These days, many people are getting their finances in order as the economy continues to improve and the effects of the recession fade, but millions of families got themselves into trouble so deep that they’re still struggling significantly under the weight of massive debts.
Millions of families are considered “underwater” with their mortgages because they owe more on their loan than their home is worth. Additionally, millions more are also underwater when it comes to their non-collateralized debt, which can be more troubling, according to a new study from the University of Michigan. In all, about 20 percent of all households nationwide owe more in non-collateralized debt (which can include credit card balances, medical bills, student loans and the like) than they have in savings and other liquid assets.
“Some families have not been able to make substantial headway,” said Frank Stafford, an economist at the University of Michigan Institute for Social Research, who co-authored the report with researchers Bing Chen and Robert Schoeni. “Even if they’re not underwater with their mortgages, they are struggling to save money and reduce their debts.”
In all, the number of consumers who carried $30,000 or more in non-collateralized debts increased significantly between 2009 and 2011, rising to 10 percent of those surveyed from 8.5 percent, the report said. Meanwhile, the number of people who said they had no such debt at all slipped, though marginally, to 47.4 percent from 48 percent. At the same time, the number of families with no liquid assets or savings rose to 23.4 percent from 18.5 percent.
On the other hand, the researchers found that a good portion of non-collateralized borrowing increases were the result of spikes in student loans, which can lead to tens of thousands of dollars in debt for those who receive a four-year degree, the report said.
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Of course, many of the economic problems people ran into during these times came about through no fault of their own. Millions of families were laid off and increased credit card borrowing as a means to make ends meet when other sources of income were not available. Further, these troubles also made it more difficult to pay their various bills, and some prioritized mortgage payments over other types of borrowing to keep their homes.
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