Rising Federal Debt Increases Household Borrowing Costs and Slows Wage Growth
The U.S. federal debt, which reached 99% of GDP in the first quarter of 2026, is significantly impacting American households and businesses by increasing borrowing costs. This level of debt, the highest since World War II (excluding the COVID-19 pandemic recession quarter), has led to an estimated 1.36 percentage-point increase in current-day interest rates compared to what they would otherwise be. This rise in rates translates to higher costs for mortgages, auto loans, and student loans. For a household with a mortgage, a new auto loan, and an undergraduate student loan, this increase amounts to approximately $4,500 per year in additional costs. The financial strain is evident in rising delinquency rates across various loan types, particularly student loans, which spiked after pandemic-era payment pauses ended.