Leading Causes of Debt in New Jersey

October 25, 2018

Americans currently exceed $13 trillion dollars of outstanding household debt. Within that amount, $9 trillion is related to mortgage balances, $1.5 trillion is related to educational loans, and $2 trillion is split evenly between both auto loans and credit card debt. Very few households around the world utilize debt as freely as the United States’ households do. When household debt is measured against GDP, the United States’ 77.30% ranks as the 11th highest percentage in the world.

How does all of this relate to New Jersey and its residents’ habits?

The Financial Picture of New Jersey’s Residents

As recently as 2016, New Jersey’s median household income was slated at $76,126. This represents a median household income that’s nearly one-third higher than the national average of $57,617, meaning that New Jersey sits comfortably within the top 5of the states with the highest-earning households in the country. However, New Jersey lags behind the national average when it comes to unemployment rates. The state currently sits at a 4.4% unemployment rate, compared to the national average of 3.8%. Furthermore, the relatively high cost of living ranks New Jersey among the top 10 most expensive states to live in, thus, wiping out many of the high-income advantages that come with living within the state. In order to keep up with the high standard of living, many residents have resorted to taking out debt.

Leading Causes of Debt in New Jersey

New Jersey has not been able to escape the prevalent debt-using habits found within the rest of the country. Just like the rest of the nation, the leading causes of debt center around housing, student loans, and credit cards.

Mortgage Debt

Consistent with the rest of the country, the leading cause of debt in New Jersey is related to home ownership. Nearly two-thirds of the residents in New Jersey own their homes, and most of that ownership comes in the form of a mortgage. The average mortgage debt for those with outstanding balances is nearly $250,000, which ranks within the top 10 of the states with the highest averages in the country and is significantly higher than the national average of roughly $200,000 outstanding. What’s more, New Jersey is tied with Mississippi for having the highest rate of mortgage delinquencies of more than 90 days at 2.1%, while the national average sits at about 1.1%.

Student Loan Debt

Behind mortgage loans, student loan debt has the largest overall impact on New Jersey debtors. Those with student loans have taken out a median amount of $18,633, which is higher than the national average of $16,995. Thanks to the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, student loans cannot not be discharged through bankruptcy filing. This ruling has contributed to a national student loan default average of 11.3%. New Jersey’s student loan default rate falls below the national average at about 9%, putting it in the top 11of the least defaulting states in the country.

Credit Card Debt

The debt type deemed to be the third-most common in New Jersey is credit card debt. New Jersey has racked up the 7th highest credit card debt in the nationat nearly $30 billion. More troubling is the fact that all of the states ahead of New Jersey have higher populations, as New Jersey ranks 11th in population. Despite its relatively smaller population than the states ahead of it, New Jersey ranks first in the number of credit cards per person at 3.49, fourth in average balance outstanding at $7,151, and maintains a top 20 spot with respect to credit scores at an average score of 686. This supports the notion that the average New Jersey resident has no qualms about spending outside of their immediate means.

How to Cope with Overbearing Debt

Although New Jersey enjoys a place among the median highest-earning households in the United States, high costs of living typically play a role in perpetuating the same free-borrowing behavior that’s present throughout the rest of the country. If the act of keeping up with payments becomes too burdensome, many options for managing outstanding debt are at a borrower’s disposal. One could consider debt settlement alternatives such as debt consolidation, lender negotiation, or even bankruptcy as a last-resort (excluding student loans). Help is only one call, text, or email away.



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