Average Consumer Debt Levels Increase in 2022

Overall Debt Levels Increase

The total consumer debt balance increased to $16.38 trillion in 2022, up from $15.31 trillion in 2021. The 7% increase from 2021 to 2022 was larger than the 5.4% increase in the same period from 2020 to 2021.

Source: Experian data from Q3 of each year

How much debt grew in 2022 varied across the different types of consumer debt. Auto loans, credit cards, mortgages and personal loans saw the largest increases on a percentage basis. Meanwhile, total balances declined for store credit cards, auto leases and student loans, each for different reasons.

Source: Experian data from Q3 of each year

Consumer demand for most types of loans increased more than usual in 2022. The largest percentage increases were for personal loans, where total balances grew by 18.3%, and credit card balances, which grew by 16%. Balances of home-based loan types—mortgages, home equity loans and home equity lines of credit—all grew as mortgage interest rates increased. Retail credit card balances declined, as consumer financing for department stores became increasingly supplemented, if not supplanted, with buy now, pay later financing.

In the auto financing space, consumer demand for new auto loans was abundant, as dealers sold cars as soon as they arrived on dealers' lots for much of 2022. Most cars sold for more than their manufacturer's sticker price, driving average car sale prices up by 9.4% from September 2021 through September 2022, according to the consumer price index. Overall, auto loan balances grew by 6%. Conversely, the relatively smaller auto lease market actually fell by 23%, as inventory was diverted from the lease market to the auto loan market.

Finally, student loan balances declined in 2022, as eligible borrowers await the Supreme Court's decision on a challenge to the administration's loan forgiveness program, which would forgive more than $400 billion in outstanding loans. Meanwhile, student loan payments—and the accrual of interest—continue to be on hold more than three years after the pause began in March 2020. Additionally, thousands of other borrowers had their loan balances forgiven through the Public Service Loan Forgiveness program. Overall, student loan balances fell by 9.3% in 2022.

Each of these types of debt illustrates a similar picture: Inflation, which grew at a pace not seen in 40 years, played a role in increasing nominal average balances of all types of debt, more than it had in the previously low-inflation environment of the 21st century. Average credit card balances increased the most, driven by increased demand for goods and services as economic activity resumed as pandemic restrictions and supply chain disruptions eased.

Source: Experian data from Q3 of each year
Note: Average personal loan balance includes both unsecured and secured loans

Average Consumer Debt Increases in Every State

All 50 states and Washington, D.C., experienced increases in average debt balances in 2022. The larger increases were in the Western states, with Idaho and Utah leading the nation. Oklahoma and Connecticut had the two smallest increases in average debt last year.

Source: Experian data from Q3 of each year

Average Overall Debt Increases, No Matter the Credit Score

Balances grew for all borrowers, no matter their risk to lenders. Typically, those with very good or exceptional FICO^® Scores^☉ are able to finance more than those with lower scores. Nonetheless, average balances grew the most in percentage terms among those with the highest credit scores and lowest credit scores. Even those with good scores—comprising more than 35% of all U.S. consumers—saw overall average debt increase by 3.9% to $95,067 last year.

Source: Experian data from Q3 of each year

Debt Trends Follow Similar Pattern Across Generations

Average overall debt increased among all except the oldest of U.S. consumers in 2022. Through a generational lens, 2022 echoed 2021: Debt balances held by older generations have largely leveled off, while younger generations continued to amass debt at double-digit annual rates.

One big difference however, was the economic backdrop for each year. In 2021, inflation was still under 2% for much of the year, and consumers were still able to refinance 30-year mortgages to about a 3% rate. In 2022, inflation ran higher than 8% and mortgage rates soared past 6%. So even though baby boomers and the Silent Generation owe about the same on average in nominal dollars, in inflation-adjusted dollars the average balance is somewhat lower.

Source: Experian data from Q3 of each year; ages as of 2022

Generation Z experienced a nearly 25% jump in average debt balance, which is in line with the additions of new debt the generation is broadly taking on. While this increase may seem striking, it's largely a result of milestone responsibilities such as first-ever car payments, student loans or, in some cases, mortgages.

Older generations are seeing their debt follow established patterns as well. Debt balances typically peak during a person's middle-age years, when income and expenses are at lifetime highs and then decline as cars, homes and other debt obligations are paid off as one ages.

Mortgage Debt Increases Alongside Higher Mortgage Rates

The U.S. continues to face a housing shortage, and rising interest rates designed to tamp down inflation are also dumping cold water on new home purchases. That's especially the case for those financed by conventional 30-year mortgages, which saw rates increase from about 3% at the beginning of 2022 to more than 6% by autumn. Consequently, the typical monthly payment for a new 30-year conventional mortgage increased from around $1,900 in September 2021 to about $3,000 last September, according to the National Association of Realtors. The 50% jump puts homeownership out of reach for many for now.

Source: Experian data from Q3 of each year; ages as of 2022

While the more than 13% jump in Generation Z mortgage balances may appear startling, keep in mind that currently this generation represents less than 1% of all mortgage borrowers. As they get older and increase their incomes, their share is certain to increase.

