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American Families Drowning in Debt: Report

| BY Donald Liebenson

Debt is threatening to overtake a substantial number of American families, according to a new University of Michigan report.

About one out of every five American households owes more on credit cards, medical bills, student loans and other noncollateralized debts than they have in savings and other liquid assets, the report found. Further, 23.4 percent of families surveyed at the end of last year said they have no savings at all, up from 18.5 percent in 2009.

The University of Michigan’s annual Panel Study of Income Dynamics (PSID), interviews roughly 9,000 families from across the country. The report spans 2009 to 2011, capturing the financial impact of the recession.

The report forecasts continued challenges for homeowners, of whom 1.7 percent said they expect to fall behind on their mortgage payments in the near future. This, at least, is down from 1.9 percent three years ago. Approximately 4.1 homeowners reported behind behind on their mortgage in 2009 and/or 2011.

Mortgage refinancing, either as a way to relieve mortgage stress or to take advantage of attractive rates during this period, increased slightly from 3.8 percent in 2009 to 5.4 in 2011.

Debt is a personal concern for 25 percent of households surveyed in the first quarter by Millionaire Corner with a net worth between $100,000 and $1 million (not including primary residence). This was of particular concern for respondents under the age of 45, 32 percent of whom said that they were concerned about the amount of debt their household had amassed.

A separate investor survey conducted last month found that education costs was the leading factor contributing to debt (28 percent), followed by unexpected medical expenses (22 percent), job loss or reduction in pay (20 percent), unrestrained personal spending (19 percent) and underwater mortgages (15 percent).

Between 2009 and 2011, the report also found, about the same percentage of families had $30,000 or more in credit card and other noncollateralized debts (8.5 percent vs.10 percent), and about the same proportion (48.0 percent vs. 47.4 percent) had no such debt in both years.

"Some families have not been able to make substantial headway," said Frank Stafford, co-author of the report and an economist at the University of Michigan Institute for Social Research, "Even if they're not underwater with their mortgages, they are struggling to save money and reduce their debts. But the problem is that today only those families who have more than $50,000 in liquid assets have actually been able to do this to any extent. The rest of American families are simply treading water, if they're lucky."


About the Author

Donald Liebenson

Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.  

A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.