Debt is eating up a bigger chunk of your raise, research shows

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Consumer spending has helped keep the U.S. economy resilient. Yet research shows debt payments are taking a growing bite out of Americans' income gains, leaving less money available to spend or save.

A new analysis by the nonpartisan think tank The Century Foundation and the consumer advocacy group Protect Borrowers found that a typical U.S. household's estimated real take-home monthly pay rose $109 from late 2022 to early 2026. "Real" take-home pay is one's wage after accounting for inflation.

Meanwhile, a worker's monthly debt payments rose $57. 

In other words, researchers estimate that for a one-earner household, 52 cents of every dollar of income gained in recent years goes to higher debt payments. For a two-earner household, they project that the entire real income gain, and then some, goes toward debt. 

The analysis also found inflation-adjusted debt payments rose nearly 15% over roughly three years — about eight times as fast as household income, which grew less than 2%.

A shopper looks for items in a department store on October 14, 2026 in Miami, Florida.

Joe Raedle | Getty Images News | Getty Images

The Century Foundation and Protect Borrowers analyzed credit records for millions of working-age Americans ages 25 to 64, along with Census Bureau income data. The research includes payments on credit cards, auto loans and leases, student loans and home equity lines of credit. It excludes mortgages and some other borrowing, including many buy now, pay later loans and medical payment plans.

Angela Hanks, chief of policy programs at The Century Foundation, said the findings may understate the financial pressure households face.

"Even though it shows that workers' wages are getting eaten up by debt payments at a tremendous level," Hanks said, the findings represent "perhaps the rosiest analysis that we could have done using the data." 

She said adding mortgage payments as well as installment loans not included in a credit file — like buy now, pay later and payday loans — would have made household debt payments higher.

More consumers are relying on credit cards to cover basic expenses when their paychecks fall short, she said.

Separate Federal Reserve data underscores the strain. The Fed's latest Survey of Consumer Finances found 8.6% of families spent more than 40% of their income on debt payments in 2025, up from 6.5% in 2022 — a level not seen since the 2013 survey.

Mortgages and student loans are often considered "good debt" because they may help build wealth or earning power. But even potentially beneficial debt, or debt taken on for necessary expenses, can become a financial burden.

"When that debt stretches out for six months or a year or longer, or if you're taking out a seven-year auto loan, or if you're taking out a longer mortgage than maybe you ideally would want to, or a bigger mortgage, that's when things get a little dicey," said Matt Schulz, chief consumer finance analyst at LendingTree and author of "Ask Questions, Save Money, Make More."

To avoid taking on more debt than you can afford, he recommends three simple steps:

• Set a budget. Know how much you can realistically spend before you borrow or shop.

• Make a list. Shop with specific purchases in mind rather than giving in to impulse buys.

• Compare prices. Shopping around can reduce costs and how much you may need to borrow.

Before taking on debt, consider the total borrowing cost, repayment terms and whether you have enough savings to handle unexpected expenses, Schulz said.

—CNBC's Stephanie Dhue contributed reporting.