Americans are struggling to pay their credit card and student-loan bills
A new Urban Institute analysis showed that nearly a quarter of Americans have debt in collections, with higher rates of distress in the South.
Recent analysis from the Urban Institute reveals that nearly a quarter of Americans are grappling with debt in collections. This figure includes individuals struggling with student loans, credit card bills, and medical expenses. The median amount owed in collections stands at $2,913, with some regions, such as rural Jim Hogg County in south Texas, experiencing an even higher prevalence of debt in collections, exceeding 50%.
Disparities in debt collection are evident, with communities of color facing a 50% greater likelihood of having debt sent to collections compared to predominantly white communities. The time it takes for a debt to be sent to collections varies depending on the type of debt. Credit card payments typically lead to collections after four to six months of missed payments, while medical debt lags for three to six months.
The process to rehabilitate a student loan varies based on whether it is federal or private. Federal loans typically default after 270 days, during which borrowers have the chance to work with their servicer to bring their loan back to good standing. A federal student loan default in 2026 affected 16% of borrowers, with an average defaulted amount of $5,078. Private student loans, on the other hand, usually default after 180 days and follow standard collection procedures.
Overall, Americans owe a staggering $18.8 trillion in debt as of the second quarter of 2026, with 4.7% of this debt having reached a delinquent state. The New York Federal Reserve reports that 10.6% of student loan debt is 90 days or more delinquent. Factors such as inflation, rising grocery prices, and high interest rates on credit cards and student loans have contributed to the financial strain faced by many Americans.
Consequently, some individuals are forced to prioritize which bills to pay, often putting off larger debts to focus on smaller ones. For example, Susan Cannon, a 73-year-old with nearly $40,000 in debt across 19 credit cards with interest rates ranging from 12% to nearly 35%, expressed her frustration, saying, "I've always tried to put some in savings, but it's gotten to where it's all going toward interest. I just cannot get ahead."
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