Managing Debt in the United States

How much debt do Americans have and can they handle it?

To answer these questions, we here at Political Calculations went to the Federal Reserve's 2004 Survey of Consumer Finances (SCF), which provides a breakdown of the median amount of debt (of any kind) held by the surveyed families. The Fed interviewed some 4,552 families, which through the miracle of statistical sampling, represent approximately 112.1 million families in the United States!

The survey report breaks down its data by a number of different methods (age, income, work status, etc.), but the method we found most interesting was by net worth. The following table shows the breakdown of the percentile brackets by which the report presented its data, along with the corresponding median income and net worth for each bracket range:

2004 SCF Net Worth Percentile Data
Net Worth Percentile Bracket	Median Income	Median Net Worth	Net Worth at Top of Bracket
0 - 25	$20,500	$1,700	$13,300
25 - 50	$37,000	$43,600	$93,100
50 - 75	$52,400	$170,700	$328,500
75 - 90	$77,000	$506,800	$831,600
90 - 100	$143,800	$1,430,100	N/A

So that's the basic profile of who's been surveyed. Now, let's see the median debt that each grouping has along with their median debt burden, which is defined as the percentage of debt payments divided by income (also called the debt-to-income ratio.) This latter figure gives us a good indication of how well the families surveyed are able to manage their debt:

Median Debt and Median Debt Burden by Net Worth Percentiles
Net Worth Percentile Bracket	Median Debt Held	Median Debt Burden
0 - 25	$11,400	13.0%
25 - 50	$44,200	21.2%
50 - 75	$90,100	21.4%
75 - 90	$110,700	17.9%
90 - 100	$190,800	12.6%

We can measure how well families manage debt by seeing where they fall on the debt burden scale. Lending institutions are reluctant to extend credit for individuals whose debt-to-income ratio is greater than 36% - often charging people with a debt ratio above 36% higher rates of interest to discourage them from exceeding this debt burden level. Since the median debt held in each grouping is well below this level, it indicates that overall, Americans are in pretty good shape when it comes to managing their debt.