This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

American Consumer Debt Trend Is Still Troublesome

When debt accumulates in this area, it also implies that the consumer is not able to repay even smaller debt obligations and is more likely to experience defaults or bankruptcy in the future.

Consumer credit card debt is now coming in above $856 billion, which will become more troublesome if we start to see marked increases in revolving balances and missed payments. For these reasons, it is important to always pay more than the minimum balance as this is the best way to avoid the predatory lending practices that are seen in many credit card agreements. This is especially true for card agreements that are directed at the sub-prime consumer base, as these agreements are almost always accompanied by interest rates at significantly higher levels.

Student Loan Defaults: Potential for Long-Term Concerns

The next important area to watch can be found in trends related to student loan debt, as there have been massive increases in this area in the last few years. On a yearly basis, the latest official figures show that total student loans have risen above $1 trillion. This is an increase of 12.3% from the previous year as more students have opted to avoid entrance in a weaker jobs market, choosing instead to invest in higher education. But while many will argue that student loan debt falls into the "healthy debt" category, there is some cause for concern as well. In particular, this is true in cases where the overall debt levels fall out of proportion with the expected earnings in careers associated with a student's chosen degree.

Of course, hiring rates and long term career prospects for those with a college degree far outweighs those with high school diplomas, so it does make sense to look at student loans as a viable option when pursuing an advanced degree.

Recent economic data show that monthly hiring numbers have improved far beyond the original analyst expectations in the financial markets. It will be important for these trends to continue in order for new graduates to keep a lid on their student loan levels. There are protective measures in place for students to avoid defaults in their earliest stages after graduation (with measures like deferment periods and subsidized interest rates).

In any case, the next few years will prove critical as we will need to see some slowing in the annual accumulation rates for student loan increases. This is likely to be the case as the labor market continues to show improvement. Confirmation will be important, however, in order to assess the true performance in these trends and this will be a key area to place the focus as the economy continues to progress in 2014.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Sam Kikla is the founder of BestCredit.net, which offers the latest information in consumer trends, debt management and labor markets as they relate to the broader market environment. Focus is placed on investment decisions that are affected by consumer trends, and credit markets are addressed from the long-term perspective, with most of the attention paid to macro events influencing multi-year market positions.
3 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,122.01 +15.31 0.09%
S&P 500 2,000.12 +0.10 0.00%
NASDAQ 4,569.6210 -1.0160 -0.02%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs