U.S. household debt consumes rising income gains

New research and federal data indicate that rising debt payments are significantly eroding income gains for American households. An analysis by The Century Foundation and Protect Borrowers found that between late 2022 and early 2026, monthly debt payments rose by $57 against a real monthly wage increase of approximately $109. For single-earner families, this means 52 cents of every dollar gained in real income was consumed by debt. In dual-earner households, debt payments reportedly consumed or even exceeded total income gains.

Federal Reserve data shows that 8.6 percent of families were spending over 40 percent of their income on debt in 2025, up from 6.5 percent three years prior. Additionally, one in five U.S. households is currently behind on debt payments, a rate not seen in 16 years. Financial experts note that many consumers are living paycheck-to-paycheck, leaving little margin for unexpected expenses when competing with the costs of groceries, utilities, and housing. The studies noted that these figures may understate the issue, as they often exclude mortgage payments and alternative lending products like buy-now-pay-later services.