Debt shifts: Credit cards, auto loans cool while student loans heat up

The Hill

15-05-2025

Americans pumped the brakes on credit card and car debt to start the year, but with missed student loan payments now showing up on credit reports, new data reveals a fresh financial headache is already setting in.
Total household debt rose by $167 billion to $18.2 trillion in the first quarter — a jump driven by mortgage debt, according to the latest quarterly report from the Federal Reserve Bank of New York. Credit card balances dropped by $29 billion and auto loan debt fell by $13 billion from the previous quarter.
Meanwhile, student loan balances hit a record $1.63 trillion, and now that past-due loans are hitting credit reports for the first time in five years, delinquencies are spiking.
In the first quarter of 2025, about 8 percent of student loan debt fell into serious delinquency, meaning 90 days or more past due. That's up from less than 1 percent a year earlier but roughly in line with the pre-pandemic norm.
A New York Fed analysis of borrowers, rather than balances, found that nearly a quarter (23.7 percent) of borrowers who were required to make payments were behind on their student loans.
Missed payments are already dragging down the credit scores of millions of Americans, driving up borrowing costs and making it harder to get approved for loans.
According to the New York Fed, more than 2.2 million student loan borrowers who became newly delinquent saw their credit scores drop more than 100 points and more than one million saw drops of at least 150 points.
The highest rates of student loan delinquency were in southern states, led by Mississippi and Alabama.
Earlier this month, the Education Department resumed involuntary collections, which means borrowers in default could face garnished tax refunds and reduced Social Security payments.
Credit card debt tends to dip after the holidays as consumers pull back on spending, so the latest drop is likely seasonal, not a sign that Americans have tackled their underlying debt issues.
'Don't be fooled by the modest decrease,' Ted Rossman, Bankrate's senior industry analyst, said in a statement. 'Credit card balances and interest rates remain near record highs, and Americans' total consumer debt load is a record $18.2 trillion.'
Perhaps more concerning: The share of credit card debt that is 90 or more days delinquent climbed to 12.3 percent in the first quarter, the highest level since 2011.
Rossman pointed out that credit card balances are 54 percent higher than they were four years ago and auto loan balances have risen by 19 percent.
Americans now owe $1.64 trillion in auto loans, making it the second-largest category of consumer debt after mortgages. Rising delinquencies and elevated interest rates have sparked concerns about an auto loan bubble, but the New York Fed's latest analysis suggests the situation remains under control.
Transition rates into serious delinquency have 'leveled off' for auto loans over the past year, Daniel Mangrum, research economist at the New York Fed, said in a release.
The first quarter decline in auto loan balances marked only the second time since 2011 that they've dropped from the previous quarter.
However, it remains to be seen whether the tariff-driven car buying surge will push up auto debt in the second quarter.