18 Reasons Why So Many Americans Are in Serious Debt

Consumer debt is growing in the United States, with the Federal Reserve showing worrying numbers in the trillions. With Americans facing rising costs and fluctuating interest rates, it’s no wonder they’re struggling with serious debt. This article lists 18 reasons why Americans are continuously facing increasing debt.

Escalating Cost of Living

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Inflation took off in America in mid-2021, with prices rising much faster than wages. CNN recently reported that despite inflation cooling down last year, a majority of Americans polled “say the cost of living is outpacing growth in their salary and wages.” Millions of Americans still struggle with paying for utilities, food, healthcare, and transportation, and often go into debt when trying to finance their lives.


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Tens of millions of Americans lost their jobs and incomes almost overnight when the COVID-19 pandemic hit. Employment has recovered, but many Americans entered into debt during the pandemic to pay for their mortgages, rent, and food.

Predatory Lending Practices

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Payday loans trap Americans in debt cycles, forcing them to borrow more to pay off the loans after they cannot return the initial loan on time. Borrowers are often unaware of the loans’ hidden fees and extremely high interest rates.

Stagnant Wage Growth

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Business News Daily noted in 2022, “While real wage growth has been fairly stagnant for years, it’s particularly noticeable in today’s circumstances.” Since mid-2023, wages have grown faster than inflation, but many Americans got into serious debt when their real wage growth was low.

Credit Card Dependency

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Fox Business writes that half of American credit card users use “their cards to cover essential living expenses such as rent, food, and utilities.” More Americans are saying they depend on their credit cards, and 35% of respondents to a Quicken survey in the article said they “won’t be able to pay off their credit card debt before the end of the year.”

Changing Family Dynamics

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For decades, there has been a decline in marriage rates and births outside of marriage in the U.S. More children are living with a single parent, who faces higher financial burdens with only one income. Single parents often struggle with higher debt levels than couples raising children.

Consumerism and Social Pressure

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The pressure to match the lifestyle of their peers, neighbors, and family can lead Americans to spend beyond their means. According to Debt.org, the average credit card holder in the U.S. has 2.7 cards, and the “average household credit card debt is $5,315.” Many Americans have spent a large percentage of this debt trying to keep up appearances on new cars, electronics, and home improvements.

Fluctuating Interest Rates

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Loans and credit lines with variable interest rates can be more expensive than their fixed-rate counterparts over time, increasing borrowers’ debt burdens. Homeowners with adjustable-rate mortgages may also see their payments rise after the initial fixed-interest period ends.

Healthcare Costs

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KFF writes that “health care debt is a burden for a large share of Americans,” with 41% reporting health care debt. These Americans are in debt to collection agencies, credit cards, family, and friends due to medical and dental bills. KFF notes that a disproportionate share of “Black and Hispanic adults, women, parents, those with low incomes, and uninsured adults” are in healthcare debt.

The Gig Economy and Unstable Employment

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More Americans are working gig and freelance jobs that offer less income stability than traditional 9–5 jobs, making it more difficult to manage debts. Many gig economy jobs do not provide health insurance, retirement savings, or paid leave, leaving workers at greater risk of entering into debt.

High Cost of Education

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The Council on Foreign Relations notes that “student debt has more than doubled over the last two decades.” Only home mortgage debt is larger in the U.S. Over 40 million Americans collectively owe over $1.6 trillion in federal student loans, and many of them find themselves underemployed, making it difficult to pay off their debts.

Failure to Budget and Plan Financially

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Financial education helps Americans to effectively budget, avoid impulse purchases, and save for long-term goals. Many lack this basic financial education, leading them to spend beyond their means and accumulate debt.

Lack of Savings and Emergency Funds

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CNBC notes that over 60% of Americans live paycheck to paycheck, even those “earning over $100,000 a year.” Some Americans’ incomes have not matched inflation, but others fall victim to “lifestyle inflation,” spending more as their income increases and failing to save.

Generational Debt Cycles

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Negative financial habits, including a failure to budget, overspending, and impulse purchases, can be passed down from parents to their children, perpetuating a cycle of debt that lasts generations. Systematic barriers to economic mobility can also trap families in debt over multiple generations.

Impact of Divorce and Separation

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Forbes writes that “almost half of all marriages in the United States end in divorce,” with an average cost of $15,000 per person, which can increase to $100,000 in more complex situations, such as custody disputes. Divorcing Americans often find themselves accumulating debt when trying to pay for the divorce and adjust to a single income.

Underutilized Debt Management and Relief Options

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Many Americans are unaware of or uneducated about debt consolidation, management programs, or relief options available to help them manage their debt. Cultural stigmas surrounding debt and bankruptcy can also prevent individuals from seeking help until it’s too late.

Natural Disasters and Unexpected Events

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CBS News reported, “People affected by hurricanes, floods, and other events often see their credit scores drop and debts rise.” Natural disasters can lead to immediate property loss in severe cases, forcing victims to rely on credit, and the long-term costs of rebuilding and replacing property can significantly increase debt.

Investment and Market Losses

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Stock market fluctuations can massively impact individual finances, particularly those with large investments. Downturns in the real estate market can leave homeowners owing more than their homes are worth, and volatility in retirement accounts due to market fluctuations can harm Americans’ long-term financial security.

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