Debt Levels for the Elderly Are Worse Now Than During the Recession
By Lindsay Frankel
A recent report released by the Federal Reserve Bank of New York revealed that senior citizens over the age of 70 collectively hold more than twice the amount of debt they did during the financial crisis. Seniors in this age cohort had $1.16 trillion in debt in the second quarter of 2019 compared to just $0.54 trillion in the late 2000s. And Americans in their 60s collectively owed $2.16 trillion this past quarter, much more than in the second quarter of 2008, when they had $1.47 trillion in household debt.
Debt can be devastating for seniors who live on a fixed income, and elderly borrowers are frequently targeted by lenders with quick-fix options such as payday loans. But these risky loans only exacerbate financial hardship, with annualized interest rates reaching nearly 400 percent. Financial advisors recommend that seniors retire after paying off as much debt as possible, work out a manageable repayment schedule with lenders or other professionals, and avoid expensive methods of borrowing, such as payday loans.
Most other age groups have the same amount of debt now that they did during the recession, according to the report. Americans in their late teens through late 30s had similar debt levels in the second quarter of 2019 to what they owed during the Great Recession. Debt levels are only slightly down for people in their 40s; they held $3.73 trillion in household debt in the second quarter of 2008 compared to $3.49 trillion this past quarter.
Most debt across age groups was due to mortgages, but people age 40 and over were especially saddled with debt from home loans. Home equity lines of credit were popular with people in their 50s and 60s, accounting for more than 10 percent of the total household debt in each age group. These loans are second mortgages taken from the current value of the homeowner’s property.
Student debt, on the other hand, was particularly problematic for younger age groups, but also made up more than a fifth of household debt for people in their 50s. Student debt is increasing for older Americans, making them even more vulnerable to retiring with excessive debt.
Overall, household debt has seen a steady increase over the past five years, and rose 1.4 percent in the second quarter of 2019. Americans owed a whopping $13.86 trillion this past quarter. When household debt last peaked in the third quarter of 2008, the total balance was $12.68 trillion.
As Americans become increasingly weighed down by debt, borrowers need to be especially wary of predatory lenders and loan scams.