At the start of the year, many Americans slowed down on credit card and auto debt, yet they began missing student loan payments, which are now showing up on credit reports. New data highlights a rising financial concern.
Household debt grew from $167 billion to $18.2 trillion in the first quarter, according to a recent report from the Federal Reserve Bank of New York. Meanwhile, credit card balances dropped by $29 billion, and car loan debts saw a decline of $13 billion since the last quarter.
On the contrary, student loan balances hit an unprecedented $1.63 trillion, with delinquencies surging as these overdue loans are affecting credit reports for the first time in five years.
In early 2025, roughly 8% of student loan balances were classified as seriously delinquent—over 90 days overdue—up from under 1% a year prior, but roughly in line with pre-pandemic statistics.
A New York Fed analysis revealed that nearly 24% of borrowers behind on their payments were struggling with student loans.
These missed payments have already negatively impacted the credit scores of millions of Americans, raising borrowing costs and complicating loan approvals.
According to the New York Fed, over 2.2 million new borrowers have seen their credit scores drop by more than 100 points, with at least a million experiencing declines of 150 points or more.
The most significant rates of student loan delinquency occurred in Southern states, particularly Mississippi and Alabama.
This month, the education department resumed collections, which may result in some borrowers facing garnished wages, tax refunds, and reduced Social Security payments.
Don’t overlook the situation with credit cards and car loans
The usual post-holiday decline in credit card debt may not indicate that Americans have made headway on underlying debt issues. It’s likely more seasonal than a sign of improving financial health.
“A minor decrease shouldn’t confuse anyone,” remarked Ted Rothman, a senior analyst at Bankrate. “Credit card debts and interest rates are still near all-time highs, and total consumer debt has reached $18.2 trillion.”
Perhaps more worrisome is that 12.3% of credit card debt is now over 90 days overdue—the highest since 2011.
Rothman pointed out that credit card balances are currently 54% higher than they were four years ago, and car loan balances have risen by 19%.
Currently, Americans owe $1.64 trillion in car loans, making it the second-largest consumer debt category after mortgages. Concerns about delayed payments and a potential auto loan bubble have arisen due to rising interest rates, but recent analyses from the New York Fed indicate that things are manageable.
Daniel Manglum, an economist at the New York Fed, noted that the transition rates to serious delinquency for car loans have stabilized. The recent quarterly decline in car loan balances marks the second consecutive decrease since 2011.
Still, it’s uncertain if this decline is due to tax changes, as a surge in car buying might increase debt again in the following quarter.
