One in 12 American Families Now Spends More Than 40% of Income on Debt — a Level Not Seen in 13 Years
Americans borrowed about the same amount as three years ago, yet something shifted in their budgets that borrowing totals never reveal. Here is the hidden pressure that could hit consumer spending before late payments ever sound the alarm.
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Most American families paid more over the past three years to carry what they already owed. The Federal Reserve’s 2025 Survey of Consumer Finances shows that 8.6% of families now spend more than 40% of their income on debt payments, or about one family in 12.
That is up from 6.5% in 2022 and is the highest level since the 2013 survey.
The Center for Retirement Research at Boston College just highlighted the figure in an analysis of whether consumers are heading toward a spending slowdown. Its answer depends less on how many people owe money and more on how much of each paycheck their debts take.
Same Debt, Much Bigger Monthly Bill
The Fed found that the share of families holding any debt stayed at about 77% between 2022 and 2025. Median debt among borrowers barely moved, at $88,100. On paper, Americans borrowed about the same way they always had.
The cost of that debt went up. Over the survey period, the average 30-year mortgage rate rose from 4.2% to 6.7%. The average credit card rate rose from 14.6% to 21.4%. A family that bought a home, carried a card balance or refinanced after 2022 paid far more for the same dollars than a family that locked in earlier.
Auto loans moved the same way. Average new-vehicle loan rates rose from 4.9% to 7.7%. A household that replaced a car in 2024 took on a bigger monthly payment than it would have three years earlier, even for the same car.
How the Typical Borrower’s Burden Shifted
The 40% line picks out families in serious trouble. The median shows what happened to everyone else. Medians matter because a few extreme cases can pull an average up. If 10 families each spend 10% of income on debt and one spends 90%, the average rises sharply, but the median stays at 10%.
The median borrower now spends 15.4% of income on debt payments. That is up 2.0 percentage points from 2022 and back to its 2019 level. The typical borrower feels the pinch. A growing minority is close to breaking.
Here is the share of families above the 40% line in each survey:
- 2013: 8.2%
- 2016: 7.0%
- 2019: 7.4%
- 2022: 6.5%
- 2025: 8.6%
The mostly downward path after 2013 came from years of cheap credit and paying down debt after the financial crisis. One survey cycle erased almost all of that progress.
Higher incomes did not make up the difference. Real median family income rose 7% to $82,200, and median net worth edged up to $215,900. Those gains still could not stop higher borrowing costs from eating a bigger share of the budget for a growing group of households.
What 40% of a Paycheck Actually Looks Like
Take a household making $75,000 a year. At the 40% line, its debt payments come to $30,000 a year, or $2,500 a month.
That leaves $45,000 to pay taxes, groceries, utilities, insurance and healthcare. With so little room, one car repair can end up on a credit card, which makes next month’s ratio worse.
Middle Earners and Older Households Feel It Most
The Center for Retirement Research points to two groups as most exposed: middle-income working-age families and the poorest retirement-age households. Middle earners often carry a mortgage, a car loan and card balances at once, without the investment buffer that wealthier families have. The researchers note that households with substantial investment wealth have felt much less stress.
Retirees face a harder version of the same problem. A retiree paying a mortgage, car loan or card bill has few ways to making more when costs rise. Debt payments can wear down retirement security before healthcare costs or inflation even come into play.
Why Spending Could Crack Before Delinquencies Do
The researchers note that consumer spending makes up nearly 70% of U.S. economic activity. Families sending more of their income to lenders have less left for restaurants, travel and entertainment. Their buffer is also getting smaller. The personal saving rate fell to 4.1% in the third quarter of 2026, down from 5.3% in the first quarter, according to the Bureau of Economic Analysis.
So far, people are still paying their bills. The credit card delinquency rate at commercial banks fell to 2.85% from 2.95% in late 2025, and the researchers do not forecast a recession. They do warn that stock-market gains may be propping up spending by wealthier households, so a sharp market drop would add a second source of pressure.
Three Moves to Check Your Own Debt Load
- Calculate your ratio. Add up your required monthly payments on mortgage, auto, student and card debt, then divide by your gross monthly income. Compare the result with the 15.4% median and the 40% danger line.
- Pay off the most expensive debt first. The average card APR was 21.2% as of August 2026. Every dollar of balance you pay off avoids interest at that rate.
- Clear consumer debt before you retire. If you plan to retire within a decade, set a goal to pay off car and card balances while you still have a paycheck.
Overall, a steady share of Americans borrow, but a growing portion of their income goes to lenders, and that is where the next slowdown in consumer spending could start.
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After two decades of patrolling the dark corners of suburbia as a police officer, Rich Duprey hung up his badge and gun to begin writing full time about stocks and investing. For the past 20 years, he’s been cruising the markets looking for companies to lock up as long-term holdings in a portfolio while writing extensively on the broad sectors of consumer goods, technology, and industrials. Because his experience isn’t from the typical financial analyst track, Rich is able to break down complex topics into understandable and useful action points for the average investor. His writings have appeared on The Motley Fool, InvestorPlace, Yahoo! Finance, Money Morning, and, of course, 24/7 Wall St. He has been featured in both U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, and USA Today.
