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Cornell Student Articles on Topical Affairs

Debt: An Embarrassing and Confounding American Principle

While America may be one of the richest countries in the world, it’s also one of the most heavily debt-laden nations. How and when did we arrive at a point where hundreds of thousands of dollars of debt is normal for the average person?

Here’s How Much Debt Americans Carry

Debt is a useful and necessary financial instrument for those who want to gain access to things like education, housing, and transportation, but it can also be debilitating and costly over the long haul.

According to a recent report from NerdWallet and Federal Reserve, the average American household carries $137,063 in debt. When you look at the averages based on specific debt categories, credit cards ($16,883), auto loans ($29,539), student loans ($50,626), and mortgages ($182,421) lead the way.

When you consider the fact that the median household income in the U.S. is just $59,039, the weight of this debt becomes even more alarming. The average household carries debt that amounts to 232 percent of their annual income. And you don’t need a degree in finance to know this is a troubling trend.

While the economy has improved and unemployment has gone down over the past few years, there are other numbers that indicate debt will continue to balloon. Not only has cost of living outpaced growth of income over the past decade, but medical expenses have increased tremendously and staples like food and housing have also surged.

For millennials, who are shouldering an increasingly large portion of the nation’s debt, student loans are crippling. 

Whereas student loan debt can be considered “good” debt, at least in the sense that it increases job opportunities and earning potential, there’s nothing healthy about credit card debt.

According to statistics gathered in 2017, there is $1.03 trillion cumulative U.S. credit card debt spread out across 196.8 million credit card holders. For perspective, the national credit card debt was less than $860 billion in 2013.

Debt in American Culture 

Debt is not strictly American, but it’s certainly more connected to the ideals of American freedom and the pursuit of happiness. For example, whereas the average American credit card holder carries thousands of dollars of debt over from month to month, the average French citizen spends less than $300 per card per year. Germans are even more conservative, only charging an average of $158 per person per year.

For a country that was founded on Puritan principles of self-discipline and thrift, the current state of debt is quite confounding. In a study of middle-class Americans prior to the 2008 financial crisis, researchers sought to answer the question of, “How did America get to this point?”

After hours of research and in-depth interviews with a variety of people, the authors concluded, “Spurred on by tax rebates, prominent among which is the mortgage tax deduction, ambition to get ahead, and social pressure to build wealth, study participants accumulated debt to demonstrate financial independence and express freedom, and some participants even cast their credit use as a patriotic duty to boost the national economy.”

Whatever the case may be, debt has become closely connected with the American dream and notions of personal autonomy. However, it often leads to negative repercussions (on an individual and national basis).

Tips and Suggestions for Getting Out of Debt

For Americans that find themselves drowning in debt – whether of the credit card, student loan, car loan, medical bills, or mortgage variety – there are ways to overcome. Some strategies and techniques include:

  1. Get Some Help

According to Rowdy G. Williams, negotiating with debt collectors for small debts can be easy, but when the debt is for a higher amount, it can be difficult for students to navigate on their own.

Don’t be too prideful to ask for help. Getting assistance with debt negotiations and restructuring is beneficial when facing large amounts of debt.

  1. Strip Your Budget

If you don’t have a budget, you must create one as soon as possible. You need to know exactly how much is coming in each month, as well as how much is going out – down to the penny. Once you have this figured out, strip away all superfluous expenses – including cable, eating out, and unnecessary online shopping – and put all of this money towards the debt.

  1. Find Extra Work

Unless you’re one of the few people who can pay off all of your debt within a few months, you’ll need to go ahead and pick up some extra side jobs to increase your income and accelerate your efforts. Even something as small as $100 per week can give you a significant boost.

Moving Past Debt

Debt has become so ingrained in American culture that there’s no going back to earlier centuries where spending was done in cash. However, there’s also no rule that says Americans have to spend their entire lives strapped with debt. Debt can and should be repaid in a timely manner, so that life can be lived and enjoyed to the fullest.

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