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As my colleague Grace Bartini recently pointed out, student debt isn’t an issue just for Millennials. Student loans are increasingly part of the consumer debt mix for older Americans, too.
Now, a new study from the Federal Reserve Bank of New York is reinforcing that fact. According to The Graying of American Debt, the “tail” of education debt, or its longevity, has grown astronomically over the last 15 years.
Check out this chart from the study:
In 2003, student loans became the smallest part of a consumer’s debt portfolio around age 35, when auto and credit card debt overtook it. But by 2015, auto debt doesn’t surpass student debt until the consumer is about 45, and credit card debt only exceeds it once the consumer reaches age 55 or so. Additionally, at each age the average student loan balance per borrower more than doubles.
The study goes on to show that Americans younger than 45 are increasingly having a harder time, or are simply unwilling, to take on other forms of consumer debt, likely because they’re burdened with existing student debt. At the other end of the spectrum, new credit originations are tilting toward older Americans because they have better creditworthiness, which is probably due in part to the ongoing successful pay down of their student loans.
We should all be concerned that student debt is holding young consumers back from fully participating in our economy. However, there’s equal cause for concern when those nearing retirement risk financial security in their Golden Years because they’re still struggling to pay off their own education debt or that taken out for a child.
This latest research is some of the strongest proof yet that student debt is a cross-generational issue with economic impacts for us all.