Debt in collections affects nearly 1 in 4 Americans with credit records, and the financial burden is hitting communities of color especially hard, according to newly updated research from the Urban Institute. The findings show that 23.5% of people with credit records have unpaid debts that have reached collections, with a median balance of $2,913. In predominantly nonwhite communities, that figure rises to nearly 30%, with a median collections balance of $3,009.
The Urban Institute updated its Debt in America research on November 10, 2026, using credit bureau information from August 2026. Researchers examined more than 10 million credit records alongside U.S. Census Bureau data to understand where Americans are falling behind financially. The findings cover accounts that creditors have written off after missed payments and unpaid bills reported to credit bureaus for collection. These are more serious financial problems than simply missing a payment by a few days.
The racial disparities are among the most significant findings. Approximately 29.9% of people with credit records living in predominantly nonwhite ZIP codes have debt in collections, compared with about 20% in majority-white communities. That means the collections rate is nearly 50% higher in communities of color.
The researchers based those comparisons on neighborhood demographics rather than borrowers’ individual races. ZIP codes where at least half of residents are people of color were classified as communities of color. While the findings do not establish the race of every borrower, they reveal substantial differences in financial hardship depending on where Americans live.
Those disparities exist alongside longstanding differences in household income, savings, homeownership, and access to affordable credit. Separate Urban Institute research published in March 2026 found that Black households continue to hold substantially less wealth than white households, leaving fewer financial assets available to absorb unexpected expenses. A medical emergency, expensive car repair, or interruption in employment can be especially difficult for households without substantial savings.
Rising living expenses are adding to the pressure. Breno Braga, a senior fellow at the Urban Institute, told CBS News that higher everyday costs are making it harder for families to pay for basic necessities. Expensive borrowing can create additional problems when households depend on credit cards or loans to cover expenses their regular income cannot fully support.
The latest figures also show that debt in collections has become slightly more common nationwide compared with 2025, when the share of Americans with credit records facing collections was below 23%.
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Separate data from the Federal Reserve Bank of New York provides another picture of the financial strain. On November 10, the bank reported that total U.S. household debt reached approximately $19.1 trillion during the third quarter of 2026, increasing by $334 billion from the previous quarter. Credit card balances alone reached $1.29 trillion, while auto loan balances climbed to approximately $1.73 trillion.
Not all outstanding household debt is delinquent or in collections. However, the New York Fed found that 5% of outstanding household debt was in some stage of delinquency during the third quarter, an increase of 0.3 percentage points from the previous quarter.
Geography also plays a significant role. The Urban Institute data shows that Louisiana has one of the country’s highest shares of people with debt in collections, at approximately 34.7%. Texas follows at 33.8%, while Georgia stands at 32.8%. Minnesota, by comparison, has a rate of approximately 13.6%. The differences demonstrate how financial distress varies across states, even as the national numbers point to widespread problems.
Student loans are another source of financial pressure. Nearly 16% of borrowers with student loans are delinquent or in default, according to the Urban Institute’s analysis. In Louisiana, the student loan delinquency rate approaches 22%. Falling behind on education debt can place additional strain on borrowers already managing rent, transportation, groceries, and other recurring expenses.
Medical bills are creating difficulties as well. Approximately 3% of Americans with credit records have reported medical debt in collections, with a median balance of $1,492. The actual number of people struggling with unpaid medical bills may be higher because some debts no longer appear on credit reports.
Since 2022, the three major credit reporting companies have changed how they handle medical collections, including removing certain smaller or previously paid debts. Additional restrictions in 15 states and Washington, D.C., limit medical debt reporting. Those protections can reduce the damage to consumers’ credit histories, but removing an unpaid medical bill from a credit report does not necessarily eliminate the amount owed.
For households already under pressure, collections can make financial recovery more difficult. Negative information on credit reports may affect access to loans, borrowing costs, and rental housing applications. Someone struggling to pay an existing bill may eventually face higher costs when attempting to borrow money or secure housing.
Consumers also have protections when debt collectors contact them. The Consumer Financial Protection Bureau advises people to confirm the identity of a collector and request information verifying the debt before making payments. Generally, collectors must provide details about the amount owed, the creditor, and how to dispute the balance. Consumers who dispute a debt in writing within the required 30-day period can require collection activity to pause until verification is provided.
Americans can also review their credit reports from Equifax, Experian, and TransUnion for free each week through AnnualCreditReport.com. Checking those reports can help identify unfamiliar collection accounts, incorrect balances, or debts that have already been paid.
