Consumer Debt for Average American Down 22% Since 2019

Consumer Debt for Average American Down 22% Since 2019

Nearly half expect to pay off their debt within five years, despite pandemic
couple happy to pay off their bills

Despite the devastation from the coronavirus pandemic, there was also a small bright spot: A drop in personal spending has given some consumers a chance to catch their breath in terms of debt.

A new survey from Northwestern Mutual shows that although the COVID-19 pandemic has devastated the economy, many individuals have managed to improve their finances during the crisis.

Specifically, the financial services company’s survey found the average amount of debt carried by American adults has dropped by 22% since 2019 (excluding mortgages) — falling from an average of $29,800 down to $23,325 this year.

On the other hand, this improvement hasn’t lifted the burden felt by many Americans with debt, even if some are confident of eventually repaying it all.

Average consumer spends almost one-third of income on debt payment, servicing

While the overall picture may have gotten a little better, Americans still dedicate about a third of their monthly income (30%) on average to paying off non-mortgage personal debt.

And most continue to struggle. As Empower Retirement and Personal Capital found in a survey earlier this year, only 48% of U.S. adults say they feel financially healthy.

Part of this is the negative effect of debt. The Northwestern Mutual survey found 78% of respondents reporting that their debt is hurting their long-term financial security. Likewise, others report that they have had to delay...

  • Making significant purchases (29%)
  • Saving for retirement (18%)
  • Buying a home (14%)
  • Having children (8%)
  • Getting married (7%)

In terms of the type of debt, the survey showed that the biggest sources of consumer debt after mortgages were…

  • Credit cards (19%)
  • Car loans (8%)
  • Personal education loans (7%)
  • Home equity and lines of credit (4%)

Most of those with debt now follow a payoff plan

Fortunately, the findings also suggested many consumers are actively taking steps to improve their situation.

An earlier edition of this Northwestern Mutual survey found that over half of respondents were in "financial recovery mode," with 89% expecting to make a full comeback.

This latest survey also shows broad consumer optimism, helped by the fact that two-thirds of those with debt have a debt payoff plan and timeline. Specifically, when asked how long they expect to remain in debt…

  • 45% said just one to five years
  • 20% said six to 10 years
  • 14% said 11 to 20 years
  • 9% said the rest of their lives

Still, these timelines might be more upbeat if not for the disruption of the COVID-19 crisis. Just over a third (34%) of those polled said their repayment will take longer because of the pandemic, compared to 23% who predicted they would be able to pay off their debt sooner than expected.

Methodology: The Harris Poll conducted an online survey of 2,320 American adults (ages 18+) during March 16-26, 2021 on behalf of Northwestern Mutual. Survey data was weighted to Census targets for education, household income, region, age, gender, race and ethnicity.