On Aug. 24, President Biden announced the cancellation of $10,000 in federal student loan debt for many borrowers making lower than $125,000 annually.
But student loans account for lower than 10% of household debt in America, which reached $16.15 trillion through the second quarter of 2022.
“We should not be panicked in regards to the level of household debt immediately, but we must always be concerned about it,” said Katherine Lucas McKay, associate director on the Aspen Institute Financial Security Program. “I feel it’s particularly essential for policy leaders and leaders within the financial world to concentrate to who and where we start seeing greater challenges.”
Policy plays a significant role in keeping household debt in check. Experts say outdated procedures resembling wage garnishment, wherein a person’s earnings are withheld for the payment of a debt, are in dire need of a policy update. A survey found that about 7% of employees in America had their wages garnished, in keeping with probably the most recent study in 2016.
“For folk who’ve higher debt loads, they’re actually getting their wages garnished or seized at really high rates,” in keeping with Lucia Mattox, senior policy manager on the Center for Responsible Lending. “Currently on the federal level, only $217.50 is protected in someone’s weekly paycheck and that bill hasn’t been updated for the reason that late ’60s.”
The federal government may play a possible role in reducing certain sorts of borrowings, resembling medical debt that’s currently held by roughly 23 million Americans.
“There’s been a lag within the southeastern states of expanding Medicaid so we all know that medical debt goes to be increasing,” said Mattox. “But when there is a method to expand Medicaid so that people are higher supported when it comes to their medical expenses that is going to be a method to alleviate that burden.”
Watch the video to seek out out more about why household debt is rising in America.