decisions? I’m sure it all boils down to someone making money off of it. Many would agree that a college degree is a good debt, but if you decide to go to college because of a pretty campus or without researching the potential job market after graduation, you’re making an uneducated decision.
Students, parents, counselors, and college admissions all have a role to play in the surge in student loan debt in the United States. We need to better prepare our youth for debt.
We need to make sure they understand that the goal is to get as little debt as possible. Sure, we want our kids to enjoy college, but we don’t want them to live four years and struggle to get their loans back for the next 20 years.
We need to do better for our young people.
How to solve our debt problem
This is a simple solution. We need to stop spending more than we earn. This decision is easier said than done. There are many factors that affect how our money is managed. Behavior and habits are critical. The math for balancing your finances is fifth grade math. But those unexpected life events may care less about this math.
The psychological consequences of debt can be paralyzing, stressful, anxiety and fear. Not to mention relationships and partnerships, it can be ruinous and controversial.
Would it be great to reduce these emotions about money in people’s lives?
The idea that the American Dream is dead is false. Achieving this dream has just changed. The world is very different from what it was 100 years ago. 100 years ago, credit cards didn’t exist and it was much harder to spend and borrow more than you earn. The United States is still a land of opportunity, and it is available to everyone. There are a few more pitfalls today.
It boils down to teaching all the basics of money management and budgeting as early as possible and prioritizing how we use our money. We spend our entire lives. It is an important life skill that parents and teachers must pass on to our youth.
Better money education won’t just fix everything. Just because you are educated in a topic does not mean that you are good at it. But having a basic knowledge doesn’t hurt and gives you the foundation you need. Your motivation to take advantage of this is still up to you.
I doubt we will fix the trillion dollar national and consumer debt in the United States overnight by simply increasing education. But imagine a world in which students begin to learn about money in elementary school and continue that education in high school. When faced with their first big money decisions like college tuition fees, I’m sure we’ll see improvements.
You can go into debt very quickly with one big purchase, but it can take years to get out of it, shouldn’t we do our best to avoid this cycle?
This article originally appeared on The Money Mix and has been republished here with permission.