Southern Partnership to Reduce Debt (SPRD)

Project Overview

MDC is a national partner of the Southern Partnership to Reduce Debt (SRPD) initiative, sponsored by the Annie E. Casey Foundation. SPRD is a network of more than 20 state and local organizations working throughout Alabama, Arkansas, Georgia, North Carolina, South Carolina, Tennessee, and Texas to tackle consumer debt issues that perpetuate wealth and income inequality.

State-level grantees work in four main consumer debt types: student loans, medical debt, fines and fees, and high-cost lending. MDC and other national partners, including the Aspen Institute, Asset Funders Network, National Consumer Law Center, National League of Cities, Prosperity Now, and the Urban Institute, provide support to SPRD and state-level grantees.

MDC is supporting this initiative in a variety of ways. It is preparing and publishing three papers addressing Southern indebtedness. The papers analyze how structural inequities and flawed systems keep people in debt; how society uses debt to restrict the economic mobility of youth and young adults; and an equity-driven policy agenda to reduce debt.

Overview

For a significant share of Americans, it is practically impossible to live debt-free in the United States. Consumer debt in the nation reached $13 trillion at the end of 2018. Debt is often the only way to meet daily needs but keeps families economically insecure and in a mode of survival that is fraught with risk.

We need a nuanced understanding of how consumer debt is propping up the economy at the expense of families so we can focus on more effective interventions and employ more accurate measures to evaluate those interventions. Acknowledging the reality of the consumer debt crisis is a prerequisite to accurately identifying policies and practices to address the structural causes of an increased debt burden among the most disadvantaged.

Evidence missing from popular narratives includes:

• Forty percent of Americans had trouble paying for food, medical care, housing, or utilities in the last year.
• Seventy percent of low- and middle-income households surveyed by the Center for Responsible Lending reported relying on credit cards for basic living expenses, medical expenses, or car and house repairs.
• The personal savings rate of the average American household is below 10 percent, even accounting for personal savings of wealthier families. Nearly half of Americans have no retirement savings, and more than 60 percent do not have $500 in cash on hand for emergencies.
• Average incomes of the top five percent of households grew by 13.2 percent in 2018. In comparison, average incomes in the bottom fifth fell by 3.2 percent during the same time period; incomes in the fourth quintile grew at less than half the rate of the top earners, just 5.6 percent.

Trends in consumer debt show striking differences between the South and the rest of the nation:

• Student loan debt comprises the largest percentage of non-mortgage debt held by Southerners, likely because of the rising cost of education, unrestricted loan borrowing, and low returns on credentials in the labor market.
• Southern states account for nine of the 10 states most burdened by credit card debt and penalties associated with this type of debt. In many Southern states, the burden is so high that families making the median household income would need more than 18 months to pay off the balance.
• Auto loan debt in Southern states increased by more than 50 percent between 2003 and 2017. Families take on loans with longer repayment terms, sometimes more than six years, and end up owing more on their vehicles than they are worth.