Americans have less personal debt than before the pandemic, according to data showing the average adult has just under $22,000.
Research by financial services firm Northwestern Mutual found that, excluding mortgages, the average personal debt per individual was $21,800 in 2023, significantly lower than the $29,800 recorded in 2019.
At the same time, Americans have very different experiences with their debt: While more than a third of Americans said they had the highest level of debt ever, an even larger share said the opposite. The latest data from the New York Federal Reserve also shows that rising credit card debt and auto loans helped push U.S. household debt to new records in the fourth quarter of 2023.
Average debt levels
Northwestern Mutual and Harris Poll surveyed 2,740 U.S. adults online between mid-February and early March 2023. Here are some of the findings:
- Despite persistently high inflation of late, the study showed that average personal debt among U.S. adults, excluding mortgages, has declined steadily over the past four years.
- In 2023, the average American had $21,800 in personal debt (not including mortgages), a full $8,000 less than what Northwestern Mutual reported in 2019.
- Many Americans’ personal debt is decreasing: 43% said they have the lowest or close to the lowest debt they have ever had.
- However, 35% of Americans reported having more debt than their lifetime. New York Fed data shows U.S. household debt rose to $17.5 trillion last quarter, with credit card balances accounting for about $1.13 trillion — a new high for the credit card debt.
- It’s no surprise that younger generations are the ones who struggle the most with student loan debt, according to the Northwestern Mutual study: 5% of survey participants overall said personal education loans are their biggest source of debt. This percentage rises to 17% for Gen Z and 10% for Millennials.
- Those with personal debt say that on average 30% of their monthly income goes towards paying it off.
- Nearly half (49%) of respondents said they expect to pay off their debt within one to five years, while 39% expect it to take longer, perhaps even a lifetime.
Main sources of personal debt
Credit cards are the largest source of debt for U.S. adults, accounting for more than double that of any other source cited by respondents.
Progress in repaying debt
Americans have made steady progress when it comes to paying down their debts, even reducing the amount they owe during a period of historic inflation, the survey found. While the report did not explore how Americans are paying off debt, the data shows that average debt per individual fell the most (by $6,475) between 2019 and 2021. By comparison, debt per individual fell by $1,525 between 2021 and 2023.
During those early years of the pandemic, many workers grew their savings and eliminated debt by spending less, working remotely and saving for stimulus checks. In surveys, many people say they used their stimulus checks to save or pay off debt.
While the report suggests that Americans are reducing their debt overall, that doesn’t mean everyone’s circumstances are the same, as evidenced by the gap the survey found between those who say they have the most or least debt overall.
In fact, according to the New York Fed, U.S. household debt grew by $16 billion between April and June 2023, driven largely by high interest rates on credit cards: The average credit card APR is now above 20%. Auto loan balances also increased by $20 billion during the same period thanks to inflation and high interest rates. Defaults on credit card debt and auto loan debt have also increased recently.
Regardless, Americans should do their best to stick to their repayment strategies to continue the trend of consistent decreases in debt levels recorded by the Northwestern Mutual study.
“It can be a slippery slope between manageable debt and runaway debt, so it’s an important time to remain extremely vigilant about planning and spending,” Christian Mitchellchief customer officer for Northwestern Mutual, said in a news release.
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