Household Debt Has Reached New Heights, But There's Good News

Household Debt Has Reached New Heights, But There's Good News

Guess who's back? Debt is back.

As with lots of news about the economy, there's some good and bad to this story, so bear with us.

Total household debt in the United States reached $12.73 trillion during the first quarter of 2017 — a record high — the Federal Reserve Bank of New York announced this week. We haven't seen borrowing levels this high in nearly a decade — since 2008 in the midst of the Great Recession, during which Americans had borrowed $12.68 trillion across student loans, auto loans, credit cards and housing (think mortgages and home equity loans).

While most of us know that more debt is usually not ideal, some economists are looking at the bright side, as The New York Times reports: Record borrowing means people are recovering their credit from the days of the recession and in turn taking out loans to buy a home, start a business, send kids to college and fuel consumer spending in general. This peak could also signal greater optimism about economic growth among the banks and lenders fronting these debts.

Overall, the share of housing debt is a little lower than it was in 2008, while student loan and auto loan borrowing have gone up. Student loans, in fact, have jumped from 5% of household debt in 2008 to nearly 11% today, no doubt thanks to skyrocketing tuition. Student borrowers today owe $1.3 trillion, a far cry from the $611 billion owed at the height of the recession.

Still, that's a much smaller piece of the American debt pie compared to today's $8.6 trillion mortgage market, which makes up 71.4% of consumer debt. In the end, today's economic climate is arguably better than it was in 2008, and while borrowing is expanding, this time around the economy is doing so, too.

RELATED: 3 Things You Should Do Before You Pay Off Your Student Loans

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