Tuesday, August 02, 2016

Characteristics of Households with Negative Wealth

Fourteen percent of American households have negative wealth—meaning their debts exceed their assets, according to researchers at the Federal Reserve Bank of New York. Analyzing 2015 data from the Fed's Survey of Consumer Expectations, the researchers compared the characteristics of negative wealth households to households with nonnegative wealth, finding such things as...

Households with negative wealth (vs. households with nonnegative wealth)
Average age of householder is 43 (versus 51)
Average annual household income of $39,077 (versus $86,309)
19% are homeowners (versus 75%)
24% are Black or Hispanic (versus 17%)
24% are single mothers (versus 6%)
18% experienced worsening health in past year (versus 11%)

Among households with smallest amount of negative wealth (less than $12,400), credit cards account for the largest share of debt. That's not so for households with greater negative wealth. For those with negative wealth between $-12,500 and -$46,300, student loans are the largest component of debt and account for 40 percent of the total. For those with the most negative wealth (-$47,500 or more), student loans account for an even larger 47 percent of the total.

"Given the importance of student debt in explaining negative household wealth," the researchers conclude, "it is likely that the steady growth in student debt and borrowing, combined with the very slow rate of student loan repayment...has materially contributed and will continue to contribute to negative household wealth and wealth inequality."

Source: Federal Reserve Bank of New York, Liberty Street Economics, Which Households Have Negative Wealth?

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