We have selected consumer debt as EPIC’s second issue. Our interest in this topic stems from our work on income volatility. During our 18-month cycle with income volatility, we learned that individuals and families use an ad hoc patchwork of strategies to manage dips in income and spikes in expenses, including a heavy reliance on borrowing. Households rely on credit to get by, often because savings are insufficient or have been depleted. For low-income families, the combination of income and expense volatility and limited access to credit can create serious challenges to their ability to make ends meet without becoming mired in expensive debt, creating a new burden that stretches their budgets even thinner.
This inability to meet basic needs with income from labor, transfers, and other sources makes it difficult to maintain emergency savings and appears to push many households into debt. Moreover, these same households often rely on more expensive and higher-risk forms of debt, such as payday loans, subprime auto loans, and private student loans.
Our work on consumer debt will include a focus on the drivers, features, and consequences of household debt among these financially vulnerable households.