What Are The Causes Of Growing Household Debt Of Oecd Countries? An Econometric Investigation

There is a widespread concern about rising levels of debt. Debt can become disastrous for those who live alone or those families who are already having problems with supporting their family. The people who might be struck by debt, they might have trouble recovering. Debt can cause Americans to lose their homes and stability they need to feed, and shelter their families. Although debt comes upon us Americans quickly, people can see debt as terrible thing to be stuck with. It has many disadvantages that can devastate to people.

1 Edward N. Wolff. “Recent trends in household wealth in the United States: Rising debt and the middle-class squeeze - an update to 2007,” Working Paper No. 589. Accessed January 13, 2013, http://www.levyinstitute.org/pubs/wp_589.pdf

In this essay I shall be discussing the factors which influence the level of and access to unsecured debt held by households.

1. If the U.S. debt is growing, why doesn 't the government cut back on spending and can you make any recommendations on what to cut? (Hint: You should consider the list of "Largest Budget Items" listed on the Debt Clock before making recommendations.)

There is a critical financial trend in the United States: student debt is at an all-time high. For the first time in mid- 2013, student debt rose to 830 billion, surpassing the credit-card debt (Clemmitt). Many economists and scholars compare the student debt crisis to the housing bubble, which resulted in a nationwide recession 2008. In a senate hearing regarding the current student debt crisis, Illinois Attorney General Lisa Madigan said, “The warning signs are there, just like they were before the housing crisis, and congress needs to act before it is too late” (Bidwell). After graduation, many students find it difficult to repay their debt, due to the bleak job market. According to a report published on the financial website Smart money, ten percent student loans borrowers defaulted in 2010 (Clemmitt). The percent was larger for students that attended a for-profit educational institution, like a career college; fifteen percent of these students defaulted (Clemmitt). Although the default rates do not contribute to the increasing student debt, one can compare it to the mortgage crisis when people stopped paying their mortgages and the American economy crashed. This exemplifies the critical problem that the student debt bubble if burst; it can have devastating impacts on the vulnerable American economy. Three causes for the increase in student debt are due to recent trends in college attendance, the increase of for-profit colleges and the rise of tuition due to spending

From the moment they become old enough to be aware that money is limited, young people today are taught to avoid getting into debt. Horror stories of payment defaults, exorbitant interest rates, and ruined credit are passed from generation to generation, and along with it, sentiments of disgust and panic toward the large and seemingly never-decreasing number that is the national debt of the United States of America. Yet, it cannot be said that all debt is bad; student loans taken as an investment in the future, or a mortgage on a house -- there are plenty of examples of how deficit spending can be a valuable practice, and the first Secretary of the Treasury was a strong proponent of that view when it came to government spending.

the way the economy is behaving based on the facts that borrowers would be willing to borrow

Based on the U.S. National Debt Clock, the current average debt per citizen is $58, 271. Although some may say that the reason people get in debt is due to poor money management, the truth is that income inequality plays a significant role in forcing Americans into debt as well. As members of the upper class become wealthier, they set standards that make it almost impossible for members of the middle and lower classes to keep up. People of the lower class become surrounded by the

Living in debt has become the norm for most U.S citizens, with nearly 80% of the population in some kind of financial dilemma. Even the national government is trillions of dollars in debt, and the main cause is spending money we don't have. If everyone would stop using credit cards, taking out huge loans, and buying houses that they really can't afford, the economy might slowly regenerate. Many people don't understand how fast debt can build up and how much interest rates can increase that debt. Yes, life would be a lot more difficult for many people if they could only use money they actually have instead of paying it back later and adding on debt, but sometimes change is needed. No matter how difficult this change may be to implement, it may

Most of the student debts are a result of loans to fund their education. Student loans are significant for education funding because it is a form of investment. However, the students are normally left with huge debts after completing their studies and have to struggle financially to acknowledge the debt when it falls due. This has a negative impact on an economy as these students will minimally contribute towards their retirement savings due to the financial burden accelerated by the current high unemployment rate. It is also stated that the students’ delinquency and defaulting rates are high compared to other housing debts (Elliott & Nam, 2013). This is bound to have an adverse effect on economic growth, and the

The Levy Institute: Recent Trends in Household Wealth in the United States: Rising Debt and the Middle-Class Squeeze: an Update to 2007 Statistics

Over the preceding few years, there has been a swift surge in the level of student debt in the United States. Student debt has now exceeded credit card debt in order to become the second largest volume of household debt only lagging to mortgage debt. (Figure One) The idiosyncrasy that makes student debt stand out from other types of debt and liabilities is the fact that it cannot be resolved via bankruptcy. A consequence of this is the financial burden that an individual will have until the burden is repaid. This financial burden will not only affect individual economic outlook but also on the whole United States economy. Currently, more than forty million people in the U.S have student debt that totals $1 trillion. (Dynarski) This upsurge

To solve this problem we must look at the cause of high student loan debt increases in recent years. The

Depending upon the person, the colossal amount of money already owed takes part in the financial decisions this person makes. Recently, the argument that the generation of people with all of this debt (the Millennials) and even the generation after them (X) are being affected by this debt in such a way that they are, “delaying major life milestones such as buying a home or saving for retirement…” (Chang) The meaning of this is to inform that these common milestones in life are not being reached. This stands as an important point because it will just be a continuous cycle of debt if these graduates cannot pay it off within their life time. Also, if they are not investing in their retirement--which they will eventually have to retire--there will be nothing to live off of when it comes to the time that they are no longer able to work. To counteract that, there is no proof that the college debt is what is holding these graduates back from attaining these major milestones. According to Matthews, “the problem is, there isn’t any proof that higher student loan debt is actually causing young people to own homes at lower rates than they did in the past, or that the overall student loan burden is leading to a smaller share of first-time home buyers. These trends could be cause by other factors, such as a cultural shift that has led young adults to delay all sorts of decisions, from buying a home, to marrying and having children.” (Matthews) Matthews expresses that there is no hard evidence to prove that it is the student loans that are cause the delay in the Millennials to doing such things as buying a house; it could simply just be the new “trend”. This is important in showing that there might not be a correlation between these graduates debt and buying a house (amongst other major milestones). To sum up, the debt these youngsters are in when they graduate is something that is

Western debt-based, consumption-driven societies have been living beyond their means for a very, very long time. For decades we have been consuming, as a group of people, more than we have been producing and we 've been financing it by mortgaging our children 's future through national debt and deficit spending. The question becomes, "How long can we continue to mortgage our children 's future and how many creditors are still willing to buy that mortgage?"