Publication date: 24.07.2025
Types of Debt in the U.S.: Credit Cards, Medical Bills, Student Loans
The U.S. financial system is closely tied to the concepts of credit and debt. Most households regularly deal with various forms of debt—from short-term daily expenses to long-term obligations like student loans. Each type of debt has its own characteristics, repayment terms, risks, and legal regulations. In this article, we explore the three most common types of debt in the U.S.—credit card debt, medical bills, and student loans—and explain how they work, how they affect your credit history, and how to manage them effectively.
1. General Overview of Consumer Debt in the U.S.
According to the latest Federal Reserve reports, total consumer debt in the U.S. exceeds $17 trillion.
This record figure includes mortgages, auto loans, student loans, credit cards, and medical debt. The most problematic category remains unsecured debt—those not backed by assets—particularly credit cards and medical bills. These often carry high interest rates and can accumulate quickly, especially if the borrower is unable to meet their obligations on time.
2. Credit Card Debt: Essence, Risks, Management
Credit cards in the U.S. are a convenient but risky financial tool. They provide access to revolving credit. If the user doesn't pay the full balance each month, interest is charged on the remaining amount, which can be very high. The average Annual Percentage Rate (APR) in 2025 is about 21–26%.
Risks of credit cards include:
- accumulating debt by paying only the minimum payment;
- debt growth due to compounding interest;
- high risk of missed payments in case of income loss;
- impact on credit score due to high utilization and late payments.
For management: use auto-pay, balance transfers to 0% APR cards, or debt consolidation programs through credit unions.
3. Medical Debt: Causes and Impact
Medical debt arises when a patient cannot fully cover healthcare expenses—even with insurance. Common sources include surgeries, hospitalization, emergency care, and dentistry. Given the high cost of healthcare in the U.S., medical debt is the second most common cause of household bankruptcy.
Until 2022, unpaid medical bills were automatically sent to collection agencies. Now, under new credit bureau policies, medical debt won’t appear on credit reports for one year. Paid debts are removed entirely. However, medical debt over $500 that remains unpaid after one year can negatively impact your credit history.
4. Student Loans: Types, Terms, Repayment
There are two main types of student loans in the U.S.: federal and private. Federal loans are provided by the government and offer fixed rates, flexible terms, and forgiveness programs. Private loans are less flexible, often with higher interest rates and eligibility based on credit score.
Key features of student loans:
- deferred payments until graduation (grace period);
- Income-Based Repayment programs;
- forgiveness after 10–25 years or through public service (PSLF);
- not dischargeable in bankruptcy—except in rare cases.
Between 2023–2025, student debt remains a hot political topic, with limited forgiveness offered to certain groups by the federal government.
5. How Debt Affects Your Credit Score
Your credit score (FICO or VantageScore) is based on 5 key factors:
- Payment history (35%) — late payments are most damaging;
- Amounts owed (30%) — stay below 30% of your credit limit;
- Length of credit history (15%) — older accounts help your score;
- Credit mix (10%) — different types of credit improve your score;
- New credit inquiries (10%) — frequent hard inquiries lower your score.
Debts sent to collections can drop your score by 50–100 points and remain on your report for up to 7 years, even after being paid.
6. Consumer Rights for Each Type of Debt
American consumers have a range of rights when interacting with creditors and debt collectors:
- FCRA: allows disputing errors in the credit report;
- FDCPA: prohibits harassment by debt collectors;
- HEA and CARES Act: regulate student loans and benefits;
- HIPAA: protects medical information from unauthorized disclosure.
There are also consumer protection programs at the CFPB, FTC, and the Attorney General’s office of each state.
7. Debt Resolution Mechanisms
When debt accumulates and repayment becomes difficult, consider the following strategies:
- Consolidation — combining several debts into one with a lower APR;
- Negotiation with the creditor — to lower the interest rate or extend the terms;
- Debt settlement — paying a reduced amount as full satisfaction;
- Forgiveness or restructuring programs (especially for student loans);
- Credit counselor or attorney in cases of complex disputes or collections.
8. Tips for Responsible Debt Management
Responsible debt management is key to maintaining a good credit history, financial stability, and avoiding problems with creditors or collectors. Here are some practical tips to help control your debt levels:
- Create a budget and regularly monitor your debt obligations.
Develop a monthly budget that clearly lists all income sources and expenses, including debt payments. Regular updates will help you avoid late payments and unwanted debt accumulation. - Avoid using more than 30% of your credit limit.
A high credit utilization ratio negatively affects your credit score. Try to keep your balance as low as possible — ideally under 10% of your credit limit. - Pay all bills on time.
Even short delays can hurt your credit history. Use automatic payments or reminders to avoid missing due dates. - Don't hesitate to seek help from financial advisors.
If your debt becomes unmanageable, financial planners can help create a customized repayment plan, negotiate with creditors, or recommend restructuring programs. - Regularly review your credit reports on AnnualCreditReport.com.
This helps detect errors, fraud, or forgotten debts. Check reports from each of the three major bureaus (Experian, TransUnion, Equifax) at least once every four months. - Avoid taking on new debt unless absolutely necessary.
Analyze your ability to repay before taking out new credit. Focus on saving rather than borrowing for consumption. - Prioritize high-interest debts.
Paying off high-interest debt (e.g., credit cards) reduces total servicing costs.
Responsible debt management not only strengthens your financial stability but also improves conditions for future credit, housing, or employment opportunities.
Each type of debt in the U.S. has its own characteristics, legal framework, and impact on a consumer’s financial life. Understanding how credit cards, medical debt, and student loans work enables better financial control, helps avoid accumulating obligations, and ensures timely protection of your rights. Smart debt management is the key to financial stability and a healthy credit history. Remember, support is available — for those who seek advice and act proactively.
