US Consumer Delinquencies Hit 10-Year High as Credit Card and Student Loan Defaults Surge
Delinquency rates on loans ranging from mortgages to credit cards climbed to 4.8% of all outstanding U.S. household debt in the fourth quarter, marking the highest level in nearly a decade. The increase, driven largely by higher defaults among low-income and younger borrowers, signals growing financial strain even as overall debt levels remain manageable.
Data From the Federal Reserve Bank of New York Highlights Growing Divide
While the overall share of loans in default is near pre-pandemic norms, the data points to an increasingly bifurcated economy. The latest Quarterly Report on Household Debt and Credit shows that financial stress is becoming more concentrated among vulnerable groups, particularly those with lower incomes.
Low-Income Borrowers Face the Brunt of Rising Defaults
The rise in delinquencies has been especially pronounced in lower-income zip codes. Researchers found that borrowers in these areas are struggling more with mortgage payments, reinforcing concerns that economic pressures are not being felt evenly across the population.
Mortgage Delinquencies Climb Back to Pre-Pandemic Levels
Mortgage delinquencies, which had remained historically low in the years following the pandemic, are now steadily increasing. Although still within normal historical ranges, the number of loans becoming at least 30 days overdue; and those entering serious delinquency; rose in the fourth quarter.
“As household debt levels grow modestly, mortgage delinquencies continue to increase,” said Wilbert van der Klaauw, an economic research advisor at the New York Fed, said in a press release accompanying the figures. “Delinquency rates for mortgages are near historically normal levels, but the deterioration is concentrated in lower-income areas and in areas with declining home prices.”
Credit-Card Debt Surges During Holiday Spending Season
Credit-card balances rose sharply in the fourth quarter, increasing by $44 billion to reach $1.3 trillion by the end of 2025. While seasonal spending typically drives such increases, the ability of households to pay down these balances remains uncertain amid slower wage and job growth.
The share of credit-card loans at least 90 days delinquent jumped to 12.7%, the highest level since early 2011.
Auto Loan Delinquencies Approach Record Highs
Auto loans also showed signs of stress, with serious delinquency rates rising to 5.2%, just below the peak reached in 2010. This trend further underscores the mounting pressure on consumers managing multiple forms of debt.
Student-Loan Defaults Spike After Payment Pause Ends
Student-loan delinquencies surged following the end of pandemic-era payment pauses. About 16.3% of student-loan debt became delinquent in the fourth quarter; the largest increase on record dating back to 2004.
Additionally, roughly one million borrowers who were more than 120 days past due had their loans transferred to the Education Department’s collections unit during the quarter.
Household Debt Continues to Grow at a Steady Pace
Overall household debt rose by 1%, or $191 billion, to reach $18.8 trillion in the fourth quarter. Mortgage balances accounted for the largest share, increasing by $98 billion to a total of $13.2 trillion, while non-housing debt; including auto loans and student loans; rose by $81 billion.
Despite the growth, the pace of debt accumulation has remained relatively stable over the past two years.
Young Workers Struggle Amid Elevated Unemployment
The financial difficulties faced by younger borrowers are closely tied to labor market conditions. The unemployment rate for workers aged 16 to 24 stood at 10.4% in December, near the highest levels seen since the pandemic-era peak in 2021.
This weak job environment is making it harder for younger Americans to stay current on their loan obligations.
A K-Shaped Economy Becomes More Apparent
The divergence between higher- and lower-income households continues to widen. Delinquency rates remain low in the highest-income zip codes, while rising sharply in areas experiencing job losses or declining economic conditions.
This pattern reinforces the idea of a “K-shaped” economy, where financial outcomes differ dramatically depending on income level.
Potential Relief From Tax Refunds
Some economists expect larger tax refunds this year, which could help households pay down debt accumulated during the holiday season. However, that relief may be temporary if wage growth and employment conditions do not improve.
Why Rising Delinquencies Could Impact Consumer Spending
Although current delinquency levels do not yet signal a full-blown economic crisis, they present a growing risk. If financial strain continues to build; especially among lower-income households; it could weigh on consumer spending, a key driver of the U.S. economy.
With debt levels rising and repayment challenges mounting, the trajectory of the labor market may ultimately determine whether these warning signs intensify or stabilize in the months ahead.
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Zillow Identifies 7 U.S. Cities Where Buyers Now Hold the Most Leverage
The real estate landscape is shifting as we enter 2026, offering new opportunities for those who have been waiting on the sidelines. According to Zillow’s latest analysis, Indianapolis has emerged as the most buyer-friendly housing market in the United States. This ranking highlights a significant trend: while coastal hubs remain financially out of reach for many, “opportunity metros” are providing home shoppers with the breathing room and affordability they need to secure long-term value.
Zillow Identifies 7 U.S. Cities Where Buyers Now Hold the Most Leverage
Ray Dalio Warns World Is ‘On the Brink’ of a Capital War; Says Gold Is the Safest Money
Billionaire hedge fund manager Ray Dalio is warning that global tensions are shifting beyond traditional geopolitical conflicts and entering a new era where money itself becomes a weapon. The Bridgewater Associates founder said the world is not just facing a cold war or trade war, but a looming “capital war” in which nations could use financial leverage to pressure rivals. Dalio made the remarks during an interview at the World Governments Summit in Dubai, cautioning that escalating political and economic tensions could disrupt global markets and investment flows. Dalio described a scenario where countries could attack each other by controlling the flow of capital, particularly through debt ownership and financial sanctions. Such financial warfare, he warned, could create severe market instability and alter how investors and governments manage their money.
Ray Dalio Warns World Is ‘On the Brink’ of a Capital War; Says Gold Is the Safest Money
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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.
