More Americans Struggled With Debt Over the Past Year. Larger Tax Refunds Will Be Essential

KEY TAKEAWAYS

• More than one-third of Americans will use this year’s tax refund to pay down debt.
• The average tax refund for the 2026 filing season is expected to be $750 higher than the previous year.
• Consumers can use their refunds to help pay down the rising debt levels that many Americans have struggled with in 2025.

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More than two-thirds of Americans expect to receive a tax refund this year, and the majority will use it to pay down their debt.

With new and expanded tax breaks from the “One Big, Beautiful Bill,” the average tax refund for the 2026 filing season is expected to be almost $750 higher than the last filing season, said the Tax Foundation, a nonpartisan tax policy think tank.

The average consumer had a credit card balance of about $6,735 in July 2025, according to Experian credit data. While the expected average tax refund of $3,800 won’t pay off all their credit card debt, it will help many Americans who added debt and have been struggling to make their payments in 2025.

Why This Matters

Debt can heavily weigh on consumers, especially loans with high interest rates. Paying down debt before it can accumulate to an unmanageable level helps consumers manage and save money.

Consumers Have Struggled With Their Debt For More Than a Year

In January 2026, the average credit score for all consumers was 700, according to the most recent VantageScore credit report. That is 0.17 points lower than in December, and 1.6 points lower than the previous year.

“This … [was] a gradual increase that shows that the more borrowers are feeling the pressure,” Atif Mirza, the head of Credit Insights at VantageScore, said in a recorded round table. “There are two reasons behind this. One we feel is the student loan reporting resumption that’s affecting the credit scores for some of the borrowers and also…higher delinquency rates across credit [types].”

Last month, the number of consumers who missed their payments for 30 to 59 days increased across all debt types. In particular, the number of households that are one to two months behind on their mortgage increased by 30.9% from January 2025 to January 2026, VantageScore reports.

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In 2025, several changes to student loan repayment plans overwhelmed many borrowers. Some borrowers have also not made a payment for years, as several federal grace periods meant that missed payments did not negatively affect their credit scores until February 2025.

The many changes to student loan policies in 2025 have made it more difficult for borrowers to resume payments. As of September 2025, about 3.3 million federal student loan borrowers were delinquent (31 to 270 days past due), and 7.3 million were in default (271 days or more past due), according to the Department of Education’s most recent data.

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