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Younger Borrowers Show Signs of Financial Stress as Debt Levels Climb

Nov 05, 2025 11:01:00 -0500 by Megan Leonhardt | #Economics

Higher expenses and a weakening job market have weighed on Americans’ finances. (Dreamstime)

Key Points

The overall number of Americans making late payments on their credit cards and other bills has only inched up in recent months, but younger consumers, even some in their 30s, are showing signs of worsening financial stress.

While consumer sentiment has slipped in recent months, as higher expenses and weak labor conditions have weighed heavily on Americans, there hasn’t been a corresponding spike in signs that people are running into financial trouble. Aggregate delinquency rates, for example, stabilized a bit in the third quarter, according to the Federal Reserve Bank of New York’s latest quarterly report on household debt and credit.

Overall delinquency rates, while still elevated in the third quarter, only rose slightly to 4.5% as of the end of September. That compares to the 4.4% in the second quarter.

That trend of delinquencies largely holding steady was also reflected in data from Equifax. It found that 1.56% of total U.S. consumer debt was in some type of delinquency at the end of September, a slight increase from the 1.52% rate at the end of the second quarter.

The types of accounts shifting into early delinquency—30 days past due or less—were mixed, researchers at the New York Fed found. Early delinquencies on credit-card debt and student loans increased.

That said, one of the key measures of consumer financial health, the number of accounts shifting into serious delinquency—more than 90 days past due—ticked up to 5.33% in the third quarter, from 5.26% as of June. The increase was broad-based, with pretty much all types of debt showing a rise last quarter, although mortgages saw a slight decline.

NY Fed researchers pointed out that when broken down by age, younger Americans with the strongest ties to the labor market and without access to housing equity are showing signs of financial stress. About 5% of the debt held by Americans aged 18-19 moved into serious delinquency during the third quarter. And even consumers aged 30-39 experienced an elevated 3.7% rate of new serious delinquencies last quarter.

That is likely due, in part, to the fact that the median age for the first- time home buyer is 40, according to the National Association of Realtors. That means many Americans in their 20s and 30s aren’t able to draw on the full wealth effects of strong stock market gains and real estate equity.

Overall total household debt increased modestly by 1%, or $197 billion, to $18.59 trillion during the third quarter, the New York Fed said. Most of that debt is mortgage balances, which climbed by $137 billion in the third quarter and totaled $13.07 trillion at the end of September, according to the bank.

But credit card debt stood at $1.23 trillion at the end of the quarter, up by about $24 billion. That said, the climb in balances during the third quarter was slower than the second quarter’s $27 billion gain.

Auto loan balances held steady at $1.66 trillion, while home equity line of credit balances grew by $11 billion to hit $422 billion at the end of the third quarter.

“Household debt balances are growing at a moderate pace, with delinquency rates stabilizing,” Donghoon Lee, economic research advisor at the New York Fed, said in a statement Wednesday. “The relatively low mortgage delinquency rates reflect the housing market’s resilience, driven by ample home equity and tight underwriting standards.”

Write to Megan Leonhardt at megan.leonhardt@barrons.com