The U.S. consumer debt default rate has risen to a five-year high, with the student loan default rate reaching 14.4%, a record high!

The situation of consumer debt defaults in the United States is worsening.

On Wednesday, the New York Federal Reserve released the "Quarterly Report on Household Debt and Credit," showing that total household debt increased by $197 billion in the third quarter, reaching $18.59 trillion.

From July to September, the proportion of debt overdue by more than 30 days reached 4.5%, the highest level since the first quarter of 2020. Among them, the delinquency rate for student loans climbed to 14.4%, setting a new historical high.

The rise in default rates reflects the financial pressure faced by American households, particularly among younger groups, with severe defaults being most prominent among consumers in their 20s and 30s.

This trend underscores the impact of high interest rates, a weak job market, and persistent inflation on American households. Major companies like Starbucks, Target, and Amazon have recently announced layoffs, and consumer confidence indicators from the University of Michigan and the Conference Board have also turned downward in recent months.

The Mortgage Market Remains Resilient

The report also presented some positive signals.

As the largest component of consumer debt, the delinquency rate for mortgages remains at a low level.

Donghoon Lee, an economic research advisor at the New York Fed, stated in a press release:

Household debt balances are growing at a moderate pace, and default rates are stabilizing. The relatively low mortgage delinquency rate reflects the resilience of the housing market, supported by ample home equity and strict underwriting standards.

The Federal Reserve cut interest rates by 25 basis points for the second consecutive month last week to support the slowing labor market.

Fed Chairman Jerome Powell stated that after recent reports of significant losses from subprime auto lenders, he is "closely monitoring" credit conditions but added that he does not currently see "broader credit issues."

25-35 Age Group "Holds Tight to Wallets"

Wall Street Journal previously mentioned that Goldman Sachs consumer goods expert Scott Feiler stated that the discussion about consumer health is shifting.

Previously, companies attributed weak consumption to individual company factors or issues among low-income groups, but now more companies are reporting a slowdown in consumption, and the weakness has spread to middle-income groups, especially consumers aged 25-35.

Mexican burrito chain Chipotle stated:

The gap has widened, and middle- and low-income customers have reduced their consumption frequency, facing pressures from unemployment, student loan repayments, and slowing real wage growth.

Kraft Heinz CEO Carlos Abrams-Rivera stated during the earnings call:

We are now facing one of the worst consumer confidence levels in decades.

The company significantly lowered its full-year sales guidance, expecting a decline of 3% to 3.5%, a substantial deterioration from previous expectations. Management attributed the ongoing weakness to inflation-driven price increases and pressures from cuts to food stamps.

Even traditional defensive sectors have not been spared. Snack giant Mondelez International CEO Dirk Van De Put warned that:

Government shutdown will not help boost consumer confidence. The Hershey Company is offering discounts ahead of Halloween as American consumers tighten their spending due to economic uncertainty and rising cocoa prices