The amount of household debt in American has hit its highest peak—surpassing the amount of debt Americans had in 2008 right before the economy started to crash.
According to the Federal Reserve Bank of New York, the new total has reached $12.7 trillion and part of that is because of the rapid growth of people’s student loan debt.
A large amount of household debt can actually be a good sign when it comes to the economy, it shows that spending is increasing and that people are optimistic enough to ask for loans. It also can mean people are investing in themselves through education or investing by buying homes.
However, student loan debt is crippling for many people and can keep them from making other investments like homes or from spending as freely as others. Since 2003, the percentage of student loan debt has gone from about 3 to 10.6. Just nine years ago, the student loan debt was $611 billion and has more than doubled to $1.3 trillion.
“This is not a marker we should be super excited to get back to,” said Heather Boushey, the executive director and chief economist at the Washington Center for Equitable Growth, a liberal think tank, told The New York Times. “In the abstract, more debt signals optimism. But in reality, families are using debt as a mechanism to pay for things their incomes don’t support.”
Experts point out that unlike mortgage debt—which is the lion’s share of the household debt—a person’s student loan debt generally can’t be restructured or otherwise gotten rid of, which can leave them with debt for the rest of their lives, keeping them from making other moves that would move them closer to financial stability.