Household debt is overwhelming people in the U.S. Here’s how you can respond

One Woman’s Journey Through Financial Turbulence

Jaelyn Singleton, a 27-year-old social worker from Sacramento and single mother, seemed to be on the right track. She completed her college education, advanced to a management position before many of her peers had graduated, and juggled multiple roles in behavioral health to support herself and her young daughter.

But within a year, her stable life began to unravel.

After returning from maternity leave in late 2024, Singleton lost her job. She relied on unemployment benefits and began consulting, but by early 2025, instability in federal grant funding caused her consulting income to drop by half. To keep up, she accepted a lower-paying mental health position. A nannying job that brought in $3,000 a month also disappeared unexpectedly.

By May 2025, Singleton had moved back into her childhood home. Soon after, a car accident wiped out her severance pay and forced her into a new six-year auto loan. Now, with $50,000 in student loans, a $25,000 car loan, and about $5,000 in credit card debt—totaling $80,000—she and her mother are managing on a combined household income of roughly $175,000.

"I had to apply for food assistance for the first time ever," Singleton shared. "It was a humbling experience."

She finds that her money simply doesn’t go as far as it used to. "Budgeting is tough when prices are so unpredictable. When emergencies arise and you can’t cover them, debt piles up—that’s exactly what happened to me."

Her experience is becoming increasingly common across the country.

Record-Breaking Household Debt and Rising Delinquencies

According to the Federal Reserve Bank of New York’s latest report, total U.S. household debt soared to a new high of $18.8 trillion in the final quarter of 2025, a $4.6 trillion increase since the end of 2019, before the pandemic recession.

• Mortgage debt, which makes up the largest portion, reached nearly $13.6 trillion in Q4 2025.
• Non-mortgage debt—including student loans, credit cards, auto, and personal loans—rose to $5.17 trillion, a 1.6% increase from the previous quarter.
• Credit card balances hit $1.28 trillion, up 5.5% from the previous year, the highest since tracking began in 1999.

The average annual percentage rate (APR) for U.S. credit cards is now 23.77%. High interest rates make it even more challenging for those carrying balances to escape debt.

Delinquencies Are on the Rise

Even more concerning than the growing balances is the sharp increase in loan delinquencies.

By the end of 2025, 4.8% of all outstanding debt was delinquent, up 0.3% from the previous quarter.

Research from the St. Louis Fed in 2025 revealed that lower-income households are feeling the most pressure, but rising delinquencies are affecting all income levels. In the lowest-income ZIP codes, delinquency rates jumped by 53% to 22.8% by early 2025, up from 14.9% in late 2022. Even the wealthiest ZIP codes saw a 73% increase, reaching 8.3%.

Student loan debt is also climbing, with balances reaching $1.66 trillion in Q4 2025. Alarmingly, 9.6% of student loan borrowers were at least 90 days overdue as of late 2025, largely due to the resumption of federal student loan repayments in 2025.

The Century Foundation reports that nearly 9 million borrowers have defaulted—the highest number ever recorded. With the recent elimination of the Saving on a Valuable Education (SAVE) plan, another 17 million could face the same fate.

Mortgage Delinquencies Raise Red Flags

Nowhere is the financial strain more apparent than in the housing sector.

The Mortgage Bankers Association’s latest survey found that delinquencies increased across all major mortgage types in Q4 2025, with FHA loans—often used by first-time and lower-income buyers—seeing the steepest rise.

The FHA delinquency rate climbed to 11.52%, up 74 basis points from the previous quarter and about 50 basis points year-over-year, according to Marina Walsh of the MBA. Comparable rates haven’t been seen since around 2012, excluding the unusual COVID-19 period.

"If you exclude the pandemic, you have to look back to 2012 to find similar levels," Walsh explained. "That’s where the concern lies."

The main issue isn’t just the overall delinquency rate, but the increase in late-stage delinquencies—loans that are 90 to 120 days overdue, which often precede foreclosure. Walsh noted that while early-stage delinquencies have remained steady, the rise in late-stage cases is worrisome. These loans require intervention, such as loss mitigation or trial payment plans, and it may take several quarters to see how effective these measures are.

Walsh emphasized that this stress is not widespread across the country but is concentrated in regions with higher unemployment and job losses.

Odeta Kushi, deputy chief economist at First American, highlighted that recent FHA borrowers are particularly at risk. Many entered homeownership with minimal down payments and little financial buffer, making them more vulnerable—especially those who bought at peak prices and missed out on earlier home equity gains.

Kushi pointed out that foreclosure usually requires both a loss of income and a lack of equity. While national foreclosure rates remain contained, “the data show isolated areas of stress, not a nationwide housing crisis.”

In January 2026, 40,534 homes were in foreclosure, a 32% increase from the previous year. Foreclosure starts rose by 26%, and completed foreclosures jumped 59% year-over-year, according to ATTOM.

Understanding the Debt Trap

Financial advisors say the rise in debt is as much about behavior as it is about numbers.

"Earning more doesn’t guarantee wealth," said John Walters, a certified financial planner. "Debt can feel overwhelming for anyone."

Walters and other experts agree that the first step to tackling debt is awareness: reviewing all income sources, accounts, recurring charges, and monthly statements to get a clear picture of your finances. Without this, old habits are likely to persist.

When it comes to repayment, Vincent Birardi, a senior wealth advisor, describes two main strategies:

• Avalanche Method: Focuses on paying off debts with the highest interest rates first, then moving to lower-rate accounts.
• Snowball Method: Pays off the smallest balances first to build momentum and motivation.

Birardi generally recommends the avalanche approach for its cost-effectiveness, but acknowledges that the snowball method can help those who need quick wins to stay motivated.

Both advisors stress the importance of having an emergency fund before aggressively paying down debt. While three to six months of expenses is ideal, even a modest cushion can help avoid relying on credit cards when unexpected costs arise.

For those with significant high-interest credit card debt, consolidating into a lower-rate product—such as a personal loan, balance transfer card, or home equity line—can make repayment more manageable. However, Birardi warns that consolidation should not be seen as a final solution.

Looking Ahead: The Broader Economic Impact

Despite rising household debt, economists caution against predicting a systemic crisis. Walsh notes that forecasts through 2028 still anticipate above-average GDP growth, and serious mortgage delinquencies remain a small share of the market compared to historical norms.

However, the relative strength of the stock market—often cited as a success for the Trump administration—does not reflect the financial stress many Americans are experiencing.

With consumer spending making up about 70% of the U.S. GDP, any significant reduction in spending by financially strained households could have broader economic repercussions, though these effects may take time to appear.

For Singleton and countless others, the big-picture economics are less important than finding ways to cope day-to-day. She’s adopted creative strategies to manage her budget, such as starting a community vegetable garden to cut grocery costs and using a mental trick at the checkout—adding $1 to every produce item and $2 to each packaged good—to avoid surprises at the register.

Singleton has also launched a community bartering network where people trade services and skills, helping her realize that many others are also working through their own debt challenges.

"I’ve found a stronger sense of community just by seeking it out," Singleton said. "There are people who seem to be doing well but are actually carrying even more debt than I am."

Instead of giving in to despair, Singleton is determined to create new income streams and a brighter future for her family. Despite her financial setbacks, she remains resolute:

"I won’t let this debt define me," she said. "If I believe I’ll never escape it, I’ll stay stuck. But I get to choose how I move forward."