US Household Debt Nears Great Recession Levels Amidst Rising Wealth

Americans' debt levels are approaching those seen in the aftermath of the Great Recession, a trend that is raising concerns even as household wealth has increased and consumer spending remains robust, according to federal data released Friday.

The share of American families falling behind on loan payments rose to nearly 20% by the end of 2025, up from 12% in the previous period, according to the Federal Reserve’s Survey of Consumer Finances. The number of families two months or more delinquent on payments reached over 8%, an increase from 5% in 2022. The report stated that families were more likely to be behind on their financial obligations than at any point since the 2010 survey, which captured data from the period following the 2007-2009 Great Recession.

Despite the rise in debt delinquency, the Federal Reserve's survey, which covers the 2022 to 2025 period, also revealed a slight decrease in wealth disparity. Incomes for most Americans grew as the economy recovered from the COVID-19 pandemic.

The inflation-adjusted average net worth saw a 7% increase, reaching $1.24 million. However, the median net worth rose by only 2% to $215,900, with larger gains concentrated among older and more affluent Americans. The report noted that wealth gains were significantly slower compared to the 2019-2022 period, which saw a 37% increase, the largest in the survey's history.

Wealth accumulation continued to favor higher earners, with the median wealth for families in the top 10% of income earners increasing by 31%, while it decreased for the bottom 40%. Older Americans, aged 75 and above, experienced a 37% surge in wealth, while those under 35 saw a 23% decrease. This disparity is likely influenced by older individuals benefiting from stock market gains.

These economic conditions may contribute to younger Americans taking longer to achieve financial milestones, such as purchasing their first homes. Consumer sentiment has also reached historically low levels, with persistent inflation contributing to public frustration, according to the University of Michigan.

Consumer spending has remained resilient, with U.S. household spending increasing by 6.1% in the 12 months leading up to August. This rise is attributed to both higher prices and an increased volume of purchases, according to the Department of Commerce.

However, the increase in consumer spending is accompanied by a rise in consumer debt. A Deloitte survey indicated that Gen Z individuals are accumulating credit card interest, facing a competitive entry-level job market while also engaging in early stock market investments.

The median debt payment as a share of income rose by 2 percentage points to 15.4% between 2022 and 2025, according to the Fed survey. The overall debt-to-income ratio reached 94.9%, up from 89.4% in 2022. A notable 8.6% of families reported debt payments exceeding 40% of their income, an increase from 6.5% in 2022 and the highest level recorded since 2013.