we all know that governments are drowning in debt
but there’s another debt crisis quietly unfolding in the background one that could hit much closer
to home the record-breaking mountain of consumer debt from soaring credit card balances to rising
mortgage payments and the return of student loan bills millions of Americans are feeling the
squeeze so in today’s video we’ll break down the data unpack what’s really happening and ask
whether a crisis could be brewing right under our noses my name is Guy and this is a video you
can’t afford to miss okay let’s start by getting our definition straight so whenever you hear the
word debt in the news chances are it refers to government or sovereign debt that massive figure
in the tens of trillions owed by the US government racked up through decades of deficit spending
governments borrow by issuing bonds promising to pay back investors with interest using future tax
revenue or in some cases by simply printing more money but consumer debt is a completely different
beast this is the money that regular people like you and me borrow from banks lenders and sometimes
the government itself it’s the sum total of all the credit cards auto loans mortgages student
loans and buy now pay later plans that keep the wheels of everyday life turning unlike government
debt which relies on a country’s ability to tax or print money consumer debt is collateralized by our
incomes our homes and our promises to pay and to put things into perspective as of Q1 2025 total
US household debt has reached a staggering 18.2 trillion that is the highest figure ever recorded
and it touches nearly every American family in one way or another but why do people take on consumer
debt well sometimes it’s about making those big life investments like buying a house or paying for
college other times though it’s about smoothing out cash flow between paychecks handling an
emergency or simply trying to keep up with rising living costs in the US consumer credit has been
woven into the very fabric of economic life after all it was the mass adoption of credit cards auto
loans and mortgages that fueled decades of growth in the 20th century and created what many still
call the American dream but here’s the catch when government debt gets too high the consequences
are mostly felt in financial markets interest rates go up the currency weakens maybe investors
get nervous but when consumer debt balloons the pain is felt on Main Street so to speak defaults
can mean losing your car your home or even your financial future and when millions of people feel
the squeeze at the same time the ripple effects can hit the entire economy so while politicians
in Washington DC debate the national debt ceiling millions of families across the country are
quietly facing their own ceilings on credit cards mortgages and student loans and by the way
if you’re enjoying the video so far be sure to smash that like button to help give it a boost and
if you haven’t already subscribe to the channel and ping that notification bell so you won’t miss
our next upload now the first form of consumer debt is credit card debt credit cards have become
a fixture of American life since the 1950s turning what used to be a cash and carry society into one
that thrives on plastic for decades credit cards promised flexibility and convenience embodied
by American Express’s famous don’t leave home without it slogan but this does the business
the American Express card shows exactly who’s who don’t leave home without it but beneath the
surface credit card debt has quietly become one of the riskiest forms of borrowing in the modern
economy see unlike a mortgage or a student loan credit card debt is revolving that means there’s
no set payoff date just a minimum payment that keeps you on the hook often for years what starts
out as a bit of financial breathing room can quickly snowball especially since any balance you
don’t pay off in full each month is hit with an average annual interest rate of over 20% in other
words if not done right borrowing on a credit card isn’t just expensive it can be punishing and the
numbers are nothing short of staggering as of Q1 2025 Americans owe more than 1.8 8 trillion on
their credit cards a sum that’s grown by more than 50% since the pandemic era lows of 2021
the typical card holder carrying a balance now owes over $7,300 and nearly half of all adult
credit card users didn’t pay off their full balance at least once in the past year meaning
they let some of that debt roll over to the next month piling up interest and making it harder
to get back to zero what’s striking is that this isn’t just about overspending on luxuries however
far from it surveys show that millions are relying on credit cards just to cover essentials like
groceries medical bills and even utility payments and it’s not just traditional bankissued credit
cards making life more expensive retail credit cards so think big box stores fashion brands
or even your local hardware chain often come with even higher interest rates sometimes as
high as 36% they’re pitched as a way to save a few% at the checkout but for those who don’t
pay in full the long-term cost can be crippling in fact retail cards have become a major driver
of consumer bankruptcies as their high interest rates and hefty late fees can quickly spiral out
