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United in debt: the Vox guide to healthy finances

How we got into this financial mess, but more importantly, how you can get out of it

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We are living in unprecedented times. Consumer debt is the highest it has ever been, staying above the $4 trillion mark since April 2019, according to the Federal Reserve.

Although our country is deeply polarized over everything from gun laws to health care reform, debt is the one thing that unites Americans from every generation. According to Northwestern Mutual’s Annual Planning & Progress study released this year, millennials carry an average debt of $27,900, with nearly a fourth of that going to credit card debt. Student loan debt makes up 20% of Gen Z’s average debt of $14,700. And Gen X carries the highest amount of personal debt with an average of $36,000.

Discussing debt is just as fraught as getting out of it. Several Democratic presidential candidates have made debt a top-tier campaign issue. Bernie Sanders wants to fight the $81 billion worth of medical debt in this country. Elizabeth Warren’s student loan forgiveness plan would cancel $50,000 of student debt for households making less than $100,000.

But how did we get here? The 2008 Great Recession introduced consumer debt to a new generation. The Washington Post called this financial crisis “the worst economic disaster in the U.S. since the Great Depression.” Americans saw big banks fail, the housing market collapse, unemployment rise and $9.8 trillion of lost wealth in homes and retirement funds, according to this Post article. Since then, the economy has taken a turn for the better with mortgage rates and unemployment declining. But attitudes toward debt have not. More than one-third of American adults say they are “less comfortable taking financial risks today” than during the financial crisis in 2008, according to the same Northwestern Mutual study.

So if Americans are more cautious about their finances, what are the main sources of debt? Tuition at public colleges and universities nearly doubled between 1996 and 2016, according to the National Center for Educational Statistics. For example, the cost of in-state tuition at MU in 1996 was $3,771. Now, it’s $12,094.

And wages can’t keep up with inflation. A 2018 Pew Research Center study found that real average wages haven’t increased much and still have similar purchasing power as it did 40 years ago.

And a large problem is that consumers aren’t educated on debt. In a press release, Lu Fan, an MU assistant professor of personal financial planning, said “only 30% of borrowers said that they had received financial education about paying off their student loans.” And when it comes to credit cards, the Northwestern Mutual study revealed that nearly one-fifth of millennials are unsure of what interest rates are.

The lack of understanding surrounding finance along with rising living costs can be stressful. But in Vox’s primer on debt, we walk and talk you through all things debt from credit card basics to the best podcasts along with practical guidance on filling out a FAFSA and student loan repayment.

Click the links below to read on.

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“FAFSA

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“profiles

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