By Spencer Feingold
Consumer debt in the U.S. reached a major milestone at the end of last year, surpassing $4 trillion.
The debt, which does not include home mortgages, was increased primarily by spikes in student loans, car financing, and holiday shopping. The record figure was announced by The Federal Reserve in early February.
The growing level of debt, however, is not significantly worrisome for economists who see it as another sign of the strong economy.
“It’s actually saying the economy is pretty good,” Tendayi Kapfidze, Chief Economist at the online loan marketplace LendingTree, told Cheddar. “Lenders lend when they think they are going to get paid back. And they think they are going to get paid back when they see people have jobs and wages are increasing.”
Along with increased debt, assets are also on the rise in American households.
“The debt, of course you want to keep an eye on it, but there is another side to that ledger, which is the assets,” Kapfidze explained.
Personal deposits have increased by $2.5 trillion more than debt and the asset total for U.S. households is now over $100 trillion, according to Kapfidze. Assets can include personal finances, real estate, property, and investments.
“Income grows, assets grow, and debt grows. As the economy gets bigger, all these numbers tend to get bigger,” Kapfidze added.
The last trillion dollar milestone was in August 2013 when consumer debt surpassed $3 trillion; it reached $2 trillion in April 2003.
Nonetheless, one rising metric that is especially concerning for young people is the increased percentage of debt from student loans, which has grown by around 33 percent since August 2013 ー the fastest of all sources of consumer debt. The total sum of student loans surpassed $1.56 trillion in December 2018, according to the Fed.
“Whether the economy can afford to forgive everybody’s [student] debt, I’m going to let the Congress decide that and debate it,” Kapfidze stated.
For full interview click here.