of control now the use of credit cards has been fueled by persistent inflation wages that haven’t
kept pace with the rising cost of living and for many the psychological trap of minimum payments
the pain of buying is blunted when you tap a card instead of handing over cash and before
you know it those balances can quickly climb but perhaps most telling of all is the fact that
this problem isn’t confined to one age group or income bracket yes Gen Zed and millennials are
shouldering a growing share of the burden often using cards to fill the gap between paychecks but
data shows that credit card reliance is climbing across the board and there are already signs
that people can’t keep up as of Q1 2025 just over 3% of credit card balances are at least 30
days delinquent which simply means the payment is more than a month late that’s still well below
the peaks seen during the Great Recession but it is rising and history tells us that when economic
headwinds pick up delinquencies can accelerate fast well hello there i know you’re enjoying
the video immensely but I just very quickly debt trends of the last few years is buy now pay
later or BNPL for short bnpl has its roots in 19th century America when furniture makers and local
merchants would let customers take home a product and pay in installments but what’s changed is the
speed and scale at which technology has brought this old idea into the mainstream if you’ve bought
anything online lately you’ve almost certainly seen the option four easy payments zero interest
and at least on the surface no strings attached their pitch is simple convenience affordability
and none of those highinterest charges that come with traditional credit cards it’s no wonder
BNPL services exploded during the pandemic as lockdown shoppers turned to online retail and used
installment payments to stretch their budgets but here is where the story gets interesting unlike
credit cards most BNPL lenders don’t perform a hard credit check and approvals are often instant
now that’s great if you need new trainers or a laptop right away but it also means millions
especially younger lower income or financially vulnerable Americans have been swept up by the
ease of deferred payments according to recent data about 1 in5 Americans have used a BNPL service
with usage especially high among millennials and Gen Zed on paper the industry looks like a win-win
merchants love it because BNPL encourages shoppers to spend more and more often sometimes up to 30%
more per purchase the providers meanwhile charge retailers a fee and they make extra money from
late fees if you miss a payment for most users as long as you pay on time there’s no interest
sounds simple right well not quite the hidden risk with BNPL is that it’s incredibly easy to
take on more debt than you can manage there’s no centralized reporting system so you could
rack up installment plans across multiple apps without anyone including yourself really keeping
track unlike credit cards or traditional loans most BNPL providers aren’t required to report
their lending activity to credit agencies and as a result regulators are increasingly concerned
about so-called phantom debt meaning unreported under the radar borrowing that isn’t reflected
on credit reports this lack of transparency means much of the debt flies under the radar making
it difficult for economists lenders and even consumers themselves to get a true picture of the
risk what’s more some estimates say the BNPL debt pile could hit $700 billion by 2028 and if you do
miss a payment that interestfree promise quickly evaporates late fees can be severe sometimes
up to 50% of the payment amount your credit score can take a hit and your debt can be sold
to collections just like with traditional loans some surveys found that over 40% of BNPL users
had missed at least one payment and close to 30% said keeping up with installments made them fall
behind on other bills all told buy now pay later may look like an easy answer to rising prices but
for many it’s simply swapping one form of debt for another often with less transparency and more risk
than most shoppers realize and we actually have an entire video on BNPL by the way which you can
check out right over here okay next let’s turn to the largest debt that most Americans will ever
take on the mortgage now the word itself comes from old French literally a death pledge which
if you’ve ever looked at how long it takes to pay one off might sound about right now a mortgage
is a loan secured by property most commonly your home and mortgages have existed in some form
or other for centuries but it wasn’t until the 20th century that they became the backbone of the
American dream in the 1930s most people needed a 50% down payment in order to buy a house and loans
were typically short-term but following the Great Depression the US government stepped in creating
Fanny May and later Freddy Mack to make home ownership more accessible institutions we covered
in more depth right over here now by establishing these institutions the government standardized
the 30-year fixed rate loan and encouraged ever more borrowing helping transform the US into a
nation of homeowners fast forward to today and the numbers are simply massive americans owe a
staggering 12.8 trillion on 85 million mortgages that’s nearly 70% of all consumer debt in the US
