Consumer debt looks balanced but not student loans

November 5, 2025

During the third quarter, nominal household debt rose 1.1% quarter-over-quarter to a total of $18.6 trillion. That's from the Federal Reserve Bank of New York’s Household Debt and Credit report. Consumers aged 18-59 took on more debt; those aged 60 and over reduced their debt.

Delinquencies of any duration inched up to 4.5% from 4.4% in the second quarter. That's just below 2020. The relative stability shows that consumer balance sheets were generally healthy prior to the shutdown.

Seriously delinquent (90 days or more) student loans fell to 9.4% of total outstanding student loan balances in the third quarter from 10.2% in the second quarter. They were 0.5% in the fourth quarter of last year, before the end of the pandemic-era moratorium on student loan repayment.

Transitions into serious delinquency rose to 14.3% in the third quarter compared to 12.9% in the second, 8% in the first and 0.8% in the fourth quarter of last year. That is the fastest transition rate into serious delinquency since the data have been collected, going back to 2000. It means more borrowers are moving on from early-stage delinquency without making any payments.

In late October, the Department of Education agreed to resume student loan forgiveness for eligible borrowers in two income-driven repayment plans. That marked a reversal of previous policy. There is still a backlog of over one million borrowers seeking to access an income-linked repayment plan.

Both financial weakness and bureaucratic issues contribute to the stress in student loans. Many borrowers have moved and are unaware payments have resumed. Some receive emails from an unknown company asking them to make payments, which feels like phishing.

More delinquent student loans will dampen credit demand and consumption, especially among Gen Z, Millennial and Gen X borrowers. That is contributing to the stress in the housing sector where the age of the average first-time buyer is climbing.

Mortgage balances rose 1.1%, a touch above the 1% increase in the second quarter. New mortgage originations increased by $512 billion, the largest increase since 2022. Mortgage rates have fallen compared to the start of this year, which has boosted demand despite low affordability.

New mortgage delinquencies ticked down to 3.6% from 3.7% over the previous two quarters. Seriously delinquent mortgage loans flattened out at 0.8%.

Credit card debt rose by 2% in the third quarter, slightly below the 2.3% increase in the second quarter. Like mortgages, credit card delinquencies were largely stable. New, 30-day delinquencies on credit cards rose to 8.8% from 8.6%; serious delinquencies edged up to 12.4% from 12.3%.

Older borrowers waded further into debt, transitioning to serious delinquency for credit cards. The rate increased to 5.5% from 5.1% among 60–69-year-olds; it rose to 6% from 5.7% among those aged 70 or above. Those are the largest increases since 2011 during the aftermath of the Great Financial Crisis. Though baby boomers hold the majority of wealth in the United States, there are large disparities within their generation. Many seniors are struggling financially.

Payroll gains weakened in July and August, the last two months for which we have government data. Disposable personal incomes, adjusted for inflation, eked out small gains over those two months.

This week's senior Loan Officer Opinion Survey (SLOOS) by the Federal Reserve found that banks approved credit card applications for super-prime and prime borrowers more than subprime borrowers. That reflects the increasing bifurcation among consumers.

Auto debt came in flat in the third quarter. That partially reflects the fact that many autos are increasingly purchased with cash.

New delinquencies on auto loans fell to 7.8% from 8%; new, 90-day delinquencies were flat at 5% for the third straight quarter. Auto loan originations fell the most for those with credit scores below 620. Subprime vehicle loan delinquencies have risen in recent quarters.

Home equity lines of credit (HELOC) balances increased by $11 billion. That marks the fourteenth straight quarter of gains. HELOCs are allowing some homeowners to access record levels of equity.

New HELOC delinquencies ticked down to 2.2% from 2.4% but transitions into serious delinquency edged higher to 1.3% from 1.2%. That is the highest level since 2014.

The number of new foreclosures and bankruptcies moved higher in the third quarter. Both remain well below pre-pandemic averages.