Let’s talk about household debt, a kind of debt that many families in the U.S. deal with every day. Recently, household debt in the United States reached its highest level ever, and that tells us something important about how families are handling their finances right now.
So, if you’ve ever wanted to know more about what this really means or why people talk about it so much, you’re lucky because we’re going to explain it in a simple way, even if you don’t know anything about money or finance. Now, let’s see what’s going on, why it matters, and what this new report can tell us about the challenges many American households are facing.
Household debt and a new record
Household debt is the sum of all debts American families owe, and it’s about to reach its highest level. This household debt can be:
- Mortgages
- Car loans
- Credit card debt
- Student loans
According to the Federal Reserve of New York, between July and September of this year, the debt reached $18.59 trillion, which is an increase of $197 billion in just three months.
What’s more, since the end of 2019, just before the beginning of the pandemic, the debt increased $4.4 trillion. This proves that families have been borrowing more money in the last few years.
Even though these figures are scary, researchers say that, in general, families’ finances continue to be ”quite strong”. However, they also point out that young people are starting to show more difficulties to pay their debts than older people.
Student loan
Another debt that reached its highest level was student loans. Americans owe $1.65 trillion in student loans, and the thing is that more people are not paying them back: almost 10% of that debt is now reported as being 90 days late or more. But why is this happening?
During the pandemic, student loan payments were paused for four years. While payments were paused, missed payments were not reported to credit bureaus. Now that payments have restarted, these missed or late payments are starting to appear all at once. This makes current numbers look especially high. Still, experts say that measuring the full problem is difficult because there was such a long period with no reporting.
Student loan delinquencies may be at a record high, but it’s reported that car loan and credit card delinquencies are not as high as they were in mid-2024. For example, the car loan debt didn’t increase; it stays the same at $1.66 trillion.
Credit card debt
The total of credit card debts increased $24 billion in the last trimester, and reached $1.23 trillion–the highest level recorded until now. This shows that people are using more of their credit cards, which increases the total household debt.
Is this situation worrying?
Analyst Ted Rossman talks about the so-called “K-shaped economy,” which means that some people are getting richer, and others are getting poorer. Even with these differences, he believes the overall economic picture for the country is still “fairly bright.”
To sum up
The rise in household debt shows that many American families are now dealing with more money stress than before because student loans are at their highest point ever, and credit card balances are also the largest they’ve ever been. Even though experts say the overall economy still seems steady, younger borrowers are having a harder time.
By understanding these changes, it becomes easier to see where people are struggling and why paying attention to household debt matters so much right now.