Auto Loans Pass Student Loans, Becoming the Second-Largest Debt Burden for US Consumers

Posted on October 2, 2023 at 11:31am by

For the first time in several years, auto loans have passed student loans, becoming the second largest debt burden for U.S. consumers. Based on data from the Federal Reserve Bank of New York, auto loan debt has reached $1.582 trillion, compared to $1.569 trillion in student loan debt, WSJ Pro Bankruptcy reported.

During the financial crisis of 2008, many individuals, some of whom had lost their jobs, decided to go back to school for new education and training. This resulted in higher levels of student borrowing. However, during the pandemic, millions of Americans were able to set aside thoughts and stress about student loans, as the U.S. government paused payments and interest on federal student loans. Nonetheless, this did not mean that consumers stopped purchasing vehicles during this time.

Consumers in the U.S. continued to buy cars that were often sold at inflated prices. New and used vehicle inflation reached 20.4% in June 2021 and remained at that level until late 2022. Consumers with auto loans are now beginning to feel the pressure of inflation and a softening job market, with auto loan delinquencies reaching 7.3%, as reported by Yahoo! Finance.

While it is still unclear whether auto loans will continue to be a larger burden for consumers than student loans, it is seen as unlikely given that student loan interest charges are resuming and prices for new and used vehicles are weakening.

This may be a stressful time for Americans who have balances on both auto and student loans. If you are feeling overwhelmed and have questions about your auto or student loan debt, or if you are considering filing for bankruptcy, contact Sader Law Firm at (816) 561-1818 for a free phone consultation.