More U.S. households now feel financially vulnerable, with 17% reporting a downturn in 2025 versus 15% the prior year, according to research by The Financial Health Network and the University of Southern California.
Debt and bill payments
Less than 70% of respondents said they paid all their bills on time over the past 12 months, a drop of 3 points from the prior year. The share of consumers reporting “unmanageable levels of debt” also increased, rising from 29% to 31%.
Low-income consumers have redirected more than $10 billion from discretionary purchases toward essentials like groceries since 2019, while higher-income households spent more on discretionary items than their lower-income counterparts.
Those with student loans are facing heightened vulnerability. More than a quarter of borrowers reported feeling financially insecure, up from 21% a year ago. Restrictive policies on federal nutrition and medical assistance programs have offset recent tax breaks, adding to the strain on households. Recently enacted restrictions on federal nutrition and medical assistance programs have offset tax breaks, while student loan delinquencies have surged to high rates, leaving many borrowers struggling to maintain stability.
Inflation has eroded purchasing power for both groups. Prices have climbed 35% for low-income consumers and 31% for high-income consumers since January 2018, according to Numerator data.
“Uncertainty about expectations for both earnings growth and inflation grew following the pandemic,” the Financial Health Network authors stated in their report. For many, the future also looks bleak, as the number of consumers expecting to be worse off financially in five years “rose sharply between 2020 and 2026,” according to their report.
Spending trends
Despite these pressures, consumer spending has remained steady. Retail sales in key segments rose 6.7% year over year in August, driven partly by late summer back-to-school shopping. Analysts expect this momentum to continue into the fall as retailers position inventory for the holiday season.