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The Scary Reality of Being in Debt

scary reality of being in debt

Consumer credit card debt and student loan debt are at an all-time high right now, and it’s pretty safe to say that almost everyone has to deal with the pitfalls of debt in one way or another. The strange thing about debt is that it’s an excellent teacher, and it’s also one of the best motivators when it comes to getting your game face on and solving your debt problems.

For many consumers, being in debt has become a cultural standard of living. Unfortunately, the realities of living with the burden of debt are hardly inspiring. With so many people struggling to pay student loans and keep up with their ever-growing credit card bills, there is little understanding of how big the problem really is.

Some Facts About Debt:

Since the economic downturn of 2008, it is true that the average household consumer debt in the United States has dropped drastically. However, that average still remains at nearly $20,000 of consumer debt per household. For people who regularly use credit cards, the numbers are even more abhorrent approaching almost $50,000.

In fact, the reality is that people who regularly use credit cards in the first place are likely to have multiple credit cards and larger outstanding balances on those accounts. Many finance professionals argue that this is a matter of behavioral psychology for people who have a mindset that allows them to spend money on revolving accounts and carry large balances habitually.

The average credit card interest rate is over 12.5%, and for young students or those with black marks on their credit report, that interest rate can be closer to 23%. On a small balance, the minimum payment may be sufficient to overcome that interest and pay down the principal balance on the card, but most credit card users are carrying an average of nearly $7000 on their credit cards, and their minimum payments are not sufficient to make any meaningful progress in paying the cards off. Instead, the balance continues to grow year after year even with on-time payments every month.

Student Loans Make It Hard To Payoff Debt:

Another harsh reality of being in debt is that student loans have become such a prevalent part of young peoples’ lives. Dependence on student loans for education and living expenses has become rampant. Combined with increasing tuition rates, students are now graduating with more than $30,000 in outstanding debt before they ever even have their first paycheck. The job market has been unreliable at best for many new graduates, and federal student loans are not subject to the same rules of bankruptcy and settlement that other consumer debt is.

As a result, students saddled with heavy debt loads may find themselves falling behind as soon as they graduate and have no means of getting caught up. In recent years, government intervention and lender’s desire to recoup some of their lost money has led to more options for students to reduce their monthly payments and try to get caught up. On the down side, most of those options mean extending the loan repayment period by several years, paying only interest and are only available to those who have not already fallen behind.

For those already fighting an uphill battle, these solutions may not be enough to turn the tides. Plus, the cost of extending the repayment period and paying only interest without making any progress on the principal loan amount leads means that students are paying even more for the loan they already have.

Face To Face With Debt:

The fact of the matter is that debt has become an insurmountable obstacle for many consumers in any age range and is not limited to any income bracket. More and more people are faced with the reality that they can only scrape by while making minimal progress in reducing their debts without making major life changes and oftentimes become so dependent on revolving debt that it is the only means by which they can survive.

There are debt relief options available that will help you pay back the unsecured debt that you owe to creditors as quickly as possible and save you money in the long run because of reduced interest rates. One of these options is called a Debt Management Program or DMP for short. A Debt Management Program is offered by a non-profit credit counseling agency. To find out more about a DMP, click here.

Conclusion:

The good news is that since the economic downturn, lenders are subject to tighter restrictions and the general public seems to be taking steps to educate themselves better on debt management and more options are becoming available to students to reduce the burden of student loans. Living with debt long term is a huge source of stress and financial instability within the American culture, and it needs to be addressed at the consumer level.

 


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