Debt Management and Settlement

• Shoppers were more disciplined over Black Friday–Cyber Monday, prioritizing value
• “Buy now, pay later” services hit new records as consumers spread out payments
• In-store traffic fell even as online spending climbed faster than expected

Holiday shoppers took a more calculated approach to Black Friday–Cyber Monday this year, focusing on stretching budgets and minimizing impulse buys, according to new industry data. Rising prices across essentials and gifts pushed consumers toward a more strategic mindset — and toward flexible payment tools.

“Buy now, pay later” (BNPL) services such as Klarna, Afterpay, Affirm and PayPal Pay Later continued their rapid rise. Adobe Analytics reports BNPL has driven $10.1 billion in spending so far this holiday season, up 9 percent from last year. Cyber Monday set a single-day record with $1.03 billion in BNPL purchases — about 7 percent of all online spending.

PayPal said its BNPL transactions jumped 23 percent in the days leading up to Black Friday.

The appeal spans income levels, driven by convenience and the ability to spread out payments, said David Tinsley, senior economist at the Bank of America Institute. Most people remain “light users,” with just one to four BNPL purchases on their accounts.

Greater availability at checkout is also fueling growth, said Sucharita Kodali, a retail analyst at Forrester. “BNPL could also just be going up because e-commerce is going up,” she said.

But experts caution that the model isn’t risk-free: missed payments can trigger interest charges, and financially vulnerable shoppers may be more susceptible to overspending.

The risks behind BNPL’s rapid rise

Mounting debt from small purchases

Experts warn that buy now, pay later services can mask the true cost of purchases. Because payments are split into smaller installments, shoppers may take on more debt than they can comfortably manage — especially during the holidays, when spending naturally spikes.

Missed payments can trigger fees or interest

While many BNPL plans are advertised as “zero interest,” that guarantee usually applies only if payments are made on time. Missed or late installments can lead to interest charges, penalty fees or account restrictions. Some providers also report delinquent payments to credit bureaus, risking long-term credit damage.

Lack of consumer protections

BNPL purchases generally fall outside traditional credit-card dispute frameworks. That can create hurdles for shoppers trying to resolve issues like incorrect charges, damaged goods or returns — particularly when multiple retailers and payment platforms are involved.

Higher risk for financially vulnerable households

Analysts say BNPL’s appeal is particularly strong among consumers facing tight budgets or limited credit access. These shoppers may rely on the services not for convenience, but necessity — increasing the likelihood of missed payments and compounding financial strain.

Overlapping installment schedules

Because many shoppers juggle multiple BNPL plans at once, it’s easy to lose track of due dates. Overlapping payment schedules can create cash-flow crunches, leading to cascading late fees across several purchases.

Preholiday caution takes hold

With groceries, housing, energy and even key gifting categories rising in price — some due to tariffs — shoppers are increasingly wary.

“People are being cautious,” Kodali said. “The economy from a retail standpoint has been really positive … and this can’t go on forever.”

That caution shows up in the numbers. The National Retail Federation expects November and December spending to top $1 trillion for the first time, but analysts stress that higher totals largely reflect higher prices, not higher volume.

Online spending surges as stores see declines

Despite broader caution, online sales roared past forecasts. Adobe Analytics recorded $14.5 billion in Cyber Monday sales, up 7.1 percent year over year, and $11.8 billion on Black Friday, a 9.1 percent gain.

Brick-and-mortar stores saw a different pattern. Foot traffic on Black Friday dropped 2.5 percent at malls and 2.6 percent in downtown areas, according to MRI Software. Small Business Saturday declines were steeper, with mall visits down 4.3 percent and downtown traffic off 6 percent.

RetailNext, which tracks activity at more than 560 brands, reported an even sharper drop: traffic fell 3.6 percent on Black Friday and 8.6 percent on Saturday.

The shift doesn’t mean shoppers sat out the weekend — just that they shopped differently. “Shoppers showed they’re done with the impulse-driven, one-day frenzy,” said Joe Shasteen, global head of advanced analytics at RetailNext. “Prices, tariffs, and tighter budgets pushed people to shop with discipline, not adrenaline.”

Essentials rise, but gifts aren’t forgotten

Consumers also pounced on deals for everyday necessities. Among Shopify sellers, the top product categories were vitamins and supplements, followed by skin care and activewear. Adobe projects online grocery sales will hit $23.5 billion this season, up 9.3 percent from last year.

“We’re seeing promotions on essentials and the things that consumers feel they need first,” said Marshal Cohen, chief retail adviser at Circana.

But even bargain hunters made room for festive splurges. “Santa Claus is going to show up — and is he going to show up with vitamins? Yeah,” Cohen said. “But he’s also going to show up with a toy here and there.”

