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Student Loans Triple as Share of Young Americans' Debt

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In 2005, student loans made up 12.9% of the total loan balance outstanding for Americans aged 20 to 29. That proportion rose to 36.8% in 2014. Student loan debt also rose from Americans who are 60 years old and older, from 0.5% in 2005 to 1.8% in 2014.

No, the boomer generation is not going back to college en masse. The rise is most likely due to borrowing on behalf of younger members of the family, either because younger family members are in more difficult circumstances or may not qualify for a student loan.

The data come from a new study by credit reporting agency TransUnion that looked at borrowers by age group in each year between March 2005 and March 2014.

For young borrowers (ages 20 to 29), mortgage loans as a proportion of total borrowing has fallen from 63.2% in 2005 to 42.9% in 2014. Home equity lines of credit (HELOCs) fell from 2.1% to 0.2%, and credit card debt fell from 5.1% to 3.8%. As noted, student loan debt nearly tripled and auto loans increased from 11.6% to 14.1%. TransUnion noted that the average mortgage balance in this group has dropped from $166,117 in 2009 to $150,624 in 2014 and that the average credit card balance fell from $3,261 in 2009 to $2,315 in 2014.

A TransUnion executive and co-author of the study noted:

Our study clearly shows that the rapid rise in student loan debt for younger consumers has occurred while the shares of all other loan types except auto has dropped, indicating that student loans may be crowding out most other loan types. Additionally, younger consumers have found during and soon after the recession that it is more difficult to gain access to credit cards and mortgages, further pushing the decline in those balances.

Among borrowers 60 years old and older, mortgage balances rose, as did average balances for car loans and HELOC accounts. Average student loan debt among this group has risen from $14,696 in 2005 to $27,168 in 2014. Nearly half these student loans involve the older consumer as a co-signer. Regarding debt among this group, the study’s co-author said:

The increase in loan originations and borrowings by consumers ages 60+ is both encouraging and a source of concern. 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.

One reason for the increased borrowing among older Americans is that they have better credit than the younger people and they appear to believe that they have no choice but to use it. This study offers a fascinating look at borrowing in the United States.

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