The massive debt hangover: U.S. household debt climbs to a record $13.15 trillion

A cornerstone of the Federal Reserve Bank of New York, who reported that U.S. household debt has climbed to record $13.15 trillionAndrew Burton/Getty Images News/Getty Images North AmericaImage: A cornerstone of the Federal Reserve Bank of New York, who reported that U.S. household debt has climbed to record $13.15 trillion

In a Nutshell

U.S. household debt is on the rise for the fifth year in a row, according to a recent Fed report. We'll break down why this matters and what you need to know.
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U.S. household debt jumped for the fifth consecutive year and now stands at a record-breaking $13.15 trillion.

On Tuesday, the Federal Reserve Bank of New York (what you may know as the Fed) released its quarterly debt report, which says the national household debt figure crept up almost 1.5 percent in the fourth quarter of 2017.

That may not sound like much, but 1.5 percent in this case translates to $193 billion – enough to push the total debt figure to $13.15 trillion. If we split that debt evenly among every single person in the U.S. – babies and children included – each person would be accountable for more than $40,000 in debt.

What does this really mean?

While the Fed’s report might sound startling, it’s not necessarily bad news. As economist Diane Swonk recently told the Wall Street Journal, “The current level of debt is still manageable and is likely to grow further this year.”

One important factor to look at is how Americans are keeping up with their debt payments.

The current level of debt is still manageable and is likely to grow further this year.

Economist Diane Swonk

The amount of debt the Fed defines as “seriously delinquent” (at least 90 days late) actually dropped between the third and fourth quarters of 2017, from 2.4 percent to 2.3 percent.

That slight decrease suggests Americans may be doing a better job of paying off their existing debts in a timely manner.

It’s also revealing that mortgages make up the largest chunk of the debt increase. Mortgage debt rose by $139 billion last quarter to $8.88 trillion, which could mean that Americans have more confidence in the housing market.

(And in case you’re wondering, overall mortgage balances are still below where they stood prior to the Great Recession.)

But the Fed’s report does contain some troubling signs – specifically about the state of student loan debt.

Student loan debt delinquency is high. The Fed reports that 9.3 percent of student loan balances have moved into serious delinquency. You’ve probably either heard about or been affected by what many are calling the “student loan crisis,” and this stat underlines how serious that crisis has become.

In fact, effective delinquency rates for student loans are likely much higher than the 9.3 percent reported.

As the Fed’s report notes, about half of these loans are currently in deferment, in grace periods or in forbearance, meaning they’re temporarily not in the repayment cycle. This could mean that delinquency rates are roughly twice as high among loans in the repayment cycle.

Why should I care?

This macro trend might be reflective of something more personal.

If you’re like a lot of Americans, debt is never far from your mind. In a Credit Karma survey of more than 2,000 individuals in December 2017, 24 percent of people said that making monthly payments toward debt is a major concern.

The good news is, you’re not alone. Millions of Americans deal with the stress of paying down debt.

While debt isn’t necessarily a bad thing in and of itself, it can seriously impact your day-to-day life if the debt starts to spin out of control. So it’s important to have a plan in place to manage your debt.

What can I do?

If you’re on-time with your credit card, mortgage and other debt payments and you feel as if you’re managing your spending responsibly, keep at it! You’re already doing great.

But if you’re struggling with debt? There are things you can do to help you get back on your feet. Here are some tips to get started:

  • Try to always make (at least) the minimum payment on time. Even if you can’t pay off your entire balance each month, paying the minimum is a must for maintaining healthy credit. You don’t want to lose all the hard work you’ve put into building your credit scores just by missing a payment or two.
  • Change your payment due date. Let’s say your credit card payment is due on the 14th of every month and you get paid on the 15th. Your credit card company might let you change your monthly due date online or by calling up customer service. This way, you can make sure your bank account isn’t short on funds needed for payment. Read more on how to pay your credit card bill.
  • Consider a balance transfer for high-interest debt. If you’re swimming in credit card debt and forking out what feels like a fortune in interest charges, a balance transfer could be just what you need. Getting a balance transfer credit card, which may offer a low or 0 percent introductory APR, could give you more time to pay off your debt.
  • Negotiate debt with your credit card company. Does your debt feel out of control? Your credit card company might be willing to work with you to establish a plan that works for both sides. Check out how to do that here.

About the author: Mika Bhatia is an Editorial Content Strategist for Credit Karma. She's worked in financial services and tech, and has now found the perfect union of the two at Credit Karma. When she's not busy strategizing about cred… Read more.