Debt held by consumers in the U.S. as they age is rising, according to an analysis by the Federal Reserve Bank of New York.
From 2003 to 2015, debt of borrowers between ages 50 and 80 increased by approximately 60%, according to the Fed’s researchers. The analysis reviewed data from the New York Fed Consumer Credit Panel.
Researchers also found that aggregate debt of younger borrowers declined modestly from 2003 to 2015 "with a debt portfolio reallocation away from credit card, auto, and mortgage debt, toward student debt."
"This shifting of debt from younger to older borrowers is of obvious relevance to markets fueled by consumer credit. It is also relevant from a loan performance perspective as consumer debt payments are being made by older debtors than ever before,” according to the researchers. Quarterly data from the Fed’s latest report on Household Debt and Credit show that household debt for U.S. consumers increased moderately in the final quarter of 2015, led primarily by peaks in auto and student loan debt. Household debt balances saw the third consecutive annual rise at the end of 2015.
The credit boom before the Great Recession could also be influencing the shift in debt balances to older consumers, they report.
"Overall balances owed by households grew $288 billion in 2015, slightly less than the $306 billion increase seen in 2014 and still less than the growth seen in the early 2000s,” according to the researchers.Looking at the 2003-2015 timeframe, researchers found that the shift in debt to older borrowers could be because of an overall aging population and change in the amount of debt per borrower that consumers choose to have at each individual age.
For consumers at age 39, for example, aggregate debt declined by 12% between 2003 and 2015 while it grew by 169% for consumers at age 67, according to the Fed’s research.
"As the Baby [Boomer] generation ages, the population of older individuals has increased substantially. And with the coming of age of the Millennial generation, the population of younger adults has also increased," according to the researchers.
Also, the Fed found that at each age the average student loan balance per borrower more than doubles when comparing 2003 and 2015.
Student loan debt for consumers at age 30, for example, increased by $6,912 between 2003 and 2015 while it increased by $857 for consumers at age 65, according to the Fed. Home-secured debt, credit card and auto loans all declined for consumers at age 30 during that time frame, while home-secured and auto-loan debt increased for those at age 65.
"Younger borrowers hold lower per capita balances in every debt category save student loans, and older borrowers hold higher per capita balances in every debt category save credit card debt. Setting aside the influence of an aging population, it remains the case that in 2015, on average, younger borrowers held less nonstudent debt and older borrowers held substantially more debt of nearly all types, than comparably aged borrowers held in 2003," according to the Fed’s researchers.
