Debt Payments Are Eating a Bigger Share of Pay Raises, a Study Finds

Spending by consumers has helped keep the U.S. economy strong. But CNBC reports that new research shows debt payments are taking a growing bite out of what people earn, which leaves less to spend or save.

An analysis by the think tank The Century Foundation and the consumer group Protect Borrowers looked at credit records for millions of Americans aged 25 to 64, together with Census Bureau income data. It counted payments on credit cards, car loans and leases, student loans and home equity lines of credit. It left out mortgages and some other kinds of borrowing, such as many buy now, pay later loans.

The researchers estimate that a typical household's monthly take-home pay, after accounting for inflation, rose by $109 between late 2022 and early 2026. Over the same time, a worker's monthly debt payments rose by $57. For a household with one earner, that means 52 cents of every extra dollar of income went to higher debt payments. For a household with two earners, the researchers estimate that all of the gain, and a bit more, went to debt. Debt payments, after inflation, rose nearly 15% in about three years, about eight times faster than household income, which grew by less than 2%.

Angela Hanks of The Century Foundation said the findings may even understate the pressure on families, since adding mortgages and loans that do not show up in a credit file would make payments look higher. More people also use credit cards to cover basic costs when their paychecks fall short. Federal Reserve data points the same way. Back in 2022, 6.5% of families used over 40% of their money to pay off debts, but that number grew to 8.6% in 2025.

How can you avoid a debt trap? Even debt that is often called "good," like a mortgage or student loans, can become a burden, said Matt Schulz of LendingTree. He suggests three simple steps. Set a budget, so you know what you can really spend before you borrow or shop. Make a list, so you shop with specific purchases in mind and avoid impulse buys. And compare prices, because shopping around can lower costs and how much you may need to borrow.