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Economic Perspective: Status of Household Debt

NC State College of Agriculture and Life Sciences professor Dr. Mike Walden working in a recording studio.


“Today’s program looks at the status of household debt. Mike, we worry about household debt for two reasons. First, at an individual level, we know that if we overdo it with using debt it can wreck our personal finances. Second, if a lot of people overuse debt it can bring down the economy. So where do we stand today with household debt?”


“We actually look pretty good. If you look at household debt as a percent of disposable household income we’re well below those levels that we saw during the last recession, and actually we’re lower than pre-Great Recession periods.”

“The largest component of household debt is mortgage debt. That has actually been fairly stable. Yes, people have been buying homes, but in terms of growth in the economy that mortgage debt as a percent of overall income is still relatively stable.”

“Now the two areas where we’ve seen fairly good and strong growth in debt have been auto loans and student loans. Auto loans, very typical, when you have an economic recovery people held off buying new cars during the recession, and then they jump back in when the recession is over. We’ve actually seen those auto loans start to slow down in terms of their growth”

“But the big focus of course, and there’s a lot of news about this, student loans. Student loans are up 139 percent since 2008. Most economists though think that doesn’t imperil economic growth. The major impact is going to be on the consumption of those new graduates. They’re going to delay buying homes. They’re going to delay buying furniture, et cetera.”

“But we don’t think that’s going to sink the economy because, quite frankly, although student debt has grown it’s still a really slow and minor part of overall debt. So right now the household debt picture looks pretty good, and I think as long as it does the likelihood of a recession will be small.”

Mike Walden is a William Neal Reynolds Distinguished Professor and Extension Economist in the Department of Agricultural and Resource Economics at North Carolina State University who teaches and writes on personal finance, economic outlook and public policy.