Household Debt Hits Record High as Student Loan Delinquencies Rise

Americans are deeper in debt than ever before. The Federal Reserve Bank of New York’s most recent snapshot revealed household debt increased by $167 billion in early 2025 and reached an all-time high of $18.2 trillion.

Although a number of categories decreased — credit card debt and car loans among them — mortgage balances increased significantly, and a flood of recently published student loan delinquencies tipped the scales.

The one that really stood out was student loans. After approaching five years of pandemic-related forbearance, late payments of federal loans reemerged on credit reports. And the consequence? A jump from under 1% to 7.74% in serious delinquency in a single period. That is not a steep trajectory — it is a wall.

Now that the window is open again for reporting these student loan debts, they have once again entered lenders’ databases and consumers’ credit scores.

Credit card balances and car loans remained stable. Both fell by $29 billion and $13 billion, respectively — a possible sign of restrained spending or lenders becoming cautious. Don’t confuse that with starting anew.

Credit card balances remain at $1.18 trillion, and 7.04% of credit card accounts were entering into serious delinquency — defined as being late by 90 days or more.

Home loans fueled a significant amount of the debt growth. Housing debt increased by $199 billion to $12.8 trillion, and HELOCs rose for the 12th consecutive quarter, up to $402 billion. Even originations rose to $426 billion.

Cracks in the ability of borrows to stay current on their debt are beginning to show. Delinquency on mortgage lending increased from 0.92% to 1.22% over the last year. HELOCs also edged up from 0.52% to 0.88%. For certain homeowners, increases in value may mask mounting repayment pressures.

In all debt categories combined, extreme delinquencies (90 days or more in arrears) reached 2.45% in Q1 2025 — a gain from 1.54% last year. But most of that growth is due to the adjustment in student loan reporting, not a broad breakdown. Credit card and car loan delinquencies were fairly steady.

Much of the growth in debt can be attributed to student loan reporting changes.

Credit card and auto-loan defaults saw settlement last year, as estimated by a New York Fed research economist, but reporting changes in student loans distorted the figures. In short, the system is still digesting the backlog.

Automobile financing stood at $1.64 trillion as of the close of the quarter. In the second consecutive quarter that the balances declined, the rate of delinquency rose from 2.78% to 2.94%. With such unfavorable interest and expensive vehicles in the picture, even a modest increase in defaults has the potential to spread.

If the sudden surge in reported delinquency of student loans is a one-time shock, the system should adjust. But if consumers cannot make up lost ground, the surge could be a signal of worse times ahead. In either case, we’re entering murkier waters.

Credit limits increased $77 billion in Q1, a 1.5% gain. That’s a possible indicator of increased faith in borrowers or improved credit records. But with 4.3% of all household debt in some state of delinquency, lenders are playing a cautious game. Higher limits provide consumers with room to breathe, but with more space to fall.

In the next few quarters, as families accommodate resumed student loan payments along with growing living expenses, lenders and policymakers will monitor for signals of stability or strain.

“Transition rates into serious delinquency have leveled off for credit card and auto loans over the past year,” said Daniel Mangrum, a research economist at the New York Fed. “However, the first batch of past due student loans was reported in the first quarter of 2025, resulting in a large jump in seriously delinquent borrowers.”

That surge may represent a temporary correction, or it could be a warning of financial instability ahead.