A Federal Reserve survey reveals that Americans’ debt problems have reached levels not seen since the Great Recession, with nearly 20% of families behind on payments by 2025. Despite some narrowing of wealth disparities, the ability to manage debt has significantly worsened. The report also highlights a stark contrast in net worth growth, with higher earners seeing substantial increases while lower-income families experienced declines.
A concerning trend has emerged in American household finances, with the Federal Reserve's latest Survey of Consumer Finances revealing that a growing number of families are struggling to keep up with their debt payments. The data, released Friday, shows that the proportion of families behind on loan payments has surged to levels not seen since the economic fallout of the Great Recession.
For the three-year period ending in 2025, the percentage of families falling behind on their financial obligations climbed from approximately 12% to nearly 20%. This marks the highest point since 2010, a period when the nation was just beginning to recover from the severe economic downturn caused by the collapse of the subprime mortgage market.
The Federal Reserve's triennial report, which tracks the nation's financial health, indicates a significant deterioration in the ability of U.S. families to manage their debts, even as wealth disparities have shown some signs of narrowing. The number of families two or more months behind on payments also saw a notable increase, rising to over 8% from 5% in 2022.
Adding to these concerns, a separate report from the New York Fed earlier this week indicated that households perceive their financial situations as having worsened over the past year and anticipate further weakening in the future. This sentiment aligns with the broader economic climate, which has been characterized by persistent inflation rates not seen since the early 1980s.
The share of debt relative to income also experienced a substantial jump, with families carrying payment-to-income ratios above 40% increasing to 8.6% from 6.5% in 2022. This represents the highest level observed since 2013.
Conversely, the net worth of higher earners saw a significant boost, with those in the top income bracket reporting a median net worth increase of 31%. While the economy continued its growth trajectory, real median family income saw a 7% increase, but average income declined by 6%. The report noted that income inequality slightly decreased, as families at the lower end of the income spectrum experienced modest income gains, while those at the upper end saw declines.
Income growth patterns varied across demographics. Families aged 75 and older experienced particularly strong income gains, whereas those aged 35 to 44 saw their incomes fall by 25%, a trend attributed to reduced capital gains for this age group. Black non-Hispanic families, Asian families, and those at the upper echelons of income and net worth distributions were exceptions, reporting declines in both median and mean income.
Overall net worth saw an increase, with inflation-adjusted average net worth rising by 7% to $1.24 million. However, median net worth only climbed 2% to $215,900, primarily driven by gains among the wealthiest households. The report cautioned that this net worth growth was considerably slower than in the previous reporting period (2019-2022).
Significant disparities were also evident among educational attainment levels. Individuals with a college degree reported median incomes 1.9 times higher than those with some college education and nearly three times the median net worth. Lower-income families experienced a decline in wealth, while higher-income families saw an increase. Families in the bottom quartile of income median net worth saw their wealth decrease by 6%, with average net worth falling by 4%.
