Student loan debt in the United States has reached about $1.34 trillion. It’s greater than the aggregate of credit card debt. But surprisingly, we haven’t seen much in-depth analysis about the spread of this debt burden across the expanse of ages within the U.S. population. Our latest research reveals that, over the last 10 years:
- The percentage of middle-aged and older population carrying student loans has doubled
- The average balance on those student loans has grown 40%
- Middle-aged and older populations are having a harder time making their student loan payments on time
Figure 1. More People Have Student Loans
| Age |
Percentage of Population with Student Loans |
|||
| 2006 Oct | 2011 Oct | 2016 Oct | %△ 2016 over 2006 | |
| 18-24 | 39% | 46% | 49% | 25% |
| 25-34 | 29% | 34% | 40% | 33% |
| 35-54 | 10% | 14% | 20% | 100% |
| 55-64 | 5% | 7% | 10% | 100% |
| 65+ | 1% | 2% | 3% | 300% |
As we would expect, there is a greater percentage of consumers in the younger age groups that have student loans. We can also see that the debt burden is spreading into the older segments of the population. This is almost certainly a function of an aging population carrying that debt forward. In addition, the need for older people to gain new skills is causing them to take out student loans to finance this.
This trend is going to continue. For example, the doubling we see in the 35-54-year age group is going to migrate to older age groups as the population ages, because they make up roughly 12% of the population, and about 25% of them are in the 50-54 age group.
The Debt That Doesn’t Go Away
Not only do a high percentage of older Americans carry student debt, they’re also right up there when it comes to balances and balance growth.Figure 2: Average Student Loan Balances Have Grown Sharply in 10 Years
| Age |
Student Loan |
|||
| 2006 Oct | 2011 Oct | 2016 Oct | %△ 2016 over 2006 | |
| 18-24 | $13,458 | $16,227 | $18,493 | 27% |
| 25-34 | $22,119 | $26,687 | $34,136 | 35% |
| 35-54 | $21,281 | $27,083 | $36,709 | 42% |
| 55-64 | $19,819 | $25,298 | $33,915 | 42% |
| 65+ | $17,021 | $22,610 | $28,268 | 40% |
As Figure 2 shows, the average balance for student loans has grown substantially since 2006. For people over 35, the average balance now is more than 40% higher than it was in 2006. For reference, the cumulative Retail Price Index growth during this period is just under 20% — half the growth rate in student loans.
In the next few years, we could see 15% of people reaching retirement ages with student loans of $35,000 in current prices.
Now let’s look at the repayment figures.
Figure 3: Student Loan Delinquency Rates Remain High 90+ days past due
| Age | Student Loan | |||
| 2006 Oct | 2011 Oct | 2016 Oct | Bankcard 2016 Oct | |
| 18-24 | 24.4% | 25.7% | 17.8% | 14.0% |
| 25-34 | 22.0% | 28.3% | 25.1% | 10.5% |
| 35-54 | 21.7% | 28.9% | 24.8% | 8.7% |
| 55-64 | 14.0% | 18.5% | 17.0% | 5.1% |
| 65+ | 14.2% | 15.9% | 13.5% | 3.6% |
What’s interesting here is that default rates (90+ days past due) on student loans have gone down over the last 10 years for people aged 18-24, but have risen for the other age cohorts. For comparative purpose the table also has the same stats for bankcard and the difference is clear and marked. One can assume that this difference is related to the size difference of the average balance in the prior table as well as, potentially, the differing consequences associated with defaulting on a credit card.
Drag on the Economy
The student loan growth and default is not like the mortgage crisis. It doesn’t cause regional blight or spill over to the rest of the community in the visible form of abandoned houses. It does, though, cause a drag on the economy as people continue paying these debts off into their retirement. There may also be evidence that this burden is driving a higher default level as consumers make choices as to which debts to service and which to let lapse.In addition, it could be impacting other lines of credit.
Figure 4: Average Student Loan Balance Has Grown Significantly Versus Other Loan Types
| Loan Type |
Average Balance: FICO Scorable Consumers |
|||
|
2006 Oct |
2011 Oct | 2016 Oct |
%△ 2016 over 2006 |
|
| Auto |
$15,750 |
$15,213 | $18,185 |
15% |
| Bankcard |
$6,210 |
$6,068 | $5,871 |
-5% |
| Mortgage |
$174,724 |
$186,505 | $193,860 |
11% |
| Student Loan |
$19,543 |
$24,360 | $31,933 |
63% |
| Installment Loan |
$17,948 |
$19,077 | $23,850 |
33% |
For instance, in Figure 4, we see how the increase in student loan balance compares to other loan types. Figure 4 shows that the average balance for student loans has grown, increasing more (63%) than other loan types including auto, bankcards, and mortgages. So even though the average student loan balance has increased, other lines of credit haven’t increased as significantly.
For more information, read a recent news release on additional potential effects of increasing student loan debt. Also check out Student Loan Basics or How Student Loans Affect Your Credit Score.
