The debt divide: how car and student loans quietly split America into two economies

Two Americans can earn the same salary, pay the same rent, and shop at the same grocery store — and still inhabit completely different financial realities. The variable that separates them is often invisible in the national conversation about affordability: whether they are carrying a car loan, a student loan, or both.

New data sampled from millions of consumers' credit files, provided to The Washington Post by the Urban Institute, puts hard numbers on that divide. More than 74 million U.S. adults are currently carrying auto debt, with a record-high average monthly payment of $716. More than 36 million adults have student loan debt, with an average monthly payment of $316. For the roughly 6 percent of adults who hold both at once, those payments routinely exceed $1,000 a month — before rent, groceries, or utilities.

In total, 36 percent of U.S. adults are currently paying off a car loan, a student loan, or both. Among adults under 55, the Urban Institute data shows that figure rises to about 45 percent in every age bracket. The burden eases with age: 36 percent of 55-to-64-year-olds carry one or both forms of debt, falling to 18 percent of those over 65.

We have all these old rules of thumb about how much your housing payment can be as a percent of your income, or how much you should be saving as a percent of your income.— Mariel Beasley, head of research, SaverLife

Those standard rules — including the widely cited guideline that housing should consume no more than 30 percent of income — were built without debt in mind, Beasley said. Spending 30 percent of income on rent might be manageable for someone with no other obligations, and punishing for someone with the same income who also owes $700 a month on student loans.

If you were lucky enough to graduate without student loans, or you were able to graduate with low enough student loans that you were able to pay them off quickly, you're just at such a massive advantage in every other aspect of your household budget.— Mariel Beasley, head of research, SaverLife

That advantage compounds over time. People carrying debt often skip workplace retirement accounts and, in doing so, forfeit employer-matched contributions — a form of income that debt-free peers can capture simply by showing up.

The geographic picture adds another layer. According to the Urban Institute data, average combined monthly payments for people simultaneously carrying both types of debt range from $900 to $1,100 in every state. But the underlying debt loads differ sharply: total combined debt runs under $60,000 in South Dakota and exceeds $82,000 in Maryland and $87,000 in Washington, D.C.

If you look over time, you saw people getting more debt. The same people, even if they had the same rent or utility payments today, they're much worse off than before the pandemic, just because now, they have a credit card to pay, an auto loan to pay.— Breno Braga, researcher, Urban Institute

The pandemic reshuffled the debt picture in ways that are still playing out. Student loan obligations, paused for years, are returning. For car loans, the share of adults carrying debt has actually declined slightly — from 31 percent in 2019 to 28 percent — but the amounts owed have risen steeply as vehicle prices and interest rates climbed.

Waverly Reynolds, 48, is living the collision of those trends. She went back to school after having children, completing a bachelor's degree in health information systems and criminal justice in 2015. She made student loan payments initially, then stopped when the pandemic pause began in 2020. That breathing room led her to take out a five-year car loan the same year. Now both debts are converging.

Reynolds had planned to enroll in the Save income-based repayment plan created under the Biden administration, which would have set her payments at roughly $330 a month. The Trump administration revoked that plan. She is now facing $700-a-month student loan payments on top of a $45,000 annual salary from her full-time job at a health insurance broker.

I'm terrified how I'm going to be able to afford them.— Waverly Reynolds

To cover her $2,100 monthly rent in Texas — where she lives with one of her adult sons, who is in college — Reynolds works a second job taking customer service calls for Neiman Marcus until midnight many nights, earning about $15,000 a year on top of her salary. Earlier this year, she paid off her car loan.

I thank God every day that I have paid off my car so I don't have a car payment. I won't complain. I'm blessed. I feel like I do make decent money. But I'm not rich.— Waverly Reynolds

The debt divide sits inside a larger structural problem identified by the Economic Policy Institute, using new Congressional Budget Office data. Between 1979 and 2022, market income for the top 1 percent of non-elderly households grew 277 percent — from $784,573 to $2.958 million. For the middle fifth of households, growth was just 26 percent, from $76,359 to $96,335. The EPI calculates this gap as an 'inequality tax': by 2022, middle-class families were forgoing $30,676 per year in income they would have received had their earnings kept pace with average income growth since 1979. Even after accounting for taxes and government transfers, that figure remained $19,320 per household.

Affordability is the outcome of a race between prices and incomes, the Economic Policy Institute analysis notes.

The EPI analysis attributes the income stagnation not to market forces but to deliberate policy choices — specifically, the rollback of labor protections and worker bargaining power that had kept growth broadly shared in the decades following World War II. The top 1 percent gained roughly $1.1 million from rising inequality in 2022 alone, while households in the 96th to 99th percentiles gained about $88,000. The lowest-income households saw slight net gains, because expanded means-tested benefits — programs like Medicaid and food stamps — offset their loss of market income. The EPI notes those transfers are now under pressure from cuts included in a Republican tax and spending bill passed in 2025.

Together, the two datasets describe a compounding problem: typical families have fallen further behind on wages for more than four decades, and a significant share of them are also carrying monthly debt obligations that standard affordability frameworks were never designed to account for. For those households, the math of daily life is simply harder — and the gap between them and debt-free peers at the same income level keeps widening.

Why it matters — For the roughly one-third of American adults carrying car or student debt, standard affordability benchmarks like the 30%-of-income housing rule are effectively broken — making the same paycheck worth measurably less than it is for debt-free peers at identical incomes.

Reported by dnyuz.com, epi.org