Consumer spending has powered the American economy during and after the pandemic. With stimulus checks in hand and low interest rates, many spent and borrowed freely, especially high earners.

With low interest rates, high earners spent on luxuries like cars, vacations, home upgrades, and even premium subscriptions.

However, fast forward to now, consumer debt has soared to $18.4 trillion. And while it may be easy to assume that lower-income earners are the ones feeling the squeeze, that may no longer be the case.

Those making $150,000 or more are falling behind on their credit card and auto loan bills which is highly unusual.

This isn’t a sign that the economy is about to collapse, but it does signal that consumer financial stress is building in places where it usually doesn’t.

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Consumer-driven spending has powered the American economy, especially during the pandemic and after it ended.

With stimulus checks in hand and low interest rates, consumers had the confidence to borrow and spend freely.

The same could be said of high earners, since they already had the means to spend, the low-interest-rate environment only emboldened them to spend on luxuries like cars, vacations, home upgrades, and even premium subscriptions.

Fast forward to now, the U.S. economy is sitting on a massive pile of debt, and as of the second quarter of 2025, consumer debt has soared to $18.4 trillion. While it may be easy to assume the bulk of this debt is from lower-income households, one would need to rethink this assumption.

It seems high-income earners are feeling the squeeze. Those making $150,000 or more are falling behind on their credit card and auto loan bills.

Said another way, big spenders are struggling to make ends meet, and that’s highly unusual.

While delinquencies are ticking higher, overall household debt remains far below crisis thresholds.

This isn’t a warning sign yet, but it does signal that consumer financial stress is building in places where it usually doesn’t.

Data from credit-scoring firm VantageScore shows that Americans making over $150,000 are falling behind on their credit card and auto loan payments faster than anyone else. Their delinquency rate has surged nearly 20% over the past two years.

Moreover, according to a recent study from the Federal Reserve Bank of Louis, the number of people who make late card payments in the highest-income ZIP codes are rising at double the pace of low-income areas over the last year.

For one, soaring interest rates, combined with the end of pandemic-era student loan forgiveness programs have made debt servicing much more expensive for consumers.

Resumed student loan payments are squeezing household budgets. According to New York Fed data, the percentage of balances on federal student loans that were at least 90 days delinquent rose to 7.7% in the first three months of the year.

Meanwhile, it’s become increasingly difficult to make more money too.

The labor market has been showing signs of cooling off as companies aren’t as hiring freezes have swept through the jobs market. Layoffs and hirings have remained low through September of this year.

Moreover, wage growth has yet to pick up from 2022 highs of 6.7%. At present, wage growth remains at 4.1% as of August this year.

All these pressures combined are already hitting discretionary spending. During the first quarter, consumer spend has been at its weakest since the start of the pandemic. Data from April and May have indicated lesser spending in areas like recreation, air transportation, and accommodations.

For the past few years, spending has driven the market’s continued growth even as rates went up, inflation soared, and tariffs added volatility to the market.

Many assumed that well-off households would keep things afloat by shopping, borrowing, and traveling even as others pulled back.

However, that dynamic is shifting.

Defaults are rising where the wallets are deepest. And early signs suggest consumers are reining in the very purchases—cars, vacations, luxury services—that drove the post-COVID expansion.

While it can be tempting to assume that the economy is in the midst of a crisis, that isn’t necessarily the case. And this means investors shouldn’t panic.

Overall household debt remains subdued. Debt-to-GDP is around 68%—down sharply from 98% in 2008 and closer to late-1990s levels. That reflects a post-crisis period of deleveraging, especially in major categories like mortgages.

Most consumers aren’t overleveraged, and the broader debt situation remains stable. But rising delinquencies among high-income borrowers are unusual—and worth watching.

If debt levels begin rising from here, then it could be a signal of deeper cracks in the consumer-driven growth story.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research