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New York Fed: Consumer Debtors Getting Older

The Federal Reserve Bank of New York regularly produces interesting analyses of consumer credit, and recently it’s blogged about how patterns in consumer debt behavior have shifted for both younger and older demographics between 2003 and 2015. Its findings have some implications for economic growth, young student-loan borrowers specifically, and possible trends in New York bankruptcy. The New York Fed researchers used data from its Consumer Credit Panel, which is based on data supplied to it by the credit agency Equifax. Here are three main results.

(1)  Younger Americans owed slightly less debt in 2015 than 2003, but their portfolios shifted dramatically from mortgage, auto, and credit-card debt to student-loan debt.

(2)  Older Americans owe much more than in the past, due as much to changes in borrowing behavior as to aging. They owe more in every class of debt except credit-card debt.

(3)  At every age bracket, student-loan debt has doubled, with the impact falling hardest on younger debtors.

The New York Fed researchers offered two reasons why older Americans might have so much more debt than younger ones. First, lending standards tightened several years back after they were very lax, so younger borrowers have had fewer recent opportunities to accumulate debt. Second, it may simply be that older borrowers are borrowing more.

Testing these hypotheses, the authors found that for auto loans, loan-origination has tilted toward older borrowers. For mortgages, however, it appears both phenomena have affected debt balances. Banks are more willing to lend to older Americans, but older Americans also took the opportunity to borrow more in the past.

Somewhat surprisingly, the New York Fed researchers believe that banks will be on sounder footing thanks to older debtors. Older borrowers have better credit scores, so they’ll be more likely to pay down debts. They tend to have higher incomes, and the net worth for household heads aged 65 and up didn’t change much between 2003 and 2015. Delinquencies haven’t risen either. On the other hand, the authors were slightly troubled by the high student-loan balances and low levels of other types of debt among younger Americans. These two trends might imply slower economic growth.

The New York Fed post can be found here.

It’s odd that older Americans both owe more than before yet have the resources to repay it. That doesn’t apply to everyone; for example, the Consumer Financial Protection Bureau issued a report in 2014 highlighting the risk elderly Americans face due to their higher mortgage balances and diminished ability to pay them. Reverse mortgages can also cause problems for elderly homeowners as well. It’s not unusual that younger Americans are substituting mortgage, auto, and credit-card debt for student loans. That might even be causing a bottleneck in homeownership that the New York Fed discussed two years ago as well.

Regardless of your age, if you are encountering difficulties repaying your debts, then you should discuss your situation with an experienced New York bankruptcy lawyer.

For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.

Rosenberg, Musso & Weiner, L.L.P
26 Court St # 2211
Brooklyn, NY 11242, USA

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