The combined debt of U.S. Households reached a record $18.7 trillion in the fourth quarter of 2025, equaling China’s annual GDP, according to data released by the Federal Reserve Bank of New York. This figure represents a 47% increase from the $12.68 trillion owed in the third quarter of 2008, just as the financial crisis triggered by Lehman Brothers’ collapse began to unfold.
While mortgages still constitute the largest portion of household debt, non-housing loans – including student loans and auto loans – are rapidly gaining prominence. In 2008, mortgages accounted for 79% of all household debt; now, that share has fallen to 72%. This shift is occurring alongside troubling signs of increasing delinquency rates and financial stress, particularly among the most vulnerable segments of the population.
A report from the Levy Institute indicates that the bottom 20% of income earners now have a debt-to-income ratio approaching 120%, meaning their outstanding debt exceeds their disposable income. This reflects a severe strain on their ability to consume and save. Across all income groups, debt levels now exceed 80% of income, a significant increase from 1995 when all wealth brackets hovered around 40%, according to research published in Economic Dynamics. The study found that debt growth has outpaced income growth threefold over the last half-century.
The overall delinquency rate reached 4.8% of outstanding debt in the final quarter of 2025, the highest level since 2017, the New York Fed reported. A concerning trend is the rise in “serious delinquencies” – those exceeding 90 days past due – which now comprise 3.3% of the total. These are considered highly unlikely to be recovered.
The surge in delinquencies is not primarily driven by mortgages, which remain relatively stable. Instead, student loans and auto loans are leading the increase. Approximately 16% of student loans are more than 90 days delinquent, while 7% of credit card debt falls into the same category. Student loan defaults have spiked following the expiration of pandemic-era forbearance measures implemented under the previous administration.
Auto loan delinquencies are also climbing, reaching 3% the highest level since 2009. Subprime auto loans – those issued to borrowers with lower credit scores – are particularly problematic, with a delinquency rate of 6.74% at the conclude of 2025, a record high according to Fitch Ratings. The recent bankruptcy of Tricolor Holdings, a company specializing in financing used car purchases for high-risk borrowers, underscores the vulnerability of this sector. Decreasing auto sales in recent months are also being watched as a potential indicator of economic slowdown.
Despite these warning signs, mortgage delinquencies remain comparatively low, though they are showing early signs of deterioration. The rate of high-risk mortgage delinquency rose from 1.09% in the fourth quarter of 2024 to 1.38% in the fourth quarter of 2025, concentrated in lower-income areas and regions experiencing declining home prices. Outstanding mortgage debt totals $13.2 trillion.
The potential for rising delinquencies to trigger a broader economic downturn is a growing concern. Consumer spending accounts for approximately 70% of U.S. GDP, according to the Bureau of Labor Statistics and a significant reduction in spending could have cascading effects. However, the concentration of financial distress among lower-income households, rather than across broader segments of the population, may mitigate the risk of a widespread crisis.
Recent data from Moody’s Analytics shows that the wealthiest 10% of Americans account for 49.2% of total consumption, a figure that has increased significantly from 35% in 1992. This suggests that the economy is increasingly reliant on the spending of high-income earners. Conversely, the bottom 20% of the population contributes only 8-10% of total consumption.
Former President Trump has publicly called on the Federal Reserve to lower interest rates to alleviate the debt burden on households, arguing that his policies have not yet fully addressed inflation. Fidelity strategist Donatella Principe noted in January that Trump’s approval ratings are declining, largely due to public dissatisfaction with the perceived lack of progress on inflation.
Another concern is the potential for a shock to financial markets. Experts like Rebecca Christie of the Bruegel Institute point to the increasing interconnectedness between the U.S. Economy and the financial sector, raising the possibility that a market downturn could spill over into the real economy. The Wall Street Journal has reported that corporate profits now represent 11.7% of U.S. GDP, double the share in 1980, while wages have declined as a percentage of GDP, increasing the economy’s sensitivity to market fluctuations.
The Federal Reserve Bank of New York continues to monitor the situation, publishing quarterly updates on household debt and delinquency rates. No immediate policy response has been announced, and the central bank has not commented on the former president’s calls for interest rate cuts.
