Monday, September 15, 2025
Lower interest rates can’t come soon enough for the average American.
When Federal Reserve Chair Jerome Powell hinted at a possible interest rate cut soon, there was a collective sigh of relief. Powell has avoided cutting rates too soon, but he said general employment stability and other labor market measures could warrant a change in the Fed’s policy stance.
Investors lasered in on this and the market took off.
But debt is still a problem in America. A severe crisis looms for the federal student loan system. The first is a repayment predicament. The second is one of fiscal unsustainability for the federal government.
The outstanding student loan balance is $1.77 trillion. It’s an astoundingly large sum and the federal student loan system underwrites 92% of all the loans, totaling 42.7 million borrowers.
The end of the pandemic payment pause has led to a dramatic spike in delinquencies. Missed federal student loan payments started being reported to credit bureaus again after a five-year pause. The 90-plus day delinquency rate jumped from less than 1% in 2025’s first quarter to 10.25% in the second quarter.
As of April, 31% of student loan borrowers are seriously delinquent. That rate represents nearly a third of borrowers. It’s the highest on record and nearly triples the pre-pandemic rate. This strongly indicates a looming default crisis, with up to 1.8 million borrowers on track to default starting in July.
As for American debt generally, most of it is for people that have higher incomes. And still folks are having a tough time paying off their credit cards with higher interest rates.
Credit card delinquencies just hit 12.3% in the second quarter. We haven’t seen that level in more than a decade. And we’re not too far off the highs seen during the 2008 financial crisis.
LendingTree data says one in four U.S. borrowers have used debt to buy groceries. Also, consumers aged 18-29 are the biggest group that’s 90-plus days delinquent.
Between student loans and credit cards, people are floundering.