The student loan crisis among Millennials is one of the most talked about issues in the press and in everyday conversation. While Millennials are still the worst-off generation, what we don’t discuss is how every generation in America is deeply in debt. What changes across age groups is what type of debt they’re drowning in.
We are all-too-familiar with the Millennial student debt crisis. College tuition went up astronomically during our era, surging even while we were in school. A large percentage of us are starting life with large amounts of high-interest student debt. The debt is delaying many of our big-ticket purchases, such as homes and cars, and crushing our hopes and dreams in the process. While the Millennial generation’s plight is obvious, if you take a look at the big picture, every generation is deeply in debt.
A brief look at debt across demographic age groups reveals that the generations that precede us are neck deep in mortgage debt. The only reason the majority of Millennials don’t have mortgages is because we simply cannot afford to buy a house or have the credit. Those who have had access to credit have been increasing their mortgage debt loads at unsustainable rates.
Statistics show that as youth fades, creditworthiness improves. When comparing average FICO credit scores, grandma and grandpa and mom and dad likely have much better credit scores than you do. Unfortunately, the younger you are, the more likely you are to be a NINJA (No Income, No Job, No Assets). During the recession, there were fewer creditworthy borrowers, so a large amount of new mortgage debt in recent years has been originated by older folk.
Naturally, if you have good credit and a down payment, you’re going to buy a house–so older people have been bingeing on mortgage credit. The problem with older individuals taking on too much debt is that their productive work lives have an expiration date that’s not very far in the future. By the time you’re an old lady or an old man, you’ll probably want your house paid off. That is not the case for millions today, because many people in the Silent Generation (1925-1945) still owe the bank a significant chunk of cash. In 2011, 21 percent of homeowners older than 75 still had mortgage debt. That number was only 8 percent in 2001.
Baby Boomers (1946-1964) aren’t too far behind, since they’re approaching retirement with huge mortgage liabilities. Income levels are the highest in your late 40s and begin declining in your 50s. The problem for Baby Boomers, who are quickly becoming grandmas and grandpas, is that their mortgage payments are consuming a growing percentage of their declining income. They haven’t saved too much for retirement either, so how they’re going to pay off their debt is somewhat of mystery.
If you’re wondering about the only generation I haven’t mentioned, Generation Xers (1965-1980) are also shouldering high levels of mortgage debt. Remember, many people in that age group went out and bought houses during the real estate bubble of the early 2000’s. Many Xers are still underwater or upside down on their homes, meaning that they owe more than their home is currently worth.
Many Millennials will look at these statistics and not feel bad for past generations. After all, they enjoyed cheap college educations, much-lower cost housing, and a brilliant job market in comparison. Besides, at least their mortgage debt has provided them with a home–our student debt has only provided us with a piece of paper whose value is extremely questionable.
Then again, ultimately, we will be the ones that take care of our elders. Their problems become our problems in their golden years. If grandma or dad are struggling to pay their mortgages, they’ll probably come live with you (or ask you to come live with them to help make ends meet).
As interest rates remain ultra-low and incomes stagnate, consumers will continue to accrue debt at historic levels. That means that debt of all kinds will remain a major issue in America. Why does Grandma still have a mortgage? It’s likely because she couldn’t pay it off in time for retirement.