By Anne Thompson Chief environmental correspondent
NBC News
updated 1/3/2005 6:16:32 PM ET 2005-01-03T23:16:32

If consumers are the engine of America's economy, then debt is the fuel driving Americans into the red as never before.  Consumers owe a whopping $9.9 trillion dollars. It is affecting all generations; from the newly-minted college grad — who owes an average of $20,000 in student loans — to the baby boomers contemplating retirement with jumbo mortgages.

“One of the implications of huge debt loads is that millions of Americans literally can not afford to retire,” says bankruptcy expert and Harvard Law School professor Elizabeth Warren.

Warren calls this record-high debt “the dark underbelly of the American economy. This isn't about over-consuming, this is about the basics.”

Here's why: the mortgage, cars, child care and health care are taking a much bigger chunk of the family budget. So to make ends meet, some turn to credit cards.

In 1981, just three percent of consumers’ income was spent on credit cards and 11 percent was saved. By 2003, those numbers flip to 12 percent spent on credit cards and a measly one percent saved.

Brad and Anita Gill brought hopes, dreams and debt to their marriage. Nearly $20,000 in the red, primarily because of plastic, they signed up with a non-profit credit counseling service.

After four years of paying cash, they have paid off $17,000.

“We obviously had to pay down some of our debt, clean up some of our credit, so we're able to qualify for our first town home together,” says Brad Gill.

Now, with son Bridger, they hope to pay off the rest this year.

With an improving economy and job market, some economists think the fears about consumer debt are overblown.

“We think that because interest rates are low, and because net worth — household net worth — is strong, they can actually satisfy their payment,” says economist Beth Ann Bovino of Standard & Poor's.

But Elizabeth Warren warns this is an economy built on borrowing against the future, leaving too many American families just one pink slip or medical crisis away from running out of financial fuel.

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