FACE OF AN ECONOMY: U.S. citizens continue to worry about their finances and student debt is particularly stressful

A Journal of People report

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Students at Washington University in St. Louis, Missouri, in 2016 pull a mock “ball & chain” representing the $1.4 trillion outstanding student debt. (Photo: PAUL J. RICHARDS/AFP/Getty Images) [THIS PHOTOGRAPH IS USED HERE NOT FOR ANY COMMERCIAL, PROFIT-MAKING PURPUSE, BUT ONLY AS PART OF THE REPORT, WHICH IS FOR EDUCATIONAL, NON-PROFIT, NON-COMMERCIAL PURPOSE]

The U.S. citizens continue to worry about their finances, and student debt is particularly stressful, finds a new survey by Bank of America.

This is a face of the economy.

The respondents in the survey were particularly concerned about not having enough savings, the possibility of a looming recession, and their ability to cope with debt.

The survey analyzed responses from 1,000 citizens throughout the U.S. and found that 51% are worried about their finances over the next few years.

Excluding their mortgages, 73% of respondents were found to be carrying some sort of debt: 43% credit card debt, 36% auto loan debt, 20% student debt, and 15% in other personal loans. Nearly half of that number owed more than $20,000 in debt overall.

Aron Levine, Head of Consumer Banking & Investments, writes in the report:

“… the majority admit managing their money is affecting their mental and physical health. Today’s youngest generations and women claim to be impacted the most. Many Americans also admit they feel envious or jealous of those they perceive as better off financially than they are, possibly adding to feelings of stress.”

So, the citizens are not spared mentally and physically. Is it a form of torture? Who are suffering? The youngest and the women.

And,

“The spring report also finds half of Americans worry about the state of their finances over the next five years, with respondents most concerned about the potential for an inadequate amount of savings, political instability, a looming recession, market volatility and their growing debt. …”

The spring 2019 Merrill Edge Report reveals:

“In fact, the majority admit handling their finances is impacting their mental and physical health (59 percent and 56 percent, respectively).

“In both instances, women are more likely than men to feel the impact on their mental health (64 percent, compared to 52 percent of men) and physical health (60 percent, compared to 51 percent of men).

“Forty-five percent of Americans also admit harboring feelings of envy or jealousy for those they perceive as better off financially than they are.

“Again, women are more likely than men to feel this way (52 percent, compared to 38 percent of men).

“And today’s youngest generations also admit to having these feelings more than their generational counterparts: Gen Z and millennials (61 percent and 59 percent, respectively) are feeling green with envy, followed by 41 percent of Gen X and only 22 percent of baby boomers.” The report also asked Americans what they would be willing to do to never have to worry about their personal finances again.

And, the responses were:

“Hypothetically, respondents say they would rather give up all social media platforms forever (41 percent), lose access to their smartphone for a month (35 percent), run into their ex every time they are out with their current partner (25 percent), cut carbs, sugar and/or alcohol (37 percent), and move back in with their parents (25 percent).”

So, the “way out” the economy gives is burdening the parents, cutting down food, and giving up smartphones, etc.

The debt I owe

With mounting debt, the U.S. citizens put life milestones on the back burner.

According to the report:

“Americans are split between a glass half-full and half-empty view of the near future, with 51 percent worrying about their finances over the next five years. Their top concerns include the potential for an inadequate amount of savings (55 percent), political instability (53 percent), a looming recession (47 percent) and market volatility (45 percent).”

The survey found:

“Another source of concern – debt. Seventy-three percent of mass affluent Americans of all ages are carrying around debt. Excluding mortgages, the types of debt respondents are dealing with the most include credit cards (43 percent), auto loans (36 percent), student loans (20 percent) and personal loans (15 percent). Forty-six percent of respondents with debt owe more than $20,000, while 18 percent currently owe $50,000 or more.

“In order to pay off more debt, 68 percent of Americans are delaying or abstaining from certain activities and life milestones, including going on vacation (43 percent), buying a car (37 percent), buying a home (30 percent), moving to a more expensive city or neighborhood (27 percent), having children (19 percent) and getting married (15 percent).”

Methodology of the survey

Concentrix, an independent market research company, conducted the nationally representative, panel-sample online survey on behalf of Merrill Edge April 17-May 9, 2019.

The survey consisted of 1,000 mass affluent respondents throughout the U.S.

Respondents in the study were defined as aged 18 to 23 (Gen Z) with investable assets between $50,000 and $250,000 or those aged 18 to 23 who have investable assets between $20,000 and $50,000 with an annual income of at least $50,000; or aged 24-plus with investable assets between $50,000 and $250,000. For this purpose, investable assets consist of the value of all cash, savings, mutual funds, CDs, IRAs, stocks, bonds and all other types of investments such as a 401(k), 403(B), and Roth IRA, but excluding primary home and other real estate investments.

The survey conducted an oversampling of 300 mass affluents in Atlanta. The margin of error is +/- 3.1 percent for the national sample and about +/- 5.6 percent for the oversample market, reported at a 95 percent confidence level.

More about debt

According to a recent survey conducted by Freedom Debt Relief,

“41% of Americans have not set aside any money at all for retirement. The main reason indicated was due to the cost of everyday expenses.

“Debt was also another impediment to saving adequately.

“About 79% of those surveyed said they have debt:

“Credit card debt accounted for 46%, mortgage debt 41%, and

“Auto loan debt 28%.”

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41% of Americans have saved nothing for retirement. (Photo: Freedom Debt Relief)

About 25% of Americans expect to die in debt

A report in the later part of May 2019 said:

About 25% of Americans surveyed in December assume to die in debt.

The online survey of 1,000 adults CreditCards.com found:

“41% of people don’t know when they’ll pay off what they owe, and

“65% of adults with debt don’t know when or if they’ll get out of it.”

Credit card rates are higher than other types of loans. (Source: creditcards.com)

 

The CreditCards.com survey also found:

“… the most common debt held by consumers were mortgage (54%), credit cards (53%), auto loans (47%), student loans (21%), medical debt (13%), and personal loans (11%).”

According to the New York Fed:

“Overall debt held by households — which includes all of the types above — has been climbing steadily, hitting $13.67 trillion in the first quarter this year. That’s higher than the third quarter of 2008 right before the Great Recession.

“At the same time, serious delinquencies — which are payments late by 90 dates or more — are also on the rise, driven by credit cards and student loans.”

The household debt ($13.67 trillion) is $993 billion higher than the peak of $12.68 trillion in the third quarter of 2008.

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U.S. household debt hit an all-time high, with about $97 trillion in housing debt and about $4 trillion in non-housing debt. (Source: NY Fed)

Student debt

Over the past few years, outstanding student debt has ballooned to $1.49 trillion in the first quarter of 2019. Borrowers are increasingly unable to meet repayment deadlines, with delinquency rates rising steadily from 9.08% in the last quarter in 2018 to 9.54% in Q1 2019.

Student loan burdens are particularly tough in the South, where some cities are seeing 70% or more of their annual income owed in student debt.

Spreading the burden around

And, graduates aren’t the only one feeling the pain.

According to Student Loan Hero,

Parents, and even grandparents are going into debt to pay for their children’s and grandchildren’s education. Last year, while 69% of college students took out loans of around $29,800 on average, 14% of their parents took out $35,600.

In the graph below, data from the New York Fed illustrates how the outstanding student loans taken out by the 40-49 age group ranks highest in terms of debt that’s transitioning into serious delinquency.

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The 40-49 age group is holding an increasing amount of seriously delinquent student loans, where payments exceed deadlines by more than 90 days. (Source: New York Fed)

Those above 50 are also finding it increasingly hard to pay back their — or their children’s — student loans.

Student debt crisis is ‘crushing millions’.

Democratic presidential candidate and Massachusetts Senator Elizabeth Warren — who has promised mass student cancellations as part of her election campaign — has now accelerated the push to alleviate borrowers’ burdens by introducing legislation in the Senate and House to eliminate up to $50,000 in student debt for 42 million Americans.

“The student debt crisis is real and it’s crushing millions of people — especially people of color,” Warren said in a press release. “It’s time to decide: Are we going to be a country that only helps the rich and powerful get richer and more powerful, or are we going to be a country that invests in its future?

Pay $122 Billion in credit card interest this year

Michael Micheletti, Director of Corporate Communications, Freedom Debt Relief, wrote (“Survey: 41% of Americans Said They Are Not Saving Any Money For Their Household Retirement Plan”) on May 14, 2019:

“… as consumer debt continues to grow and remain at historic levels, we are also seeing a gradual ramp up of credit card interest rates. In addition, a recent analysis showed that Americans are on track to pay $122 Billion in credit card interest this year, which is 50 percent more than they paid five years ago.

“The latest Freedom Debt Relief debt attitudes survey asked questions around debt, housing, and financial habits. The results paint a picture of an under saved population that is struggling on many levels.

“Day to day saving and retirement saving continues to be problematic for many. 32% of Americans said the biggest barrier for increasing their day-to-day savings is everyday expenses. 17% said it was their debt burden and 15% said it was their wages.”

Is not it a question: Why this debt-picture in the economy, considered by some as the greatest economy? And, this is a capitalist economy. There’s another question: Does debt empower any citizen?

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