New data recently released by the Federal Reserve Bank of New York shows that consumer debt has reached levels in 2017.
Total consumer debt in the first quarter of 2017 was almost $13 trillion, finally surpassing the level of debt in 2008 just prior to the Great Recession. However, the composition of the debt has changed substantially since 2008. Home mortgages are still $600 billion under 2008 levels, at about $8.7 trillion, reflecting the mortgage meltdown of the 2008 recession. Auto loans are up almost $400 billion to about $1.2 trillion, reflecting a strong recovery in the auto market. Student loans have more than doubled since 2008, spiraling up to $1.4 billion as over 25 percent of borrowers are behind on their payments.
With the notable exception of the student loan bubble, lenders are requiring increased creditworthiness of their borrowers. Since 2008, the proportion of auto loans made to people in the lowest 20 percent, of credit scores have dropped from 30 percent to 20 percent while mortgage loans to this group have dropped from 15 percent to 4 percent. The upper 40 percent of borrowers, who accounted for only 24 percent mortgages in 2008, are now back in the market, taking down 61 percent of mortgages.
From the standpoint of middle-class Americans, there is good news and bad news in the record debt level. Auto loans, even to the lowest 20 percent of credit scores, remain generally available. Home loans, on the other hand, have been concentrated in the upper level of borrowers because of high demand but also because the Obama-era Dodd Frank Law has restricted credit to middle class borrowers. As a result, middle-class borrowers have not been able to participate fully in the great housing recovery after 2008. In addition, we are seeing upticks in delinquencies which indicates that debt levels are beginning to put pressure on borrowers. Look for debt levels and delinquencies to continue rising.
But the worst news is the continued expansion of the student loan bubble. These loans, which have subsidized bloated university budgets, are now becoming a drag on the economy and may be another reason for the decline in middle class mortgages. Some 11 million Americans are delinquent and are bound up in student loan slavery because of the extraordinary collection rights given to lenders. Expect to see more restrictions on loan availability, cutbacks in university budgets, and a big taxpayer funded bailout.
Our advice to those experiencing debt pressure is to put your house in order. Meet your family's needs, including savings, first (1 Tim. 5:8) and do not forget to tithe (Mal. 3: 8-12) or pay your taxes (Rom. 13:5, 6). If you need relief from your debt payments, do not be afraid to ask (Prov. 6:1-5). For more information see our website, emancipationnet.net. And our System of Debt Relief.
Again we say, put your house in order.
Ron Allen is a Christian businessman, CPA and author who serves in local, national and international ministries spreading a message of reconciliation to God, to men and between believers. He is founder of the International Star Bible Society, telling how the heavens declare the glory of God, and the Emancipation Network, which helps people escape from financial bondage, and co-founder with his wife, Pat, of Corporate Prayer Resources, dedicated to helping intercessors.
Improve your life and ministry by learning something new. Our Ministry Leadership Bundle includes 3 Books: Amplified Leadership, Breaking Intimidation and The Power of Humility. View Offer!
Get our BEST DEAL on Ministry Today magazine. Get a full year for only $12! Yes-I want this deal.