Older consumers are taking on more debt — even as they approach retirement, according to a new TransUnion study
Consumers ages 60 and up have seen loan growth in every major loan category. Even while the average mortgage balance declined 2 percent for the overall population from 2009 to 2014, older consumers took on more mortgage debt — the only age group to do so. Older Americans also assumed more debt for automobile purchases, home equity lines, and credit cards.
Surprisingly, older Americans have seen a rise in student loan debt similar to people in their 20s, says TransUnion, a credit information and information management services
provider. Although less than 5 percent of those over 60 have student loans, out of those who do have the loans average student loan debt nearly doubled from $14,696 in 2005 to $27,168 this year.
Almost half (48 percent) of those loans include a senior as a co-signer.
Many are helping family and friends in difficult financial situations or who may not qualify for student loans on their own due to poor credit health or insufficient credit history, says Charlie Wise, co-author of the study and vice president of TransUnion's Innovative Solutions Group.
"The increase in loan originations and borrowings by consumers ages 60 plus is both encouraging and a source of concern," Wise says. "The proceeds of increasing senior borrowings may be used for their own spending as well as to assist family members in supplementing their incomes and making purchases.
"At the same time, rising debt levels by older consumers could lead to increased default rates if they are unable to meet higher loan payments with their often fixed incomes. This development certainly bears watching over the next several years."
A study by the Government Accountability Office
confirms that more seniors are assuming student loan debt. About 3 percent of households headed by someone 65 or older, about 706,000 households, carry student loan debt, it says. Their federal student debt grew from about $2.8 billion in 2005 to $18.2 billion in 2013.
Older Americans also are more likely to default on student loans, which can have dire consequences. If loans remain unpaid, the government can claim a portion of the borrower's Social Security disability, retirement, or survivor benefits.
From 2002 through 2013, the number of people whose Social Security benefits were offset to pay student loan debt increased about five-fold from about 31,000 to 155,000. Among those 65 and older, the number of individuals whose benefits were offset grew from about 6,000 to about 36,000 over the same period, roughly a 500 percent increase
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