Cal Matters / Los Angeles Daily News / ABC10

Why personal debt looks healthy despite worst year for jobs

Despite an unprecedented 2.4 million jobs lost in the spring, Californians paid down interest-heavy debt such as credit card bills, while acquiring wealth-building loans by taking out mortgages.

Tell-tale signs of financial hardship like devastating spikes in defaulted debt, bankruptcies and foreclosures are seeing near-record lows, but looks can be deceiving. To reduce delinquent debt, the federal government, and some private lenders, offered people the option to postpone payments on their student loans and mortgages, a process called forbearance. According to Prof. Giacomo De Giorgi, Director of the GSEM Institute of Economics and Econometrics, forbearances explain much of the difference between the 2008 crisis and the pandemic, including why foreclosures have virtually stopped.

However, millions of Californians suffering job losses have accumulated crippling levels of debt that go uncounted in many national measures: unpaid rent, utility bills, borrowed money from loved ones and, in some cases, predatory loans.

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