The great, the good, quangocrats, politicians of every political persuasion, and every sort of worthy windbag you can imagine complains about the levels of household or private debts.
But at the same time they advocate policies that increase the total amount of private debt: that is, they advocate a system under which government (i.e. taxpayers) stand behind (i.e. subsidise) private banks. And private banks are in the business of debt creation or lending.
Subsidise an industry, and the total size of the industry will be bigger, all else equal.
There is a better alternative: withdraw all taxpayer support for the bank industry. That is, force lending institutions (or the lending departments of banks) to be funded ENTIRELY by share holders or quasi shareholders or loss absorbers of some sort.
That way, if a lending institution makes silly loans, the institution itself doesn’t fail: all that happens is that the shareholders and loss absorbers take a hit.
Of course people or depositors will want a bigger return for taking a stake in an institution where they stand to take a hit. But that just reflects the absence of the taxpayer funded support: it reflects the removal of a subsidy.
And clearly, the reduced amount of lending that results from that withdrawal of taxpayer funded support would be deflationary. But that’s not a problem: that deflationary effect can be countered by having the government / central bank machine create new money (“debt free money”) and spend it into the economy.
Net result is that the average firm and household would have more money, and thus wouldn’t need to borrow so much. So while interest rates would rise, TOTAL INDEBTEDNESS would decline. So at a wild guess, the total amount paid by way of interest might stay about the same.