As household debt continues to rise, you may start to wonder just who holds that debt and how we got ourselves into this on-going debt crisis in the first place. Americans have accumulated $15.8 trillion in debt – a record high according to recent data from the Federal Reserve Bank of New York. The national debt continued to climb throughout the pandemic to the surprise of some economists. Federal economist Andy Haughwout found the rise of household debt especially unusual as the country entered a recession in 2020, which sharply contrasts the 2008 housing crisis. While the housing market crash ushered in a wave of people either paying off debt or facing foreclosure, the opposite has taken place over the past three years. Most Americans have fallen into even more debt this time around.

We’ve seen a rise in home ownership during the pandemic as well, but not without consequences. The amount of housing debt has increased dramatically and, according to a recent report from Kera News, it also makes up the majority of debt held by American borrowers.

“Housing debt makes up most of the debt Americans owe, about 71%. Even as home prices rose dramatically, people have continued buying homes. While older, existing homeowners refinanced their debt to get lower interest rates, most of the new mortgage debt belongs to younger people who bought homes for the first time or traded up to get more space.
As long as there aren’t tons of people buying more house than they can afford – and home values don’t drop dramatically – most economists say we’re not likely to see a housing-based recession like we did in 2008. By and large, mortgage debt is a long-term investment that helps stabilize family finances and build wealth, compared to debt from credit cards or payday loans that carry high costs that can erode a family’s financial security.”

Throughout the pandemic, wealthy Americans were able to sustain and even increase their economic status while low-income and middle class families felt the financial strain of falling further into debt. This, of course, isn’t a new phenomenon. Debt has frequently been a tool wealthy individuals could leverage and use for future financial gain. Accumulating debt might be looked at as nothing more than an investment for those in a higher tax bracket, but it places a disproportionate economic burden on the working class – especially marginalized groups.

“That debt is hard to see if you only look at averages. On average, credit card debt declined during the pandemic. It dropped dramatically in the first year, and then started rising steadily since then. It remains below pre-pandemic levels.
Nonetheless, 30% of credit card holders told the financial services firm Bankrate their debt has increased, and that added debt burden is hitting hardest among parents with kids under 18, Millennials, and lower-income earners.
[Mechele Dickerson] said lower- and middle-income people were more likely to lose work and wages when the pandemic hit, and less likely to have paid time off when childcare fell through or an illness at home kept them from working. And they started the pandemic without much financial cushion.
Most Americans reported increased savings as they cut spending and benefited from the federal interventions to prevent economic collapse; expanded tax credits, stimulus payments, rental assistance, student loan and mortgage forbearance, as well as business loans. But savings rates have fallen below pre-pandemic levels in 2022.
While those federal relief programs failed to reach everyone equally, Dickerson said they helped a lot of people stay whole.
‘But you have to balance that with the medical debt that a lot of [lower- and middle-income] people incurred because rich people didn't have the COVID infection and mortality rates in the way that poor people did,’ Dickerson said.
More than half of those infected with COVID-19 are now struggling with medical debt, according to the health care-focused Commonwealth Fund, disproportionately burdening Black, Latino and low-income people, who are least likely to have affordable health care. That’s even as medical debt overall declined during the pandemic, with more comfortably situated households paying down old debt.”

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