You asked us to look for personal debt statistics for Connecticut and nationally. You want to know what percent of the population have a significant personal debt, what percent of these are low- and moderate-income, and what percent of people under the federal poverty level have significant personal debt.

SUMMARY

We found no information that correlates Connecticut residents' income levels or poverty status with their level of personal debt.

On a national level, total consumer household debt was over $6.3 trillion at the end of the third quarter of 1999, of which $4.4 trillion was mortgage debt and almost $1.4 trillion was consumer credit, according to a February 2000 Federal Reserve Board research article by Dean M. Maki, "The Growth of Consumer Credit and the Household Debt Burden." We also found no correlations with income levels or poverty status for these figures.

The only information we obtained that correlates any debt burden statistics with family income is a January 2000 article in the Federal Reserve Bulletin. It cites a 1998 national consumer finance survey, which showed that in1998 the ratio of total family debt payments to total family income of all families in the sample was 14.5%. Of all families surveyed, 12.7% had debt payment to income ratios above 40%, which is apparently considered significant. Highlights of the article follow. Table 1 shows the percentage of families within certain income ranges that had more than a 40% debt payment to income ratio and overdue payments. The article is available on the Federal Reserve Board's website listed at the end of this report, along with others of some interest.

FEDERAL RESERVE CONSUMER FINANCE SURVEYS

Every three years, the Federal Reserve Board conducts a survey of consumer finances, most recently in 1998. The 1998 random sample consisted of 4,309 families throughout the nation. A January 2000 article in the Federal Reserve Bulletin, "Recent Changes in U.S. Family Finances: Results from the 1998 Survey of Consumer Finances," by Arthur B. Kennickell et al., describes the results and compares them with the 1995 picture. From 1995 to 1998, the proportion of families with incomes of $50,000 or more rose about one-fifth to 33.8% and the proportion of those below $10,000 fell about one-sixth, to 12.6%. While the 1998 results showed a generally positive picture for families' finances, with a moderate upward trend in income, strong growth in net worth, and a continued rise in stock ownership, families' indebtedness also grew, but less rapidly than their assets. Debt repayments were a larger share of the income of the typical family with debt, and the proportion of debtors who were 60 days or more late with their payments was higher than in 1995.

According to the article, the overall proportion of families with any kind of debt dropped slightly from 74.5% in 1995 to 74.1% in 1998. Among families with debt, the median amount of debt outstanding rose about 42% during the three-year period and in 1998 stood about 73% above its 1989 level.

Home-secured debt (first and second mortgages, home equity loans, and lines of credit secured by the primary residence) declined slightly as a share of total family debt, but the proportion of families with such debt rose over the period, from 41% to about 43%. These loans have increased since 1986 because of the phase out of tax deductibility of most other types of interest. The declining interest rates in 1998 also motivated more families to refinance existing mortgages for higher amounts. For families with home-secured debt, the median amount of the debt increased by 12.9%, while the median value of primary residences rose only 5.4% for this group.

Although the share of installment loans in total family debt rose 1%, its prevalence dropped about 2%, to around 44%. Some of the decline is because more people are substituting other kinds of borrowing and leasing vehicles instead of buying them. The median amount owed on these loans rose 36% over the three years, to $8,700.

For credit cards, the percentage of families that had an outstanding balance after paying their most recent bills dropped about 3%, to 44%. Median total balances owed continued around $1,700. Other debt was a bit more prevalent. The median amount of other debt owed rose from $2,100 to $3,000. This other debt consisted of loans on insurance policies, against pension accounts, borrowing on a margin account, and unclassified loans.

From 1995 to 1998 the ratio of total family debt payments to total family income of all families in the sample increased from 13.6% to 14.5%. According to the article, the percent of families in the sample with a ratio of debt payments to income above 40% (which might be considered "significant") broken down by income is as follows:

Table 1: Debt Burden:

Ratio of Payments to Income and Overdue Payments

Family Characteristics	Percent with Ratio Above 40%		Percent with Any Payment 60 Days Overdue
	1995	1998	1995	1998
All Families	10.5%	12.7%	7.1%	8.1%
Income (1998 Dollars)
Less than $10,000	27.6	32.0	8.4	15.1
$10,000-$24,999	17.3	19.9	11.3	12.3
$25,000-$49,999	8.0	13.8	8.6	9.2
$50,000-$99,999	4.2	5.7	2.7	4.5
$100,000 or More	1.7	2.1	1.3	1.5

Source: Federal Reserve Bulletin, January 2000, p. 25

As the table shows, a larger percentage of families in the categories for incomes under $50,000 had a debt to income ratio above 40% and a larger percentage of them also had overdue payments. In 1998, 32% of families with incomes under $10,000 had debt payments that amounted to more than 40% of their income and about 15% had overdue payments.

FEDERAL POVERTY LEVEL

The federal poverty level (FPL) varies depending on the number of people in a family and is adjusted annually. The 2000 FPL, based on the 1999 cost of living, is, for example, $8,350 for a family of one, $11,250 for two, $14,150 for three, and on up, adding an extra $2,900 for each additional person. For 1998, the year dealt with in the article, it was $8,050 for a family of one, $10,850, for a family of two, $13,650 for a family of three, and another $2,800 for each additional family member. Since we do not know the number of people in the families in the article's chart, we cannot know whether they are actually below the federal poverty levels for that year. But it would not be unreasonable to assume that most of the people with incomes under $10,000 may be below the federal poverty level.

RELATED STATISTICAL INFORMATION

The following Federal Reserve and American Bankers' Association provide access to the articles mentioned above and provide some related charts on household debt burdens and delinquencies, that may be of interest

http://www.bog.frb.fed.us

http://www.bog.frb.fed.us/pubs/bulletin/2000/0100lead.pdf

http://www.clev.frb.org/research/Et97/0297/houdebf.htm

http://www.bog.frb.fed.us/pubs/feds/2000/200012/200012pap.pdf

http://www.aba.com/aba/ConsumerConnection/ss_outstanding.asp

http://www.aba.com/aba/ConsumerConnection/ss_delinquency.asp

http://www.aba.com/aba/ConsumerConnection/SS_bankruptcy.asp

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