Americans are Financially Stressed: Reviewing U.S. Debt
Debt Struggles
Did you know that more than 70% of Americans are unable to pay back their credit card debt within a year? As of February 2023, the total U.S. credit card debt is $986 billion, higher than it has ever been. Studies have shown that the difficulty in paying this amount back is mainly a result of skyrocketing interest rates. Credit card interest rates are currently about 22% — higher than the previous year’s rates of 18%. This number also surpasses the average annual interest rate of 16.44%.
Another major source of debt in the U.S. is student loans. Tuition, fees, and room and board have escalated in cost and have become huge burdens associated with an otherwise exciting milestone: attending college. CNBC reports, “The interest rate on federal student loans taken out for the 2022–23 academic year rose to 4.99%, up from 3.73% last year and 2.75% in 2020–21.” The loans themselves are becoming more expensive due to high interest rates. Accumulating debt is causing students to reconsider graduating in the traditional four years. CNBC also reports that “the likelihood of attending a four-year school sank nearly 20% in less than a year — down to 53%, from 71%, according to the ECMC Group.”
Mental Health Concerns
As unemployment drastically increases, repayment is becoming a burden for many. The U.S. unemployment rate was 3.5% in July 2022 and rose to 3.7% in August of the same year. This has affected the U.S. population’s mental health, and signs of severe depression have been observed. It is overwhelming to consider the debt that sits in your account, which can lead to shame and guilt. These emotional impacts can make financial stressors very hard to deal with and may prompt Americans to make poor decisions.
Ways to Deal with Debt
It may seem like debt is uncontrollable and taking over your life, but this isn’t always the case. There are several ways one can deal with debt shame. First of all, it’s important to understand that more than 80% of Americans are in debt, so you aren’t alone. Knowing exactly how much you owe is crucial to making the right decisions. Setting up automatic payments and meeting with a financial advisor may be best if you have a large amount of debt. The first few meetings with your advisor can be a little pricey, but this will change later on as meetings get shorter.
Furthermore, creating a plan will certainly make your finances more organized and will help you accomplish your goals. An example of a successful plan would be listing out the debts you owe and saving a specific amount of money based on that each month. Also, make sure you are trying to cut expenses on unnecessary items. Taking these steps might ultimately result in reduced debt. It is helpful to talk to a friend that can make you feel better. Opening up to someone trustworthy will make it easier for you to express your honest feelings.
Sources:
US credit card debt now totals nearly $1 trillion — ABC News (go.com)
Inflation is suddenly making college more expensive than ever (cnbc.com)
4 Ways to Deal with Debt Shame
Charting 17 Years of American Household Debt (howmuch.net)
College debt crisis drives more students away from four-year schools (cnbc.com)
https://www.cnn.com/2022/09/02/economy/higher-unemployment-rate-good-news/index.html
