Car Loan Delinquencies Hit 15-Year High as Student-Loan Payments Return
More Americans are falling behind on their car loans than at any point in the last 15 years, a troubling milestone that underscores how fragile household finances have become in 2025.
Economists say the long-delayed return of student-loan payments is a key; and often overlooked driver behind the surge in auto delinquencies now rippling through the economy.
Auto Loan Delinquencies Hit a 15-Year High
Federal Reserve economists reported that the auto loan delinquency rate climbed to 3.88% in the third quarter, up from 3.83% in the previous quarter.
While that increase may look modest on paper, it marks the highest level since the year after the Great Recession and roughly 1.5 times higher than mid-2021 levels during the lockdown.
The Real Numbers Are Likely Worse Than Reported
The Fed’s data only captures balances at least 30 days past due and excludes “seriously derogatory” loans that have already been charged off. If those closed or written-off accounts were included, economists say the true level of stress in the auto-loan market would look even more alarming.
A Slow-Burning Sign of Consumer Distress
Experts view the steady rise in delinquencies as a sign that households are being pushed to their financial limits rather than collapsing all at once.
Unlike sudden shocks, this gradual deterioration suggests consumers are juggling bills for as long as possible before finally missing payments.
High Car Prices Still Haunt Borrowers
Many of today’s struggling borrowers bought cars during the lockdowns, when supply-chain disruptions sent both new and used vehicle prices soaring.
Those inflated prices translated into larger loans, higher monthly payments, and less room for error once broader financial pressures returned.
Subprime Borrowers Feel the Pain First
The stress is especially concentrated among subprime borrowers, typically defined as those with credit scores below 620. These borrowers tend to have lower incomes, less savings, and far less insulation against inflation; making them more vulnerable as costs rise across the board.
The Student-Loan Connection No One Can Ignore
Subprime borrowers are also more likely to carry student-loan debt. As federal student-loan payments resumed, many borrowers who had managed comfortably during the pause suddenly found their budgets stretched beyond capacity; with auto loans becoming one of the first casualties.
How the Payment Pause Inflated Credit Scores
When student-loan payments were suspended in March 2020, borrowers’ accounts were reported as current with $0 payments.
That artificially boosted credit scores, causing many borrowers to be labeled as “prime” even though their underlying finances hadn’t materially improved. Student loan collection was paused for around five years.
President Biden provided a 1-year on-ramp period during which borrowers were not reported as delinquent after missing payments.
Bigger Loans, Fueled by Temporary Cash Flow
At the same time, the pause freed up an average of $138 per month for borrowers, according to a National Bureau of Economic Research working paper.
Rather than paying down existing debt, many used that extra cash to take on new obligations; including larger auto loans they may never have qualified for under normal conditions.
Payments Resume, Credit Scores Slide Back Down
Once missed student-loan payments began appearing on credit reports in early 2025, those inflated credit scores started to fall. Borrowers who once looked prime now appear subprime, helping explain why subprime auto-loan delinquencies remain elevated and continue to rise.
A Shifting Payment Hierarchy Under Pressure
Traditionally, borrowers prioritize mortgages and car loans over student loans when money gets tight. But involuntary student-loan collections are forcing painful trade-offs.
Surveys show sharp increases in both credit-card and auto delinquencies among borrowers already struggling with federal student-loan payments.
The Return of Student-Loan Bills Is Pushing Borrowers to the Brink
Economists say the issue isn’t that borrowers are suddenly irresponsible; it’s that they’re out of options. As credit tightens and mandatory payments pile up, even loans that were once considered top priority start slipping.
If auto-loan defaults eventually spike, experts warn, it could be a much louder signal that the U.S. economy is sliding toward recession.
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Social Security Crisis: New Plan Could Tax High Earners to Prevent 21% Benefit Cut
The United States is facing a fiscal double-whammy: a ballooning federal budget deficit and a Social Security trust fund racing toward depletion. With the Congressional Budget Office (CBO) releasing new numbers on potential fixes, one option is gaining significant attention: uncapping the Social Security payroll tax.
Social Security Crisis: New Plan Could Tax High Earners to Prevent 21% Benefit Cut
The $270,000 Retirement Trap: Vanguard Says You’re Planning for Health Care Costs All Wrong
Health care costs in retirement are consistently cited as the single greatest financial worry for pre-retirees and retirees. Experts, like those at the Employee Benefit Research Institute (EBRI), have quantified the savings needed for a 65-year-old couple at a daunting $270,000 to cover total health care premiums and out-of-pocket costs throughout retirement (excluding long-term care). However, new research from Vanguard, in partnership with Mercer Health & Benefits, suggests that focusing on this large, lifetime lump sum is not only overwhelming but also the wrong way to plan.
The $270,000 Retirement Trap: Vanguard Says You’re Planning for Health Care Costs All Wrong
Trump Signals Interest in Australia’s ‘Super’ Retirement System; A Mandatory 12% Employer Contribution Could Upend U.S. Savings
President Donald Trump sparked a national debate after saying the Australian retirement system is a “good plan” that has “worked out very well,” adding that the administration is “looking at it very seriously.” His comments raised the question: Could the U.S. pivot away from its aging retirement model and adopt components of Australia’s mandatory “superannuation” program?
Seniors Receiving Their COLA Notices This Week Are Shocked As the 2.8% Raise Already ‘Wiped Out’ by Rising Costs
Most older Americans say the much-anticipated 2.8% Social Security cost-of-living adjustment for 2026 is already falling short. As COLA letters land in mailboxes this week, a striking 77% of Americans age 50 and over tell AARP the increase doesn’t come close to matching real inflation; and experts warn that rising Medicare premiums could wipe out what little boost retirees are getting.
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John Dealbreuin came from a third world country to the US with only $1,000 not knowing anyone; guided by an immigrant dream. In 12 years, he achieved his retirement number.
He started Financial Freedom Countdown to help everyone think differently about their financial challenges and live their best lives. John resides in the San Francisco Bay Area enjoying nature trails and weight training.
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Personal Capital: This is a free tool John uses to track his net worth on a regular basis and as a retirement planner. It also alerts him wrt hidden fees and has a budget tracker included.
Platforms like Yieldstreet provide investment options in art, legal, real estate, structured notes, venture capital, etc. They also have fixed-income portfolios spread across multiple asset classes with a single investment with low minimums of $10,000.
