When it comes to debt, gray is the way!
Maya B. Brandon
Older Americans are getting deeper in debt than ever before. In “The graying of household debt in the
U.S.” (Federal Reserve Bank of Philadelphia, Economic Insights, first quarter 2021), Wenli Li explores the
policymaking consequences of the relationship between an aging American population and its increasing
household debt. The last of the baby boomers is approaching retirement age and is increasing household debts, to
include credit card, medical, and home-secured debts (mortgages). Li uses the Survey of Consumer Finances
(SCF), “a triennial statistical survey of the balance sheets, pensions, incomes, and other characteristics of
American families,” to examine the distributary changes in household debt since 1989.
Although the share of total household debts continues to decrease in younger (ages 25 to 34) and middle-aged
(ages 35 to 54) households, shares of older (ages 55 to 85) households are climbing. As Americans are aging, so
are their household debts. Li found that in most households, mortgages are the greatest debt contributor, whereas
the greatest asset is the housing itself. Even after a generationwide drop in homeownership rates following the
Great Recession, the share of older homeowners with a mortgage has doubled. Through the Great Recession,
older households maintained more debt than middle-aged and younger households, and after the Great
Recession, they applied for more loans and mortgage products than did the younger groups.
Li also learned that according to the SCF data, older homeowners have more equity in their homes and are more
likely to use this equity by either refinancing their mortgages to access cash or by obtaining home equity lines of
credit. With the high levels of equity held in the homes of older households, these homeowners are borrowing
more than younger homeowners against the value of their homes. Older homeowners are also able to use their
credit worthiness to obtain additional debt since they default le