The Macomb Daily

Household debt surges as young borrowers struggle with loans

- By Alex Tanzi

U.S. household debt soared by the biggest amount in two decades in the fourth quarter, with younger borrowers in particular struggling to make loan payments amid high inflation and interest rates.

Households added $394 billion in overall debt, the largest nominal increase in 20 years, bringing the total to a record $16.9 trillion, according to data released by the Federal Reserve Bank of New York on Thursday.

Mortgage balances, the biggest form of debt for American families, drove the increase.

But debt grew across the board, with credit cards seeing the biggest jump in data going back to 1999, New York Fed economists said in a blog post. Delinquenc­ies picked up, with borrowers reaching 90 days or more of delinquenc­y at a higher rate than they did before the pandemic.

“This is particular­ly concerning for younger borrowers who are disproport­ionately likely to hold federal student loans that are still in administra­tive forebearan­ce,” the economists said in the post. “Once payments of those loans resume later this year under current plans, millions of younger borrowers will add another monthly payment to their debt obligation­s, potentiall­y driving these delinquenc­y rates even higher.”

People in their 20s and 30s are also leading among borrowers having trouble meeting auto-loan payments.

The overall share of borrowers who are in delinquenc­y remains below prepandemi­c levels. But the rate of people becoming delinquent is rising fast, suggesting a rapid return to pre-Covid trends for creditcard and auto-loan borrowers, according to the blog post.

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