The new American dream--living debt-free

Traditionally, the American dream has conjured visions of a well-paid job, a new home, two or three kids playing on a green lawn, and savings for retirement. But the impact of the recession and rising student debt may be influencing how Americans view that dream, and whether they expect to reach it.

In a new survey by Credit.com and GfK Custom Research, 23 percent of Americans defined the American dream as being debt-free. That response placed second only to those who defined the dream as a financially secure retirement by the age of 65—an answer most common among respondents aged 65 and older.

Eighteen percent of respondents said the American dream was defined by home ownership. And 7 percent said it meant going to college or paying off student loans.

“Today, more Americans dream not of affluence, but of basic financial stability,” wrote Adam Levin, the co-founder of Credit.com. “That’s what both retirement and freedom from debt have in common. When Americans dream of retirement and freedom from debt, they dream of being able to exhale.”

The idea of a changing American dream is backed by several earlier studies from the MetLife insurance group. In 2010, the company found that 65 percent of Americans named financial security as one of the three top components of the American dream. That was up from 59 percent in 2006. (Americans during those four years also became much more likely to name family and children as top components.) The insurance group said a “do-it-yourself” model of the American dream was replacing the traditional version, as more people aligned the dream to their own sets of values during a time of economic instability. The group found in 2011 that 70 percent of Americans didn’t think wealth or children were essential to the American dream, and 59 percent didn’t think home ownership was essential.

Among the age groups represented in the Credit.com poll, young adults under 25 were the most likely to view the American dream as becoming debt-free. Younger respondents were also likely to say owning a home, graduating from college, or paying off student debt defined the dream.

Student debt has become a major problem over the past decade. The total outstanding student debt load in the United States reached $1.2 trillion in May, up from $260 billion in 2004. The average debt load for a college graduate in 2012 was $28,000.

Asked what top financial goal they wanted to address during the next two years, 1 in 4 Americans told Credit.com they wanted to become debt-free—the most common goal cited.

Besides debt, widespread joblessness and the recession that began several years ago have drastically altered Americans’ financial situation—or at least their view of it. The Pew Economic Mobility Project found the number of Americans who rated their own economic situation as “good” or “excellent” dropped 23 percentage points between 2007 and 2011.

In spite of a persistently dour economic outlook, Americans seem persistently positive about attaining their version of the American dream. In the Credit.com survey, 54 percent said they believed they were within reach of the American dream, and 24 percent said they’d already attained it—a total of 78 percent who were optimistic about their prospects.

Oddly, they weren’t so positive about their neighbors: Only 41 percent thought the American dream is within reach of most Americans.