Americans' Borrowing Hits Another Record. Time To Worry? Americans owe more than ever before, with household debt hitting nearly $13 trillion. Some economists say the lessons of the credit bubble that led to the financial crisis are being forgotten.

Americans' Borrowing Hits Another Record. Time To Worry?

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Americans' overall household debt has hit a record high, nearly $13 trillion and rising, which makes people wonder if we've already forgotten the lessons of the bubble of borrowing in the run up to the Great Recession. Here's NPR's Chris Arnold.

CHRIS ARNOLD, BYLINE: The last time Americans had taken on a record level of debt, we were in the throes of the financial crisis. But the economy's in much better shape now, home loans are being made to people who can actually afford them and a lot of the borrowing is arguably pretty responsible.

SASHA GALLAGHER: My husband and I recently had a baby in February. And we've had a lot of changes in the past year.

ARNOLD: Sasha Gallagher lives outside Richmond, Va. The couple just bought a house. They spent their savings on a down payment. So they used one of those 0 percent credit card offers to buy a whole bunch of stuff for their new home - a washing machine, a refrigerator, a rideable lawnmower.

GALLAGHER: We're at roughly $6,000. And it will probably grow because at this point, we've got appliances on there but we really haven't furnished the home yet.

ARNOLD: That might sound like quite the credit card buying spree, but Gallagher says she hasn't taken leave of her senses.

GALLAGHER: You know, we're still driving both of our old beat up cars basically into the ground because a house in a good school district was more important than a new car.

ARNOLD: And Gallagher just finished pharmacy school and got a good job. So she's gone from being basically a starving student to being the bigger breadwinner for the family. And she says they'll be able to pay off that credit card pretty quickly. Likewise, millions of Americans have found work in recent years. And, of course, spending money keeps the U.S. economy chugging along. So maybe all this debt isn't so bad. On the other hand, some economists don't like this record borrowing. Lucia Dunn is an economist at Ohio State University.

LUCIA DUNN: The new level of debt is cause for alarm.

ARNOLD: Dunn's been studying consumer debt for more than 20 years. Her research shows that overall, only about half of credit card debt gets paid off each month. And so she says that rising credit card debt suggests that more Americans are getting stuck paying those high interest rates.

DUNN: Being in debt is a very stressful way to live. There's a lot of people who are just, you know, in a hole and so stressed out over it. We believe that group is growing.

SUNG WON SOHN: We are beginning to forget the lessons learned from the painful recession in 2007 to 2009.

ARNOLD: Sung Won Sohn is an economist at Cal State. He says he'd like to wave a cautionary flag about all this borrowing.

WON SOHN: Because consumer spending is really the largest portion of the economy and when the time comes for an economic recession, this is going to make the situation worse.

ARNOLD: In addition to all that credit card debt, Americans owe even more on student loans. Sasha Gallagher, who just bought the new house, says that pharmacy school was not cheap.

GALLAGHER: Yeah, I also have, like, a mortgage-worth of student loan payments (laughter). I'd like to not put the actual number on the radio.

ARNOLD: But it's a lot. Still, Gallagher says her degree got her that new job that's got a nice paycheck. Research shows that if you have a college or advanced degree, you're much more likely to own a house and earn a higher salary. But rising student debt is becoming a bigger drag on many Americans' finances. OK, so household debt overall is at a record high, but economist Sung Won Sohn says to keep it in perspective...

WON SOHN: I don't think this is anything like what we faced in 2007.

ARNOLD: For one thing, we don't have the systemic risk of financial collapse that we had back then when banks were making those huge bets on bad mortgages. Also, Americans' incomes have been slowly rising. So while overall debt is at a new high, it's still a lower percentage of people's incomes than it was when the financial crisis hit. Chris Arnold, NPR News.

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