Despite continuing concerns about inflation and high interest rates, Americans' debt is actually dropping year-over-year, according to a LendingTree report.
LendingTree's report, which was published earlier this month, found that non-mortgage debt declined by 10.6 percent from 2023 to 2024. That took it from $40,470 to $36,167 across all 50 U.S. states.
"Given the overall sentiment on the economy, it's no surprise that Americans are cutting back on spending and focusing on paying down the debt they've accumulated in the years following the pandemic," Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek. "We've seen through data over the last year how consumers are finally waking up to the reality that they have larger debt loads mixed with higher interest rates, and that combination can be a dangerous one when trying to get their finances in order."
Five states, Nevada, North Dakota, Mississippi, Oklahoma and Maryland, were able to drop their total debt by double digit percentages. Those states saw decreases of 11.5 percent, 11.5 percent, 11 percent, 10.2 percent and 10.1 percent, respectively.
For nonmortgage debt, not total debt, 33 states were able to lower their debt by double digit percentages.
"We're seeing a shift toward financial caution," Michael Ryan, a finance expert and the founder of michaelryanmoney.com, told Newsweek. "Between fears of a looming recession and the pandemic-era lesson of 'prepare for the unexpected,' more people are buckling down. Families are trimming unnecessary expenses and tackling their debt with gusto."
Total debt in LendingTree's report encompassed mortgages, auto loans, student loans, credit cards and personal loans.
Personal, auto and student loan debt were the three types that saw average balances decline nationally, at 33 percent, 14.9 percent and 10.5 percent, showing many Americans were able to make some steady progress on those types of debts.
Student loan debt was especially key in getting overall debt rates down for Americans, Kevin Thompson, a finance expert and the founder of 9i Capital Group, told Newsweek.
"A significant portion of the national debt decrease can be attributed to student loan forgiveness programs," Thompson added.
President Joe Biden forgave $39 billion in student loans last year, allowing many to start paying other outstanding debts.
Still, Thompson said the lower debt may not reflect an optimistic economic outlook.
"The tightening of credit suggests a cautious financial landscape, where banks and credit card companies are implementing stricter lending standards," he said. "This trend creates higher barriers to entry for low-income consumers, with financial institutions prioritizing more well-capitalized borrowers to safeguard against risk."
Debt expert Bernadette Joy, also the author of Crush Your Money Goals, echoed this sentiment.
"I hope this decline indicates that more Americans are prioritizing financial health and reducing liabilities, but it could also suggest caution as people may be bracing for economic uncertainties," Joy told Newsweek.
Ryan said baby boomers also played a major role in the lowered debt as they are prioritizing financial security as they near retirement.
"It's hard to enjoy retirement if credit card debt is eating away at your savings, so this generation is actively working to reduce their financial liabilities," Ryan said.
Looking ahead, Thompson said Americans are likely to continue reducing their debt burdens, but it will come at the cost of lower consumer demand.
"With restricted access to credit, households may cut back on spending, which could slow economic activity in areas dependent on consumer goods," he said. "Tight credit conditions may persist, reinforcing a cautious borrowing and lending environment."
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