• Seriously delinquent student loans surged in the first three months of 2025, harming the credit scores of millions of borrowers.
• Nearly one in four student loan borrowers were behind in their payments in the first quarter of 2025.
• Outstanding student loan debt grew slightly to $1.63 trillion in first quarter of 2025.

The share of student loan debt that is seriously delinquent, or more than 90 days past due, surged to around 7.7% in the first quarter of 2025, up from just 0.5% in the fourth quarter of 2024, according to the Federal Reserve Bank of New York.

The staggering jump follows a 43-month pause on student loan payments due to the pandemic. Starting in Sept. 2023, borrowers had a year to resume payments before being reported to credit bureaus, a grace period that expired in Oct. 2024.

"The first batch of past due student loans were reported in the first quarter of 2025, resulting in a large jump in seriously delinquent borrowers,” said Daniel Mangrum, research economist at the New York Fed, in a statement.

More than 20 million federal student loan borrowers weren't in repayment and 5 million had a zero dollar monthly payment as of end of the first quarter of 2025, according to The New York Fed.

Missing a monthly student loan payment makes the borrower delinquent and after 90 days of not making a payment, the borrower is at risk of default and will be reported to credit bureaus, according to Federal Student Aid.

More than 2.2 million student loan borrowers who became newly delinquent saw their credit scores drop by more than 100 points and more than 1 million saw drops of at least 150 points, The New York Fed said.

Credit scores can fall by as little as an average of 74 points to as much as 177 points, depending on the borrower's creditworthiness, The New York Fed said.

Seriously delinquent student loan borrowers with the best credit see the biggest drops.

Poorer credit scores means borrowers will have lower credit limits and higher interest rates for other debt.

"It is unclear whether these penalties will spill over into payment difficulties in other credit products," The New York Fed said.

• Missing student loan payments can lower credit scores by varying amounts depending on a borrower's credit.
• Reduced credit scores lower credit limits and raise interest rates.
• Student loan borrowers with the best credit who miss payments can see their scores drop the most.

Collections restarted on millions of defaulted student loans this month, but millions of other student loan borrowers are at risk of default and will see their credit scores lowered.

Starting in Sept. 2023, borrowers had a year to resume payments before being reported to credit bureaus, a grace period that expired in Oct. 2024. Due to the pandemic, requirements to make student loan payments paused for 43 months.

Missing a monthly student loan payment makes the borrower delinquent and after 90 days of not making a payment, the borrower is at risk of default and will be reported to credit bureaus, according to Federal Student Aid.

The impact is already widespread: More than 9 million student loan borrowers of the nation's nearly 43 million are expected to have seen "substantial declines" in their credit in the first three months of 2025, according to the Federal Reserve Bank of New York.

"This would result in reduced credit limits, higher interest rates for new loans, and overall lower credit access," The New York Fed said.

A student loan borrower who has missed a payment for 90 days or more can see their credit scores drop by as little as an average of 42 points to as much as 175 points, depending on their current creditworthiness, according to a May report from credit bureau TransUnion.

Student loan borrowers with the best credit are the hardest hit.

For example, a student loan borrower with "subprime" credit would see their credit score drop by an average of 42 points, but a "super prime" borrower would see their credit score fall 175 points.

Still, TransUnion said that it is mostly student loan borrowers with poor credit that are at risk of defaulting and will see their credit scores lowered.

Nearly 51% of student loan borrowers with "subprime" credit were at risk of seeing their credit scores drop for not making a payment for 90 days or more, TransUnion said.

Student loan debt and borrowers at risk of default have ballooned in recent years after payments have been missed and more loans have been taken out.

Around 21% of student loan borrowers were 90 days or more late on their payments in February 2025, compared with around 12% a year prior, TransUnion said.

And student loan debt grew to around $1.77 trillion at the end of 2024, up from around $960 billion in 2011, according to the Education Data Initiative.

There is now more student loan debt than credit card or auto loan debt, the Education Data Initiative said.

What happens if a student loan goes into default?

After 270 days of not making a student loan payment, the borrower goes into default, according to Federal Student Aid.

The first Trump administration paused the collections of defaulted student loans during the pandemic in March 2020, a pause the Biden administration extended. Collections then restarted on May 5, 2025 under the second Trump administration.

More than 5 million student loan borrowers haven't made a payment in more than 360 days, according to the Education Department.

Federal Student Aid said these are the consequences for defaulted student loan borrowers:

• Loan acceleration: The entire unpaid balance of your loan and any interest you owe will become due immediately.
• Wage garnishment: We can begin collecting on your loan by taking money from your wages.
• Treasury offset: Your tax refunds and federal benefit payments will be withheld and applied toward repaying your loan.
• Loss of options: You will no longer be able to change repayment plans and will no longer be eligible for temporary relief options such as deferment or forbearance.