More debt among older adults could hinder downsizing
Total household debt is expected to hit $12.68 trillion in 2017, a number not seen since the third quarter of 2008, MarketWatch reported. Unlike 2008, however, less of the debt is tied up in housing. The auto loan debt projection for 2017 is up $367 billion from 2008 and student loan debt is up $671 billion.
Analysis also revealed demographic shifts: Americans 60 and older had 22.5% of the total household debt in the fourth quarter of 2016, versus 15.9% in 2008. The increase could be attributable to the undertaking of kids’ or grandkids’ student loan debt.
In one bright spot, more stringent underwriting has contributed to higher credit scores among those holding the most debt.
Along with obstacles including the lack of entry-level inventory and a sluggish job market, mounting student loan debt is one of the biggest hindrances to millennials homebuying. Lending Tree reported that millennials are spending an average of 11.3% of their salaries on student loan repayment each month.
In a 2016 survey by the National Association of Realtors and SALT/American Student Assistance, 71% of potential buyers carrying student loan debt said it was delaying their purchase of a home.
The student debt crisis is hitting older Americans, too. Numbers from the Consumer Financial Protection Bureau indicate that the 60-plus age group is growing the fastest among student loan borrowers, Forbes reported. In 2015, 2.8 million members of that age group had outstanding loan debt, compared to 700,000 a decade prior, and during that time their student loan debt climbed from $12,100 to $23,500.
For these older Americans, the growing debt burden — one many probably didn’t expect or plan for — could hinder their ability to retire when they may have liked. It also could affect the timing of selling their existing homes and moving into their preferred retirement space, whether that be downsizing to an active-adult community or building their dream home by the beach.
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