In the first quarter of 2018, American household debt reached a new record: $13.21 trillion .
It was the fifteenth quarter in a row that saw record-breaking debt increases. With the stock market soaring, more families are willing to take on financing. At the same time, education and housing costs continue to climb, which means that people simply have to take on more debt to reach their career and home ownership goals. In fact, people may just be getting used to carrying larger debt loads—it’s becoming part of American life.
Record-breaking numbers in the multiple trillions can be hard to wrap our heads around, though. And grand totals don’t tell us very much about the borrowers and what they’re borrowing for. Looking at more specific debt demographics can give us a better sense of borrowing trends—particularly when it comes to borrowing trends based on age.
Checking out average debt by age statistics isn’t just for the economics wonks among us—it can help give us a sense of what to expect in terms of debt across the life span and may even motivate us to break the mold by paying off debt quickly or by finding ways to avoid large debt loads by making different savings, career, and lifestyle choices.
In this article, we’ll summarize the latest Federal Reserve data on U.S. consumer debt and U.S. household debt by age. Plus, we’ll cover how to know when how much debt is too much—and some solutions for how to take charge of your own debt and pay it down.
Breakdown Of Average Debt By Age
The most recent Federal Reserve Survey of Consumer Finances , in 2016, found that a little over 77% of U.S. households are carrying debt, and that among them, the median amount owed was $59,800.
Excluding households that carry no debt, they broke down these debts by the age of the head of the household, which lets us see borrowing trends by generation. Overall, people in their high earning years (early middle age) also carry the most debt, typically in the form of mortgages, while younger families carry more student loan debt. Let’s take a closer look.
Age 35 and under
Percentage of families with debt: 81%
Total median debt per household: $39,200
For the millennials, education debt reigns. Forty-four percent of young households hold student loan debt compared to 28.3% with mortgage debt. This tells us that people in this age range are likely putting off home ownership due to the burden of student loans. The median student loan debt was $18,500 while the mean student loan debt was $33,000. That can add up to a hefty monthly payment that could discourage taking on a mortgage loan as well.
Nearly half of millennial households are also carrying a credit card balance from month to month at a median of $1,400. Paying interest on high credit card balances can quickly eat away at income—and savings.
Percentage of families with debt: 86.2%
Total median debt per household: $93,700
As you can see, families in this age range have taken on more debt. In this bracket, education debt has increased (median: $20,000) but the percentage of families with student loans has dropped to 34%. Instead, mortgage debt accounts for much of the overall debt increase. Fifty percent of households have mortgage debt in this age bracket, with a median housing debt of $93,700. Their credit card debt is climbing too, with 49% carrying a median $2,500.
These increases show that people in this age range are taking on more debt—likely because they’re earning more and doing more: they’re settling into their careers, buying houses, and starting families.
Percentage of families with debt: 86.6%
Total median debt per household: $89,900
Most households that are firmly in middle age continue to hold debt—but the amount of debt is much less than younger households. Fewer hold student loan debt (24%, median: $20,000), and about the same number have mortgages (53%), but the amount they owe is less (median: $125,000).
There are a couple of possible explanations for this: one is that they’re earning more and have had more time to pay off their student loans and mortgages. The other is that this generation missed some of the soaring higher education costs that younger generations have had to grapple with.
They also likely entered the workforce and established their careers before the recession, while younger generations are more likely to have been hit hard by career-stalling hiring freezes and wage cuts as they were just starting out. In short, this generation and those in older households haven’t necessarily had to depend on financing as much as younger generations to get their adult lives started.
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Percentage of families with debt: 77.1
Total median debt per household: $69,000
This age bracket continues to see drops in overall debt. They owe less on their mortgages and even less on education loans. With fewer large expenses related to education, housing, and family rearing, households in this age bracket can focus on paying down debt and building savings as they prepare for retirement.
Percentage of families with debt: 70.1%
Total median debt per household: $42,000
Households in this age range are likely beginning to or have begun their retirements. At this point, they are probably tightening their budgets to live on retirement savings, pensions, and social security. As a result, they’re spending—and borrowing less.
Despite lower mortgage and education debt, 42% of households are carrying a pretty high balance on credit cards (median: $2,500). This suggests that for smaller purchases, people rely heavily on this convenient, yet high-interest form of borrowing.
Age 75 and up
Percentage of families with debt: 49.8%
Total median debt per household: $20,600
Seniors in this bracket are most likely retired and living on a fixed income. At this point, a good rule of thumb is to have little to no debt. While there are fewer and lower levels of borrowing in this bracket compared to the others, close to 50% are carrying debt. While much of this is accounted for by small mortgages, some of it may be related to high costs of medical care and senior living facilities.
How Much Debt Is Too Much?
Americans have clearly become accustomed to borrowing in order to move through their everyday lives. In fact, financing is often a necessary step in order to get the graduate level training needed for a professional career or to buy a home that will become a financial asset. But are we culturally becoming too comfortable with borrowing larger and larger sums of money? And how do you know when you’ve over-extended yourself?
One way to find out if you’re carrying too much debt is to calculate your debt to income ratio by dividing your monthly debt payments by your monthly income. For instance, if your total debt payments (student loan, credit card, mortgage, car loan, etc.) come to $2,500 per month and your after-tax monthly income is $8,000, your debt-to-income ratio would be 31.25%. That means that a little over 31% of your income goes straight to your debts.
As a rule of thumb, the lower your debt to income ratio the better: a ratio of around 30% is considered very good, while a ratio of 40% or higher could threaten your financial security.
How To Take Control Of Your Debt
Carrying debt is enormously stressful—especially if it keeps you from being able to save enough to feel financially secure. Here are some solutions if you’re looking for a strategy for paying down your debt.
Make a debt inventory:
Start by listing out all of your outstanding debts and sorting them based on whether they are “good” debts (debts taken out to help build wealth or income potential like mortgages and student loans) or “bad” debts (high interest loans and loans to buy things that don’t appreciate like credit cards and auto loans). The bad, or high-risk debts will be the ones you’ll want to take on first.
Create a debt pay down goal:
Zero-in on the loans that cost you the most (in terms of high interest, but also high stress). Then, set a realistic goal for paying it down—as well as a budget for how to swing the extra payments. For instance, you might cut back on some of your unnecessary spending for a set period of time, or choose to take on a side gig to earn some extra income.
Consider consolidating your debt:
If you are carrying a high credit card balance or other high interest debt, but have a steady income and good credit, you may be able to make your repayment simpler and cheaper by taking out a lower interest personal loan to pay off those debts. You can’t use an unsecured personal loan to consolidate student loan debt, but it can be immensely helpful if you’re trying to get out from under credit card debt.
By consolidating your high interest debt, you’ll be streamlining your debt so you have one monthly payment, one set of terms, and a lower interest rate that could help you get out of debt sooner.
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