Millennials are more likely to be in their first year of paying down a 15- or 30-year mortgage, which is a major reason they continue to be the generation with the highest average mortgage balance. While more established homeowners have either significantly paid down a previously existing mortgage or refinanced at a more favorable rate, millennials are just getting started.

Generation X and older consumers are more commonly the ones more likely to sell their homes. However, real estate listings are down, as sellers are having difficulty lining up a new home to purchase to replace a home they might otherwise be selling. It may also have a hand in a resurgent interest in home equity lines of credit and home equity loans, as those homeowners staying put are tapping their equity to make home improvements or cover other expenses.

Auto Loan Debt Begins to Stabilize

The big seller's market in 2021 was the automotive sector, and prices for both new used vehicles continued to increase in 2022. However, a combination of increasing car lot inventory and consumer sticker shock meant that loan balances didn't increase as sharply in 2022 as in 2021.

Younger generations, often purchasing their first car, have higher average auto loan balances. Older consumers, perhaps waiting a bit until their next auto purchase, saw less of an increase compared with 2021, and balances for Generation X borrowers actually fell slightly last year.

Source: Experian data from Q3 of each year; ages as of 2022

Student Loan Debt Decreases as Borrowers Await Court Ruling

Federal student loan repayments and interest remained paused throughout 2022 and are still suspended, so most federally backed student loan debts aren't growing. (The pause was recently extended again, as borrowers await a court decision challenging the legality of a student loan forgiveness plan announced in August 2022.)

Source: Experian data from Q3 of each year; ages as of 2022

The only significant increase in student loan balances are among the newly minted graduates of Generation Z, who saw balances increase by 13.1% in 2022. The other generations saw little changes in balances, though Generation X saw average balances decline in 2022 as Public Service Loan Forgiveness programs began taking a bite out of debt last year. As borrowers usually need to make 10 years of loan payments for eligibility, PSLF programs will benefit these borrowers the most.

Credit Card Debt Increases More Sharply Among Younger Consumers

Generation Z—the oldest of whom turned 25 in 2022—saw their credit card balances increase by 25.1% last year, although they still have the lowest average balances. Millennial card debt grew nearly as much at 23.4%, but the average balance of $5,649 among millennials is nearly twice that of Generation Z. All other generations have higher balances than they did a year ago, as well, though their growth wasn't as sharp.

Source: Experian data from Q3 of each year; ages as of 2022

The three older generations—Generation X, baby boomers and the Silent Generation—saw balances increase as well, a contrast to the drop in balances they experienced in 2021. Inflation and interest rates are an obvious contributor to the increase in average balances, but as the pandemic's effect on the availability of goods and services began to recede, consumer demand for certain large ticket items financed on credit cards, especially travel and eating outside the home, rebounded.

Personal Loan Debt Increases Sharply as Consumers Consolidate Revolving Credit Card Debt

Source: Experian data from Q3 of each year

Unsecured personal loans, which aren't backed by collateral, grew by 30.9% in 2022 to $174.22 billion. Unsecured personal loans are lump-sum loans that are typically paid back over three to five years in fixed monthly payments. Most often, personal loans are used for debt consolidation, and new loan activity has increased following interest rate hikes that have increased the cost to carry a balance on variable-rate credit cards.

Source: Experian data from Q3 of each year; ages as of 2022
Note: Balances include both secured and unsecured personal loans

Balances grew among all generations, but grew the most for the younger generations. Even the Silent Generation, the oldest of U.S. consumers, saw their usually static average personal loan balances increase by 5.1% in 2022, though their overall debt is lower than it was in 2021.

Factors Attributable to Increases in Debt

Debt levels have increased more than in previous years, and although the reasons are many, most fall into one of three broad categories.

• Inflation: Perhaps the most obvious explanation, the 8% increase in consumer prices from September 2021 through September 2022 broadly fed all types of debt balances, from simple grocery store credit card swipes to new mortgages for homes with much higher price tags.
• Interest rates: The Federal Reserve, in its efforts to calm inflation, embarked on an interest rate increase campaign throughout 2022, raising the key fed funds rate from a rock-bottom 0.25% to more than 4% by September. Not all types of borrowing are impacted by Fed rate hikes the same way. Credit card balances are assessed a higher rate nearly immediately after a rate hike. On the other hand, other types of interest rates aren't as directly tied to the Fed rate. For instance, despite increases in new car costs, annual percentage rates (APRs) for new car borrowers increased only modestly in 2022.
• Consumer demand: The U.S. and the world largely reopened in 2022 after more than a year in economic "hibernation" due to the global pandemic. Broadly, more consumers started buying up goods and services they were deprived of in 2020 and 2021. Moreover, bank account balances remained relatively flush, thanks to government stimulus payments many consumers socked away, and unemployment remained low, which kept household incomes stable if not rising for much of the year.

Each of these factors is expected to cool in 2023. Inflation appears to be slowing into the new year, and consumers are beginning to show they're in fact sensitive to price increases and are purchasing less than in 2022. And Fed watchers are expecting rate increases to end by spring 2023. Assuming a mitigation of each of these three factors, debt levels aren't likely to increase as much in 2023.