Debt payments are eating a growing share of US income gains, research finds

A new analysis finds that debt payments are consuming a growing share of the income gains U.S. households have made since 2022, leaving less money available to spend or save. The research, from the nonpartisan think tank The Century Foundation and the consumer advocacy group Protect Borrowers, estimates that a typical household's real take-home monthly pay — wages adjusted for inflation — rose $109 between late 2022 and early 2026, while a worker's monthly debt payments rose $57.

What the numbers show

For a one-earner household, researchers estimate that 52 cents of every dollar of income gained in recent years goes toward higher debt payments. For a two-earner household, they project that the entire real income gain, and then some, goes toward debt.

Inflation-adjusted debt payments rose nearly 15% over roughly three years — about eight times as fast as household income, which grew less than 2%.

The analysis drew on credit records for millions of working-age Americans ages 25 to 64, along with Census Bureau income data. It covers payments on credit cards, auto loans and leases, student loans and home equity lines of credit, but excludes mortgages and other borrowing, including many buy now, pay later loans and medical payment plans.

Researchers say the pressure may be understated

Angela Hanks, chief of policy programs at The Century Foundation, said the findings may understate the financial pressure households face. She described the work as "perhaps the rosiest analysis that we could have done using the data," and said that adding mortgage payments and installment loans that do not appear in a credit file — such as buy now, pay later and payday loans — would have made household debt payments higher. More consumers are relying on credit cards to cover basic expenses when their paychecks fall short, she said.

Separate Federal Reserve data points to similar strain. The Fed's latest Survey of Consumer Finances found that 8.6% of families spent more than 40% of their income on debt payments in 2025, up from 6.5% in 2022 — a level not seen since the 2013 survey.

When debt becomes a burden

Mortgages and student loans are often considered "good debt" because they may help build wealth or earning power, but even potentially beneficial debt can become a financial burden. Matt Schulz, chief consumer finance analyst at LendingTree and author of "Ask Questions, Save Money, Make More," said problems arise "when that debt stretches out for six months or a year or longer."

Schulz recommends weighing the total borrowing cost, the repayment terms and whether savings are enough to handle unexpected expenses before taking on debt.

Source: CNBC.