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Consumer Finance Hub
Real Issues. Real Answers.
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Debt Research News
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HOME ::
RESEARCH :: DEBT ::
NEWS::
OCT 2006
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The coming credit crunch: What's in your wallet?
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Despite the steadily expanding U.S. economy, a perfect storm of rising mortgage rates, disappearing health-insurance coverage, stagnant wages and relentless college-tuition increases is gathering on the financial horizon for many Americans, threatening a flood of debt and bankruptcies. The warning signs are hard to miss:
The amount of consumer credit outstanding, led by brisk growth in credit card use, more than doubled in the first six months of the year, according to the Federal Reserve. Over the past two years, consumers increased their non-mortgage debt by 12.5 percent, reaching an average of $11,669 early this year, says Experian Consumer Direct, a company that compiles credit reports and scores. Meanwhile, the average number of late payments rose 19 percent, indicating increasing difficulty managing the greater debt load.
The wave of mortgage refinancing as interest rates fell from 2001 to 2004 gave Americans a fresh infusion of cash. But with rates on the rise again, homeowners fear that the interest-only and other risky mortgages that once seemed like a good deal will now mean rising monthly payments as rates head upward. $ College students have become a growing debtor class as they borrow ever greater amounts to pay for tuition, room and board. The typical bachelor's degree graduate at a public college or university leaves with $15,500 of debt, according to the College Board. The average grad at a private, for-profit four-year institution takes on a $24,600 debt. And that doesn't include home-equity loans taken out by parents to pay tuition and other education costs. $ As household expenses rise, full-time wages, when adjusted for inflation, are merely holding steady or falling. Between 2004 and 2005, wages for males 15 and older declined by 1.8 percent; for females, the decline was 1.3 percent, according to the Census Bureau. $ The threat of overwhelming debt from sudden illness grows as more of the population under 65 loses health insurance coverage. The Census Bureau reports that nearly 16 percent of the population-47 million people-was without health insurance in 2005, an increase of about 2 percent over the year before.
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read entire article on ChicagoTribune
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