Americans currently find themselves in greater debt than at any other time in history, including prior to the great financial crisis of 2008. That debt burden stands at approximately $14.56 trillion and includes all types of consumer secured and unsecured loans totals using the latest available data for the full year of 2020. 

Key Takeaways

  • Americans carried more debt in 2020 than at any other time in history.
  • Mortgage debt grew significantly during the pandemic and is by far the largest type of debt across all adult age groups, with the average mortgage loan exceeding $208,000.
  • Credit card debt went down due to less travel and entertainment spending.
  • Student loan balances increased across all age groups with the exception of those under 30.

Across the generations, the lion’s share of those borrowing obligations is disproportionately composed of mortgage loans, which averaged just over $208,000 in 2020. But that’s actually potentially positive news: mortgage debt is generally considered to be “good debt” since mortgages are tax advantaged, generally have low interest rates (especially in the past year with record low rates), contribute to long-term equity building, and are instrumental in helping achieve the American dream of homeownership. 

Types of Consumer Debt Studied:

  • Auto Loan
  • Credit Card
  • Mortgage
  • Home Equity Line of Credit
  • Student Loan

The size of the mortgage debt–which typically represents a large multiple of the next largest type of consumer debt–can obscure more nuanced goings-on in terms of credit behavior during the pandemic. Some loan types have grown and others have declined, revealing unexpected patterns.

After mortgage debt, student loans have become the second most pervasive type of consumer credit in America in the past decade. In 2020, they stood at a total of $1.56 trillion or an average of over $39,000.  The highest concentrations of student debt are in the 18-to-29- and 30-to-39-year-old cohorts, though this educational debt burden unfortunately persists into later life for many Americans. 

Auto loans–which totaled $1.4 trillion in 2020–followed by credit card loans of $818.41 billion, also comprise significant levels of debt burden, particularly in people’s middle years between ages 40 and 59. 

Net of the increase in mortgage debt, as reported in the latest Federal Reserve G.19 report consumer credit rose by only marginally in 2020 to $4.184 trillion from $4.181 trillion in 2019. Consumer credit, as tracked by the Fed, is comprised of open-ended revolving loans (like general use and private-label credit cards), lines of credit and fixed term loans made to individuals. A 3.9 percent increase in non-revolving loans like those for students, cars and payday advances was largely offset by an 11.2 percent decrease in credit card revolving balances. 

Which Debts Grew, Which Debts Shrunk

Federal Reserve data reveals unexpected patterns in how the pandemic affected America’s debt load in 2020.

Mortgage Debt Grew For All Ages, Especially for Those Under 30

While Americans in the middle of the age continuum (ages 40-to-59) carry the most absolute mortgage debt, it is the youngest generational cohort that has seen the largest increase in mortgage borrowing in the past year. This surge in first-time and overall home buying has been driven by historically low mortgage rates coupled with the tailwind that the economic stimulus provided in 2020 to those who were lucky enough to stay employed during the COVID-19 pandemic. While unemployment disproportionately impacted this youngest group during the pandemic, many of those who were spared and had stable incomes felt the time was right to enter the housing market.   It was notable that mortgage debt grew across all age cohorts, even among those 70+, reaching a combined level of $10.04 trillion in 2020 compared to $9.6 trillion in 2019. 

Youngest Age Cohort Experienced Less Student Loan Debt

Student loan balances also increased across the board, with the notable exception of those under 30. This youngest group likely applied stimulus payments to bring down these obligations and also benefited from the temporary suspension of student loan payments and interest due to the CARES Act. The drop in student loans may also reflect the pandemic’s impact on college enrollment, with fewer new freshmen entering the college ranks by choosing to take a gap year. 

New Vehicle Loans Grew Amid Less Commuting

Loans for new and used cars increased across all age cohorts despite the fact that far fewer Americans were required to commute to an in-person office location during the pandemic in 2020, at least for the latter three quarters of the year. While not tax-advantaged like mortgage and home equity line of credit loans, auto loans for new cars were at least relatively low in cost in terms of interest rates charged. The average rate for 48 and 60 month new car loans were 4.95 percent and 4.80 percent, respectively at the end of 2020.

Home Equity Lines of Credit Saw a Huge Drop

Despite relatively low interest rates, home equity loans saw the largest percentage drop across all age groups during 2020, possibly due to the desire to postpone many of the typical uses of such loans, like home remodeling and repairs, during the pandemic. While HELOC loans can also be used to consolidate debt or pay down student loans, the pandemic appears to have had a chilling effect on the use of this type of credit.

Credit Card Balances Contracted With Less Travel, Dining Spending

Unlike mortgage and student loan debt, credit card balances were actually down in every age group and by double digit percentages as a whole. This was likely due to considerably less leisure and business airline travel, commuting, and entertainment spending during the past year and the related freed-up discretionary income being used to pay down outstanding balances. 

Summary

The growth in consumer debt in the past year has fortunately been largely driven by increases in relatively good (mortgage) debt that has positive tax and social benefits in the form of homeownership. The tremendous level of student debt remains a significant concern for our entire society, though–not just in terms of a burden for those with student loans but from the hidden displacement of vital economic activity that servicing that debt entails. The pandemic has tamped down credit card spending and revolving balances, which has been good for Americans’ personal budgets but not the economy at large. Pent-up travel, entertainment, and retail spending will likely rebound in the second half of 2021, once a majority of Americans get vaccinated for COVID-19.  It remains to be seen if the rising tide of a reawakened U.S. economy will lift all boats or lead to increasing inflation and a return to reliance on high-interest revolving debt.

Methodology

This study is based on analysis of the latest information on consumer debt levels by product and age group for mortgage, home equity lines of credit, credit cards, student loans and automobile loans sourced and compiled from the Federal Reserve Bank of New York's Center for Microeconomic Data Q4 2020 Household Debt and Credit Report.