Record $18.2 Trillion Household Debt Causes Concern As Credit Score Declines Amid Rising Student Loan Defaults

The Federal Reserve Bank of New York's most recent Quarterly Report on Household Debt and Credit indicates a significant increase in total household debt, which has reached $18.20 trillion in the initial quarter of 2025. While certain debt categories, such as credit cards and auto loans, saw slight reductions, student loan liabilities surged by $16 billion to $1.63 trillion, accompanied by rising delinquency rates following the conclusion of federal student loan payment protections. The report highlights that nearly six million student loan borrowers, approximately 14 percent, were 90 days or more overdue or in default between January and March 2025. The delinquency rate spiked dramatically from under 1 percent due to the extended payment pause during the pandemic, which lasted 43 months. As payments resumed in October 2023, many borrowers faced severe repercussions, with credit scores plummeting significantly.Scholarly insights suggest that improved financial habits and responsible debt management are crucial for rebuilding credit health amidst this financial turmoil.