the average borrower now owes just under $150,000 and the typical home price hovers around $510,000
more than double what it was just a decade ago but how did we get here well the pandemic set off
a housing frenzy as the Federal Reserve slashed interest rates to record lows millions locked in
30-year mortgages below 3% sending home prices skyrocketing as buyers scrambled to get in before
rates rose this created what’s now known as the golden handcuffs effect with homeowners sitting on
ultra low rates reluctant to sell even as market conditions change as a result inventory remains
tight in most regions but in 2025 we’re starting to see a flip steady high rates have resulted in
more homes for sale and in many places sellers outnumber buyers for the first time since the
great financial crisis of 2008 so what’s driving this shift well the main ingredient is mortgage
rates which have climbed to around 7% the highest sustained levels in more than 20 years for many
home ownership is increasingly out of reach and as affordability plunges sales volumes are
stagnating especially in markets that once led the boom yet it’s not all doom and gloom most
homeowners who bought or refinanced in the last few years are locked into those record low rates
and have built up significant equity in fact US households hold over $34 trillion in real estate
equity as of 2025 only about 2% of mortgages are underwater meaning the home is worth less than the
outstanding loan a far cry from the 26% seen at the depths of the 2008 crash but that doesn’t mean
everyone is safe delinquencies are on the rise with 0.7% of mortgages now seriously delinquent
that is at least 90 days past due on payments which is a jump from last year but still below
prepandemic norms new foreclosures are up too but remain just a fraction of what we saw during
the last housing collapse so while the headlines might not scream crisis just yet the reality is
more nuanced and the foundation of the American dream is starting to show some serious signs of
strain now if there’s one form of debt that’s become almost a regular part of life for millions
of Americans it’s the student loan at its core a student loan is simply money borrowed to pay for
higher education with the promise to pay it back plus interest after graduation but the origins and
the problems go much deeper so let’s rewind a bit the modern student loan system was born from good
intentions after World War II the GI Bill opened the doors to higher education for millions of
Americans paving the way for the federal student loan programs that followed what started as a way
to level the playing field gradually morphed into something else as college costs skyrocketed
and borrowing became the norm rather than the exception today the US stands out among advanced
economies for turning higher education into a debtfueled gamble but that shift didn’t happen by
accident with the federal government guaranteeing student loans colleges and universities quickly
realized they could ramp up fees year after year knowing that students could always borrow more
to cover the rising costs the result over the past two decades the total amount Americans
owe in student loans has soared from under $500 billion in the early 2000s to nearly $1.8
8 trillion today that’s a more than threefold increase and perhaps the clearest evidence that
easy credit hasn’t just helped students it’s also allowed colleges to charge more than ever before
today nearly 43 million people are on the hook with the average federal borrower owing more than
$38,000 for many it’s a bill that arrives before their first paycheck and lingers well into middle
age and for some especially those who pursued graduate degrees balances can easily top six
figures while the pandemic brought a brief relief under the Biden administration with payments and
interest paused in 2023 the bill finally came due again collections have resumed and the results
have been striking over one in five borrowers more than 20% are now 90 days or more past due which is
a record high that’s almost double the delinquency rate seen before the pandemic began worse millions
who default could soon face wage garnishment tax refund seizures or even reductions in Social
Security benefits but why is this hitting so hard well it’s because student loans aren’t just
another bill they’re often the difference between financial stability and falling behind
most borrowers pay between $100 and $300 a month but some face payments of $1,000 or more with
other costs of living on the rise even a modest payment therefore can tip a household budget into
the red and unlike other forms of debt student loans are notoriously difficult to discharge in
bankruptcy the politics meanwhile are heated the Biden administration cancelled more than $180
billion in loans for select groups but broader forgiveness plans were struck down by the Supreme
Court and the new administration has moved to limit access to loan relief programs meanwhile a
record number of Americans now say that they would use any student loan forgiveness simply to pay
down other debts a sign that the problem is less about education and more about the broader squeeze
on household finances there’s also a generational angle at play the largest absolute debts are now
