Low-income Americans are struggling to pay their bills on time, raising concerns over a potential delinquency spike as the economy begins to cool.

According to new research by the New York Fed, early delinquencies (30 days late) on auto and credit card loans have been on the rise among low-income borrowers and now exceed pre-pandemic levels.

“Low- and moderate-income debt holders are struggling in today’s post-pandemic period,” Fed researchers wrote. “We see this in rising early delinquencies in auto and credit card debt.”

Since the end of the pandemic, “financial stress appears to have risen” in low-income communities, the researchers said, adding that 57% of households in these areas are considered rent-burdened.

That means more than 30% of their monthly income goes toward rent.

Low-income homeowners don’t fare much better. According to the Fed, these homeowners missed the opportunity to refinance their mortgages in 2020 and 2021 when rates were at rock bottom.

“Most low-income homeowners did not refinance during the mortgage refinancing boom, missing an opportunity to lower monthly mortgage payments,” the researchers noted.

Meanwhile, auto payment delinquencies are rising partly because loan balances are increasing. By the third quarter of 2023, the average car loan for low-income households was $24,700—a 33.5% increase from 2019.

The post-pandemic recovery was supposed to be the tide that lifted all boats, but all it has done is saddle Americans with more debt.

Skipping meals, eating less

Despite earning more money since the pandemic, there’s evidence that Americans are worse off today than they were a few years ago. As Creditnews reported, inflation robbed Americans of a hefty raise in 2022 as real wages declined.

Even as inflation cooled in 2023, certain price categories like rent and services have been sticky.

With less money in their pockets, more households have relied on food stamps, such as the Supplemental Nutrition Assistance Program (SNAP).

According to a study by Propel Inc., a benefits software developer, 42% of SNAP recipients who received extended Covid benefits skipped meals in August, and 55% ate less because they couldn’t afford groceries.

A separate survey by Clever Real Estate found that nearly four out of ten Americans have skipped meals because of elevated housing costs.

Experts say a growing number of Americans are experiencing a “hunger crisis” because they can't afford groceries.

"When I see one in three households with children reporting that their children were hungry, or they skipped a meal, that shouldn't happen,” Catherine D'Amato, CEO of the Greater Boston Food Bank, told CBS MoneyWatch.

D’Amato was referring to her group’s research, which found that 33% of Massachusetts households were food insecure in 2022.

There seems to be a correlation between a lack of housing affordability and food insecurity. According to Creditnews Research, Massachusetts has the fifth-highest “house poor” ranking in the country, defined as the percentage of Americans spending at least one-third of their income on housing.

For many, the only stop-gap is taking on even more credit.

Household debt continues to grow

According to the latest Fed data, total household debt reached a record $17.29 trillion in the third quarter of 2023. Of which credit card balances and auto loans each crossed the historic $1 trillion mark.

As the debt strain grows, banks are increasingly turning down applications for new lines of credit due to "greater consumer fragility", according to a report by the Philadelphia Fed.

Economists say higher interest rates have made it more difficult for households to pay off existing debts, which forces them into a vicious cycle.

“[W]ith elevated interest rates, paying that debt becomes more expensive, and with consumers continuing to take on more debt, this combination will put more pressure on some households who have those tighter budgets,” said Sofia Baig, an economist at Morning Consult, a global intelligence firm.