The Other National Debt No One Talks About

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As we look at the state of the economy some people may be wondering,"Why, if jobs are increasing, are we not seeing other signs of improvement?" Though unemployment was down to 5.3% in July, wages only rose a few cents, and overall they have barely kept up with inflation since the beginning of the recovery.

Part of the problem may be people transitioning into new fields out of manufacturing into retail, healthcare or IT jobs; another is that people have less money after taking care of their bills to spend on the economy. One of the biggest obstacles to our economy is the massive debt burden that most Americans are carrying.

Current as of August 2015

U.S. household consumer debt profile:

• Average credit card debt: $15,706
• Average mortgage debt: $156,333
• Average student loan debt: $32,953

In total, American consumers owe:

• $11.85 trillion in debt
• An increase of 1.7% from last year
• $890.9 billion in credit card debt
• $8.17 trillion in mortgages
• $1.19 trillion in student loans
• An increase of 7.1% from last year

With student loans alone, over 11.5 percent of the $1.19 trillion owed is in default. That number is up slightly compared to the 10.9 percent default rate we saw last year around the same time.

Why is debt such a major obstacle to our economy? When people are paying hundreds of dollars in credit card and student loan payments they don't have the money to buy a new car, put a down-payment on a house or start a business.

While we currently have a national debt of $18.3 trillion which our federal government owes, the $11.85 trillion which we as Americans owe is more concerning. 60% of college seniors have credit cards leaving college, with most of them carrying a balance. This may require them to take jobs that offer a guaranteed paycheck such as in retail versus interning or doing volunteer work out of college.

Student loan debt has been increasing drastically over the last decade as the cost of attendance increases. The worse news is that it can have even longer lasting effects. A recent by Gallup showed that:

"College graduates who carry a high amount of student debt appear to face long-term challenges that stretch beyond just their finances. A new analysis of Americans who graduated college between 1990 and 2014 shows that graduates who took on the highest amounts of student debt, $50,000 or more, are less likely than their fellow graduates who did not borrow for college to be thriving in four of five elements of well-being: purpose, financial, community, and physical."

It is no wonder that individuals offering debt advice like Dave Ramsey are becoming so popular. With so many Americans carrying such a large load in debt, the burden is becoming too great. While many point to the subprime mortgage crisis of 2008, if we were to have a major crisis right now with mass layoffs it could cripple our economy for years to come. With the current amount of consumer debt there would be a major unavailability of consumer spending to pull us out of a crisis. With 70 percent of our economy reliant on consumer purchases that could be devastating.