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Under 40 and Underwater? Some Adults Are Falling Behind On Car Loans and Credit Card Debt


Key Takeaways

  • Those younger than 40 are becoming delinquent on their credit card debt at a rate last seen before the pandemic.
  • Inflation, higher interest rates, lower wage increases and the resumption of student loans has put pressure on younger debt holders’ budgets.
  • Delinquency levels for older people and mortgages held by those of all ages also rose, but did not reach its pre-pandemic levels.

If you’re younger than 40, you’re increasingly likely to be underwater on consumer debt.

More and more people are falling behind on their credit card and car loans, especially people in their twenties and thirties, data from the Federal Reserve Bank of New York showed Tuesday. The portion of newly and severely delinquent credit cards held by people under 40 has been steadily rising from the record lows it hit during the pandemic and blew past pre-pandemic levels in the third quarter of 2023.

The data highlights how younger people’s finances are under more pressure these days as cost increases over the past few years squeeze budgets, raises at work get harder to come by, and consumer debt keeps getting costlier because of high interest rates. Not to mention, the restart of student loan payments in October is adding hundreds to monthly bills on average, disproportionately affecting younger people. New credit card delinquency for older people also rose, but stayed near pre-pandemic levels.

Researchers at the New York Fed couldn’t say exactly why more people are having trouble staying current on their credit cards and car loans. In addition to being younger on average, people falling behind on their credit cards tend to live in lower-income neighborhoods, have higher balances, and also have auto and student loans. 

The delinquency uptick was somewhat surprising, given that jobs are relatively easy to get, with the unemployment rate hovering near record lows.

“It could be that there is actually some stress building that there are people in this churn in the labor market, and there are people who are losing jobs at any point in time,” a New York Fed researcher said in a conference call with reporters. “There could be real financial stress building up. It may be because of high inflation or borrowing costs going up, and it could be a combination of all those three.”

Delinquency also increased for mortgages, though remaining below pre-pandemic levels, with just 0.5% of all mortgage debt being delinquent. The report held no indication of people falling behind on student loans, due to federal rules preventing student loan delinquency from being reported to credit bureaus until 2024.

Total delinquency rates were still low compared to pre-pandemic levels: 1.6% of all debt was at least 90 days overdue in the third quarter, less than the 3.2% at the end of 2019, although above the 1.4% reached in the fourth quarter of 2022. 

Joanna Swanson

Joanna Swanson is Europe correspondent at the Thomson Reuters Foundation based in Brussels covering politics, culture, business, climate change, society, economies and inclusive tech. With specific focus in breaking news, she has covered some of the world's most significant stories.