The ability of American families to service their debts has deteriorated over the past three years, reaching levels not seen since the aftermath of the global financial crisis, the Federal Reserve reported Friday.
In the central bank’s Survey of Consumer Finances, researchers found that while wealth disparities have narrowed somewhat, the ability to meet debt payments has deteriorated significantly.
“Families were more likely to be behind on their financial obligations than at any time since the 2010 survey,” said the survey, a data-rich document that the Fed releases every three years to chronicle the nation’s financial health.
In 2010, the country was just emerging from what became known as the Great Recession, a period that spanned from December 2007 to June 2009. The collapse of the subprime mortgage market led to contagion to the largest financial institutions in the United States and around the world, sending unemployment soaring to 10 percent.
According to the new findings, the proportion of families behind on their loan payments at the end of 2025 rose from around 12% in the previous survey to almost 20%, a gain of around 67%. Those behind by two months or more have also accelerated significantly, from 5% to more than 8% in 2022.
Even though the report covers the period through 2025, Americans’ concerns about their finances persist. A New York Fed survey released earlier this week showed that households said their financial situation had deteriorated compared to last year and would likely be weaker in the coming year.
Friday’s Fed report showed that debt’s share of income also saw a big gain. Families with payment-to-income ratios above 40% jumped to 8.6%, up from 6.5% in 2022 and the highest level since 2013.
At the same time, the net worth of those with the highest incomes has soared, with those in the highest income group seeing their median net worth increase by 31%.
The report covers a period in which the economy continued to grow, but with inflation rates not seen since the early 1980s.
In this climate, the Fed found that the median real family income, or midpoint, rose 7%, but average income fell 6%.
“Families at the lower ends of the income and net worth distribution experienced modest increases in their median and average income, while families at the higher ends experienced declines,” the report said. “These trends indicate that income inequality has declined slightly between surveys.”
The report notes that income gains were particularly strong among families aged 75 or older, while they fell 25% among those aged 35 to 44, which the Fed attributed to falling capital gains income for this group.
“Exceptions to the general pattern of increase in median income included non-Hispanic black families, Asian families, and families at the top of the typical distribution of income and net worth,” the report said. “For these families, the median and average income has fallen.”
Overall, net worth has generally increased.
The inflation-adjusted average net worth rose 7% to $1.24 million, although the median net worth rose only 2% to $215,900, reflecting gains among the wealthiest. The report notes that net worth was “much slower” than the previous report which covered the 2019-22 period.
There are considerable disparities between educational groups. Those with a college degree had a median income level 1.9 times that of those with “some college” and nearly three times the median net worth. Low-income families “saw some declines” in their wealth while those with higher incomes saw gains. The median net worth of families in the bottom quarter of income declined 6%, while the average net worth fell 4%.
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