Fed: U.S. consumer debt defaults soar to highest level in nearly a decade

# By Bao Yilong, He Hao

A report from the Federal Reserve Bank of New York showed that the share of U.S. household debt that was delinquent rose to **4.8%** in the fourth quarter of last year, the highest level since 2017, driven mainly by rising defaults among low-income and young borrowers. The increase in delinquencies was led primarily by mortgage late payments.

The latest **Quarterly Report on Household Debt and Credit** by the New York Fed indicates that U.S. consumer debt delinquencies are worsening significantly.

On Tuesday, the New York Fed released its Quarterly Report on Household Debt and Credit, which showed that the share of U.S. household debt in delinquency climbed to 4.8% in Q4 2025, the highest since 2017.

Total U.S. household debt rose by **$191 billion** to a record **$18.78 trillion** in the fourth quarter. The delinquency rate increased by 0.3 percentage points from the previous quarter, driven by higher default rates among low-income and young borrowers.

### Student loan distress particularly severe

The student loan segment was especially concerning: **16.3% of student loan debt was delinquent** in the fourth quarter, marking the largest increase since records began in 2004.

Wilbert van der Klaauw, economic research advisor at the New York Fed, noted that while mortgage delinquency rates are near historical norms, the deterioration is concentrated in low-income areas and regions where home prices have fallen. The unemployment rate for workers aged 16–24 reached **10.4%** in December, close to levels seen during the peak pandemic period in 2021.

### Student loan default wave surges

Student loan delinquencies deteriorated the most. The wave of defaults fully erupted after the Biden administration’s student loan payment pause expired over the past year.

In the fourth quarter, 16.3% of student loan debt became delinquent, the sharpest rise in data going back to 2004. Serious default rates also jumped, with borrowers aged 50 and above accounting for a large share of defaults.

This pattern reflects long‑built‑up student debt burdens quickly emerging after repayment protections ended. The trend coincides with persistently high unemployment for some groups, highlighting the **K‑shaped recovery** in the U.S. economy.

As of December, the unemployment rate for young workers aged 16–24 stood at 10.4%, near pandemic-era highs, partly driven by disruption from artificial intelligence technologies.

Researchers at the New York Fed found that mortgage delinquencies are particularly elevated in low‑income zip codes and in areas with falling home prices. Although the overall default rate is near pre‑pandemic averages, the distribution is highly uneven.

### Household debt hits record high, credit expansion continues

U.S. household debt continued to expand in Q4 2025, having increased by a total of **$4.6 trillion** since before the pandemic in late 2019.

- Mortgage balances rose by **$98 billion** to **$13.17 trillion**.

- Home Equity Lines of Credit (HELOC) balances increased by **$12 billion**, rising for the 15th straight quarter to **$433 billion** — **$116 billion** above the Q1 2022 low.

Credit card balances increased by **$44 billion** to **$1.28 trillion**, up 5.5% year‑over‑year.

Student loan debt rose by **$11 billion** to **$1.66 trillion**.

Auto loan balances increased by **$12 billion** to **$1.66 trillion**.

New lending remained solid:

- Mortgage origination volumes reached **$524 billion**, up from $512 billion in Q3 and the highest since 2022.

- New auto loans and leases totaled **$181 billion**, slightly below Q3’s $184 billion.

- Total credit card limits increased by **$95 billion**, or 1.6%.

---

Source: Wallstreetcn

**Risk Warning & Disclaimer**

The market is risky and investments require caution. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial situations or needs of individual users. Investors should carefully consider whether any views, opinions or conclusions in this article are suitable for their particular circumstances. Any investment decisions based on this article are made at one’s own risk.