Mortgage balances led the rise, growing by $131 billion to $12.94 trillion as housing activity remained stable despite affordability concerns. Auto loan originations also climbed, totaling $188 billion — up from $166 billion in Q1. Credit card balances rose by $27 billion, while lenders expanded aggregate credit limits by $78 billion, pointing to continued lender optimism in extending consumer credit.
But that expansion came alongside rising signs of financial pressure. Student loan delinquencies surged as paused missed payments resumed reporting. The share of seriously delinquent student debt jumped to 12.9% — up from just 0.8% a year ago. More than 2.2 million borrowers saw their credit scores fall by over 100 points, and 1 million lost at least 150. Bloomberg Economics estimates these credit shocks could pull $63 billion in consumer spending out of the economy on an annualized basis.
Delinquency rates for mortgages and home equity lines of credit also ticked up, though performance remains strong relative to historical benchmarks. Still, rising mortgage costs have pushed 70% of households earning more than $100,000 into living paycheck to paycheck — a sharp shift in financial stability among higher-income consumers.
As traditional credit becomes harder to manage, younger consumers are turning to alternatives. Buy now, pay later (BNPL) usage continues to rise, especially among Generation Z and younger millennials — 58% of whom now prefer BNPL over credit cards. That shift is also shaping commerce habits: 43% of shoppers now choose merchants based on whether installment plans are available.
At the same time, 69% of Gen Z consumers report living paycheck to paycheck. One in three U.S. adults also said they experience surprise expenses of several hundred dollars each year — making short-term financing tools more of a necessity than a convenience.
Together, these trends reveal a consumer credit landscape in flux. Borrowing continues to rise, but so do the risks tied to repayment, especially for younger and mid-income households navigating higher costs and shrinking buffers.
