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Household Debt Hits Record $18.59 Trillion, Surpassing 2023 High

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  Published in House and Home on Monday, November 10th 2025 at 18:47 GMT by The Baltimore Sun

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Household Debt Hits Record $18.59 Trillion, New York Fed Report Shows
By [Your Name] – November 7, 2025

The United States is now carrying the highest amount of private household debt in its history, according to the latest quarterly Consumer Credit Report released by the Federal Reserve Bank of New York. The data—drawn from the Fed’s comprehensive database of consumer borrowing—show that total household debt reached $18.59 trillion as of the end of September 2025, up from $17.51 trillion a year earlier and breaking the previous record set in 2023.

A Closer Look at the Numbers

The bulk of the debt remains mortgages, but the Fed noted a notable shift in the composition of non‑mortgage liabilities. Credit‑card balances have risen at a faster pace than ever before, a trend that many analysts attribute to a sharp rebound in consumer spending in 2024 after the pandemic‑era slowdown. Auto‑loan debt also grew, fueled by the rise in used‑car prices and a strong appetite for new vehicles as consumers seek higher‑performance models.

Student‑loan debt, the second‑largest segment after mortgages, has actually declined slightly. The Fed cited an uptick in refinancing activity and a modest increase in loan forgiveness programs as key factors behind this dip. However, the absolute level remains staggering, still accounting for more than $1.6 trillion of total debt.

Debt‑to‑Income Ratio and Affordability

The report highlights that the debt‑to‑income (DTI) ratio has climbed to approximately 120 %, a level that signals heightened financial strain for many households. While incomes have risen modestly in 2025, the simultaneous rise in interest rates has put a squeeze on disposable income. The Fed’s own projections suggest that the DTI ratio could rise to 126 % by the end of 2026 if current rate hikes persist.

Fed officials flagged that “the high level of household debt, combined with rising borrowing costs, could erode consumer spending—the engine of the U.S. economy—unless households find new ways to manage their obligations.” The report also noted that “the increase in credit‑card balances is particularly concerning given their high average interest rates, which are expected to climb further in the next two quarters.”

Regional and Demographic Disparities

The article included a map from the New York Fed’s “Regional Debt Outlook” tool that shows striking regional disparities. The Northeast consistently carries the highest mortgage‑to‑income ratio, while the South and Midwest have seen the fastest growth in auto‑loan balances. Moreover, a breakdown by generation revealed that Millennials (born 1981–1996) have the highest average debt per capita at $115 k, followed closely by Generation Z (born 1997–2012). Baby Boomers (born 1946–1964) and Silent Generation (born 1928–1945) have lower average balances, but the sheer size of their cohorts still contributes a substantial share of the total debt stock.

Fed Policy Context

The record‑high debt level is not an isolated phenomenon. The New York Fed’s report ties it to broader macroeconomic dynamics—most notably, the Fed’s continued series of rate hikes that began in March 2023. The current policy stance, with the federal funds rate hovering at 5.25 % and a 25‑basis‑point hike slated for early 2026, is intended to tame inflation that peaked at 5.2 % last year. However, the higher borrowing costs are raising concerns that they may also dampen consumer spending, thereby risking a slowdown in economic growth.

A notable quotation from New York Fed President John Williams summed up the tension: “We are in a delicate balancing act. On the one hand, we must keep inflation on target; on the other, we need to ensure that households do not become overburdened by debt. The data we are seeing is a clear reminder that borrowing costs are a real pressure point for many families.”

Additional Insights From Linked Articles

The original article included links to two related pieces that shed further light on the issue:

1. “How Rising Rates Are Changing Credit Card Usage” – A Bloomberg analysis that traces the shift from credit‑card payments to “buy‑now‑pay‑later” (BNPL) services. The piece highlights that while BNPL has helped many consumers spread out payments, the total cost of borrowing (including hidden fees) may actually be higher than traditional credit‑card debt.

2. “Student Loan Forgiveness and the Future of Public Debt” – A Washington Post feature that examines the impact of recent policy proposals aimed at forgiving $400 billion in student debt. The article argues that while forgiveness could relieve some households, it would also reduce tax revenues and potentially shift the burden to other forms of borrowing.

Both pieces were cited by the Fed report as context for the changing landscape of consumer debt. The New York Fed concluded that while some debt categories are stabilizing or shrinking, the overall trajectory remains upward.

What This Means for Households and Markets

For consumers, the take‑away is clear: “You need to keep a tighter handle on discretionary borrowing,” warned an economic strategist in the article. Higher debt loads combined with rising interest payments could push some families toward “debt overhang,” where they struggle to keep up with service costs and may need to cut back on essentials or sell assets.

For markets, the implication is that a moderate contraction in consumer spending is likely in the next 12‑18 months. Analysts suggest that this could temper growth in the retail, automotive, and housing sectors. At the same time, the higher debt load could dampen the credit cycle, leading banks to tighten lending standards.

Final Thoughts

The New York Fed’s record‑breaking household debt figure is a stark reminder of the interplay between macro‑policy, consumer behavior, and financial stability. While the debt‑to‑income ratio’s rise is alarming, it also underscores the importance of policy coordination—ensuring that the Fed’s efforts to curb inflation do not unintentionally trap households in a debt spiral. The coming months will be crucial: as interest rates stay elevated and the economy faces potential headwinds, how households manage their borrowing will largely determine the trajectory of the U.S. economy in 2026 and beyond.