On August 24, President Biden announced the cancellation of $10,000 in federal student loan debt for most borrowers. But student loan accounts for less than 10% of household debt in America, which reached $16.15 trillion during the second quarter of 2022. And debt is likely to grow even further due to soaring inflation. 43% of Americans are expected to add even more debt within the next six months. So why are so many Americans in debt today and what impact does it have on the U.S. economy?
Policy plays a vital role in keeping household debt in check. Experts say outdated procedures such as wage garnishment, in which an individual’s earnings are withheld for the payment of a debt, are in dire need of a policy update.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 workers in America had their wages garnished, according to the most recent study in 2016.
The government can also play a potential role in reducing certain kinds of borrowings, such as medical debt that is currently held by roughly 23 million Americans.
Watch the video to find out more about why household debt is rising in America.
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Why Americans Are Drowning In Debt