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posted on 24 July 2016

Consumer Debt Is On The Rise

from the St Louis Fed

Total debt is on the rise for the U.S., according to the latest issue of the Quarterly Debt Monitor.

Don Schlagenhauf, chief economist for the St. Louis Fed's Center for Household Financial Stability, and Lowell Ricketts, the center's senior analyst, reported that total real consumer debt increased 2.1 percent on a year-over-year basis in the first quarter of 2016. This was the 10th straight quarterly increase. The authors noted: "The increases represent more economic activity as consumers take on new liabilities to finance consumption."

Schlagenhauf and Ricketts also broke the trends in consumer debt down into five categories: mortgage debt, auto debt, credit card debt, student loans and home equity lines of credit (HELOCs). (For charts showing trends in these debt categories, see the article "Consumer Debt Rises for 10th Quarter in a Row.")

Mortgage Debt

Mortgage debt accounted for 0.9 percentage points of the first quarter increase in debt for the U.S. The authors noted that 31- to 40-year-olds and 66- to 75-year-olds accounted for most of the new mortgage debt, while 41- to 55-year-olds lowered their mortgage balances considerably.

Auto Debt

Levels of auto debt are above their prerecession levels, and auto debt increased 8.9 percent nationally in the first quarter on a year-over-year basis. Individuals aged 31 to 55 accounted for more than half of the new auto debt nationally, though all age groups saw an increase.

Credit Card Debt

Schlagenhauf and Ricketts noted that consumers across the nation aggressively lowered their credit card debt following the recession. They wrote: "This deleveraging involved paying down balances and closing accounts."

However, credit card debt is now on the rise. Nationally, credit card debt rose 2.7 percent in the first quarter on a year-over-year basis. The 31- to 40-year-old group increased debt the most (0.8 percent), and all other age groups except one saw increases as well. The 41- to 55-year-old group saw a decrease of 0.3 percent.

Student Loans

The authors noted that, unlike with other forms of debt, consumers didn't shed student loan debt during and following the recession. They wrote: "In fact, student debt is considered to be countercyclical: Consumers may choose to take on more debt to invest in additional education during a recession when the job market is particularly weak."

In the first quarter, student debt increased 3.1 percent nationally on a year-over-year basis. The 41- to 55-year-old group saw the largest increase among the groups studied at 1.3 percent. (This analysis covered individuals aged 21 and older.)


HELOC debt was the only category studied to decline in the first quarter, dropping 2.6 percent nationally on a year-over-year basis. The 41- to 55-year-old group saw the largest decline at 2.9 percent, while the 66- to 75-year-old group saw an increase of 1.1 percent. Schlagenhauf and Ricketts noted: "It is unlikely that HELOC debt will rebound until people in the 41 to 65 age range begin borrowing again, since they carry two-thirds of all HELOC debt nationally."

Additional Resources



Views expressed are not necessarily those of the Federal Reserve Bank of St. Louis or of the Federal Reserve System.

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