Lots of American families are underwater...and not just on their mortgages.
About one out of every five U.S. households owe more on credit cards, medical bills, student loans and other debts not backed by collateral than they have in savings and other liquid assets, according to a new University of Michigan report published Tuesday.
The precariousness of Americans' financial situations has become increasingly on display since the mortgage crisis precipitated the Great Recession. As home prices fell, many borrowers found they owed more than their homes were worth, spurring some to simply walk away. About 23% of borrowers were underwater at the end of 2011, according to CoreLogic.
Though the Great Recession has ended, many families remain in tough financial spots.
"Some families have not been able to make substantial headway," said Frank Stafford, co-author of the report. "Even if they're not underwater with their mortgages, they are struggling to save money and reduce their debts."
The Michigan report found that 23.4% of families had no savings or other liquid assets in 2011, up from 18.5% two years earlier. But the number of families with more than $50,000 in liquid assets also grew to 14.6%, up from 11.8%.
And the number of families who owe at least $30,000 in credit card and other debts grew to 10%, up from 8.5%. Part of this increase is the jump in student loans.
"It's a classic response to economic uncertainty," Stafford said. "But the problem is that today only those families who have more than $50,000 in liquid assets have actually been able to do this to any extent. The rest of American families are simply treading water, if they're lucky."
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