It took nearly a decade, but debt has made a comeback.
Americans have now borrowed more money than they did at the height of the credit bubble in 2008, just as the global financial system began to fall apart.
The Federal Reserve Bank of New York said Wednesday that total household debt had reached a new peak — $12.7 trillion — in the first three months of the year, another milestone in the long, slow recovery of the U.S. economy.
The growing debt level shows that many of the millions of Americans who struggled during the recession have sufficiently repaired their credit to qualify for loans. It also speaks to growing optimism among banks and other lenders about economic growth.
Debt can fuel consumer spending, which accounts for nearly 70 percent of all U.S. economic activity.
Yet the borrowing peak also signals potential new risks to the economy. One of the big drivers of the latest debt binge has been student loans, whose mounting burden can prevent Americans from buying homes or spending on big-ticket items, stifling economic growth.
The fear is that growing debt from student loans — as well as auto loans and credit cards — could put many Americans back in a hole, triggering a new wave of defaults, much like what happened in the mortgage meltdown a decade ago.
"This is not a marker we should be super excited to get back to," said Heather Boushey, executive director at the Washington Center for Equitable Growth, a think tank that focuses on economic inequality. "In the abstract, more debt signals optimism. But in reality, families are using debt as a mechanism to pay for things their incomes don't support."
Student loan debt, driven by soaring tuition costs, now makes up 11 percent of total household debt, up from 5 percent in the third quarter of 2008. By comparison, mortgage debt is 68 percent of total debt, down from 73 percent during the same time period.
The New York Fed report also shows how growth in auto lending over the past decade had made up for declining mortgage lending. Auto loans totaled about $1.1 trillion, or 9 percent, of all household debt in the first quarter, up from 6 percent in the third quarter of 2008.