As of 2022, 16.55 trillion dollars is the amount of debt owed by American households, a staggering 41.79% increase within the last ten years. People are drowning in debt!
With each year gone by, consumers with debt have begun to struggle more and more to survive financially. This includes rent or mortgage payments, student loans, and car loans.
Oftentimes the more debt you have, the more credit card debt you have. This debt worsens your credit score as well. A survey completed by Northwestern Mutual showed that 60% of Americans’ financial anxiety stemmed from the amounts of debt owed.
The Impact of Inflation
If this news isn’t alarming, researchers have only worse news to share. Based on the 40-year high in inflation, debt is likely to grow in the near future. Predictions suggest that 43% of Americans are will accrue additional debt within the next six months alone. The question is this: Why are Americans drowning in debt?
One of the primary causes of Americans drowning in debt is the worsening of real estate prices. Shockingly enough, nearly three-quarters of American debt is due to housing!
As inflation increases, everything is affected by it. This increase in pricing especially affects interest rates.
Another cause of the debt crisis that exists in America is the rise in college tuition prices and fees. College tuition has increased 179.2% between 2000 and 2020, with a steady increase of 9% a year. Student debt has surpassed credit debt within the last few years.
The third main cause for U.S citizens drowning in debt is car payment increases. As of this year, financing has pushed the monthly costs to over $700.
This price tag is a large quantity for the average American to take on. The main cause of this is the spike in interest rates for car loan contracts.