The graduating seniors at Morehouse College received an unexpected gift.  Robert F. Smith, a billionaire investor who was giving a commencement address to the 396 students at the historically black men’s college in Atlanta, announced he was paying off their student loans.

Smith said he wanted the grads to begin their careers without nagging debt.  “This is my class, 2019,” he said.  “And my family is making a grant to eliminate their student loans.”

Debt—it is a fact of life for most Americans and for the country.  Let’s start with personal debt.

According to figures compiled by NerdWallet.com in December 2018, the average American household debt is about $135,000; that includes home mortgage, car payments, credit cards, student loans—everything. Added together, Americans have a total debt of over $13 trillion.

Home loans are the biggest expense, but that’s often viewed as “good debt” because a home frequently builds equity and mortgage interest is tax deductible.

Credit card debt? That’s another story entirely.  Outstanding credit card debt is $944 billion, and the average household is carrying a monthly balance of nearly $7,000.

According to DebtHelp.com, the number one reason for serious debt is medical problems—serious illnesses and unexpected emergencies. That’s followed by what DebtHelp.com describes as poor spending habits.  Job loss is third.

Americans are not alone in the red because the government makes the average debt-soaked person look positively thrifty.

The federal government is $22.3 trillion in debt, and a quick glance at the debt clock shows how fast that’s growing.  The Congressional Budget Office reports the deficit this year is about $900 billion, and starting in 2022 it will be over $1 trillion every year, reaching the equivalent of 93 percent of GDP by 2029.

Social Security is facing a debt crisis.

The annual report released recently by the Social Security and Medicare Boards of Trustees shows that starting next year, Social Security will pay out more than it collects. That means the government will have to, among other things, dip into the surplus that has been built up from years when the government collected more than it paid out.

However, as the baby boomers retire, the payments will increase, and the trustees estimate the Social Security Trust Fund will be depleted by 2035. Thereafter, income tax collections will only be enough to pay about three-quarters of the scheduled benefits.

Again, not all debt is bad and occasionally debt—even bad debt—is unavoidable. Sometimes the country must fight a war or rebuild after a natural disaster. But overall, it feels as though, collectively, we have been living beyond our means.

Robert F. Smith’s generosity has solved the student debt problem for the lucky graduates of Morehouse College. The country and most people weighed down by debt have no such benefactor and sacrifice and frugality seem to have disappeared from our DNA.

 

 

 

 

 

 

 

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