How Much Do Americans Pay In Interest On Their Debt?

Aug 13, 2015
Mortgages, Question of the Day, Research, Credit Cards, Student Loans, Current Events, Chart of the Week, Math

This chart released quarterly by the Federal Reserve presents several learning opportunities:


Lesson 1: Mortgage debt far exceeds all other consumer debts with a total of $8.12 trillion as of the end of Q2 2015. The next closest, student loan debt, stood at $1.19 trillion or almost 1/8 the amount of mortgage debt.

Lesson 2:  Secured debt, loans secured by property such as home mortgages or auto loans, carry lower interest rates than unsecured debts like credit cards. I did a quick set of Google searches to find average interest rates for largest consumer debt categories (see links for source documents):

  • Mortgage Debt:  Average interest rate of 3.81% as of 6/30/2015
  • Student Loan debt: 5.5% (calculated by eyeballing this chart)
  • Auto Loan debt:  Calculated by using five year average of 5.1% (6.21% in 2010, 5.73% in 2011, 4.91% in 2012, 4.43% in 2013 and 4.24% in 2014).  Could make the argument that recent years should be more heavily weighted which would have resulted in a lower rate
  • Credit card debt:  13.29% interest as of May, 2015

Lesson 3:  Over the past year, car loans are growing at the fastest rate ($101 billion increase) with student loans close behind (increased by $72 billion).

Lesson 4:  Americans spend over $500 Billion/Year in interest on their major consumer debts.  Here are the calculations (note that I rolled Home Equity Lines (HELOCs) into mortgages for simplicity purposes:

Screen Shot 2015-08-13 at 3.51.24 PM

This could lead to a great discussion of good vs. bad debt….Enjoy!

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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