held by Americans aged 35 to 49 often parents themselves still carrying their own student loans
while navigating college for their kids for many younger Americans the promise of a degree being
a ticket to the middle class feels increasingly hollow as they see high monthly payments stagnant
wages and the dream of home ownership slipping further out of reach but while it’s one thing to
talk about Americans taking on record levels of debt it’s another to ask who actually owns these
obligations let’s start with the basics credit card debt is typically owned by major banks think
JP Morgan Chase Capital 1 Cityroup as well as an expanding cast of retailers and fintech firms
mortgage debt though is a bit more complicated your bank might issue your home loan but
it’s often sold on to government sponsored enterprises like Fanny May and Freddy Mack these
institutions support over 70% of the US mortgage market providing a constant flow of credit but
also intertwining household finances with Wall Street these loans are then bundled into mortgage
back securities and snapped up by pension funds insurance companies and global investors student
loans are even more concentrated over 90% of this market is now held by the federal government
specifically the Department of Education and by extension the US Treasury the remainder is with
private lenders banks and state agencies when federal student loans go unpaid it’s not just
private lenders taking the hit it’s taxpayers since these loans are ultimately guaranteed with
public money and what about buy now pay later well BNPL debt is still a bit of a wild west most of
it is held directly by fintech companies like Cler Airm and Afterpay they either keep these loans on
their books or sell the receivables to banks asset managers or increasingly to third-party investors
through securitization the true ownership and risk exposure can be opaque and if a wave of
missed payments hits these fintexs and their investors take the initial losses but the impact
can ripple out to the broader financial system but what actually happens when people can’t pay well
the first step for banks card issuers and BNPL providers is usually a charge off wiping the
bad loan from their books though it’s hardly a victimless act for every dollar not paid back
the cost of borrowing creeps higher for everyone else and access to credit can tighten meanwhile
in the mortgage world widespread defaults mean foreclosures which can drag down home values
stress financial institutions and even shake confidence in the broader economy which we saw
vividly play out during the 2008 financial crisis so what does all this debt mean for the economy
as a whole well the fact is that in 2025 Americans are spending over $560 billion a year just on
interest payments alone to put it another way Americans now collectively work $18 billion hours
a year just to service the interest on their debts the growth rate of these interest payments has
outpaced wage growth by a factor of five since the 1970s meaning an ever larger share of household
budgets is eaten up by debt rather than spent elsewhere and that squeeze has real consequences
consumer spending makes up nearly 70% of US GDP so when more paychecks are going to banks mortgage
lenders or the Department of Education there’s less left for restaurants retail travel or new
businesses and we’re already seeing signs of a slowdown retail sales growth is flat auto
purchases are softening and even the housing market is declining in key cities delinquencies
add further fuel to the fire when someone falls behind on one debt they often start missing
payments on others as of early 2025 more than one in five federal student loan borrowers are 90
days or more delinquent a record high and credit card delinquencies have started to climb after
a historic lull these missed payments ripple outwards making banks more cautious and tightening
the flow of credit throughout the economy if defaults rise sharply then banks may pull back
on lending making it harder to get a car loan a mortgage or even a business line of credit higher
risk for lenders means higher interest rates for everyone tightening the squeeze on both consumers
and companies this is how a consumer debt crunch can evolve into a broader slowdown or even a
recession now of course it’s not all bad news many homeowners have locked in low rates and are
sitting on record equity and some consumers are paying down balances but as interest rates remain
elevated and the labor market cools the risk is that debt becomes a drag not just on individuals
and families but on growth and optimism across the country periods of rapid debt accumulation are
often followed by periods of painful deleveraging and what makes 2025 unique is just how many
Americans are feeling the squeeze at the same time across credit cards BNPL mortgages and
student loans so while we may not be on the edge of a dramatic crash just yet the era of
easy money is clearly over and the long slow squeeze of debt servicing may be the story that
shapes the US economy for years to come and if you want to know how sovereign debt plays a
part in all of this then check out our video on financial repression right over here if you
haven’t subscribe to the channel yet you can do so down there okay thanks so much for watching and
I’ll see you again very soon this is Guy signing
