The Federal Reserve Bank of New York’s quarterly report on household debt and credit has come out, and it does not look good. Overall, credit card debt skyrocketed by 13% in the second quarter, the sharpest increase since 1999.

What could be causing this increase in credit card debt for Americans? The answer seems obvious — rising costs and inflation coupled with wages unable to keep pace. 

When faced with never-ending increases in household necessities such as gas, groceries, and utilities, many American families turn to credit cards to bridge the gap between wages and costs. To fully appreciate this increase, let’s take a closer look at the Federal Reserve Bank’s report.

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Numbers That Continue To Go Up Up Up

The quarterly report shows that total household debt in the United States is now at $16.15 trillion, a staggering $312 billion increase from last year. This household debt increase includes mortgage, auto loans, and credit card balances.

Below is a breakdown of each :

  • mortgage balances up $207 billion to a total of $11.39 trillion
  • auto loans up $33 billion to a total of $199 billion
  • and credit card balances have risen by $46 billion

The people most negatively impacted are those in lower income brackets. Joelle Scally of The Center for Microeconomic Data illustrates:

“While household balance sheets overall appear to be in a strong position, we are seeing rising delinquencies among subprime and low-income borrowers…”

So why the increase in borrowing? With a nod to Democrat strategist James Carville, “It’s the economy, stupid!”

Not Balancing Out

The New York Fed states :

“Americans are borrowing more, but a big part of the increased borrowing is attributable to higher prices.”

So far, Americans have grappled with gas costing upwards of $5 a gallon and inflation at a record-setting 9.1%. But, while the Biden administration likes to tout the increase in average hourly earnings, the numbers don’t add up.

The average hourly earnings increase is 5.1%. That’s a 4% deficit from inflation. Thus we see why Americans have to rely on their borrowing power more and more. 

In a report from Personal Capital, 56% of consumers say their standard of living has decreased, and 69% rightly feel their income isn’t keeping up with inflation. Americans say they think they need to make $107,800 a year to feel financially healthy, which is double the national average.

This feeling of financial unease has many Americans focusing on small wins. As certified financial planner Paul Deer puts it :

“People are putting a higher priority on simply having a job and lowering their expectations.”

And who can blame them when lowering expectations seems to be our new motto? However, the one balance that hasn’t seen an increase is student loans, which remain relatively unchanged.

This is interesting, given that the Biden administration is postured to issue the seventh moratorium on student loan debt with perhaps an added announcement on student loan forgiveness overall.

But who will that really help?

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Forgiving Debt, Minimizing Personal Responsibility

The Wall Street Journal reported that the Department of Education had instructed loan services not to send out statements. This indicates that there will be, at a minimum, another extension on student loan payments.

However, there is a lot of chatter that a much more significant announcement from the White House is forthcoming.

The president has been mulling over the idea of forgiving $10,000 in student debt for anyone making less than $125,000 a year. However, some who lean more left than President Biden say that’s not enough.

Progressives and civil rights groups are pushing for $50,000 in student debt forgiveness, and some are even arguing for no income cap. For example, the NAACP sent a letter to the president stating that black borrowers :

“…have virtually no realistic way to pay it back in today’s unjust economy.”

Certainly not with that attitude. The argument for student loan forgiveness is that borrowers are hoodwinked by higher education and the government to take out these loans and then left with inadequate wages to pay the loans back.

Not everyone is for this possible decision, with many wanting to know why taxpayers who paid their debts should be forced to pay off other people’s debts.

It’s Called Being An Adult

Republican Senator Ben Sasse from Nebraska puts the counterargument perfectly:

“Student loan forgiveness is regressive – it writes off the debts of rich kids who are going to be just fine. It’s a gut punch to every kid who paid their way through college or who worked hard to pay their loans.”

I couldn’t agree more. My parents were unable to pay for me to go to college. Not because of any financial irresponsibility on their part, college was and still is very expensive.

So instead of taking out a student loan and getting a degree, I joined the military. My service paid for my undergraduate and my graduate degree.

And anyone that wants to say I got my higher education for free can look me up and try to say that to my face.

I spent many nights after working 12 hours a day and being a mother reading textbooks, writing essays, and studying for exams. I also spent nights studying in a tent, with the risk of being shot or blown up around the corner.

While I get that not everyone can join the military, my point is that being an adult requires you to make adult decisions and work hard for the things you want.

And if people who chose to take out student loans can’t pay them back can get forgiveness…what about all these families racking up credit card debt due to inflation? 

Where is their debt forgiveness? 

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Is It Worth It?

At this point, the argument can easily be made that college might not be worth it. The average cost in 2020, according to the National Center for Education Statistics, for an undergraduate student living on campus for one year was $25,700.

On a private institution, that cost rises to $54,500 a year. Tuition for public colleges has risen 10% and 20% for private colleges over the last decade. 

With more universities offering online instruction, the military hurting for recruits, and more industries valuing certifications over degrees, there is a real question on whether the old path from home to higher education will continue to be relevant.

With this generation of parents relying on credit cards to make ends meet, let’s hope for their children that tuition either goes down or there is an evolution of post-high school education. 

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