For most of us, debt is a big part of life. According to a new study by Pew Charitable Trusts, 80 percent of Americans have some form of debt — from student loans to credit card balances.
There are many among the so-called silent generation, those born before World War II, who are still paying off mortgages and credit cards.
“Silent generation people, 90 percent of whom are retired, are carrying debt later into life. So over half of them still have debt,” explains Diana Elliott, a research manager at Pew.
Elliott says the study shows that subsequent generations carry even larger burdens. Not all debt is bad, she says, but too much might limit future options. Baby boomers on average have far more debt than their parents did at the same age. And 13 percent of boomers are still paying off student loans, either for their children, or because they went back to school later in life.
This raises a fundamental question about whether it’s helpful that boomers are carrying this much debt, possibly into retirement.
If that seems bad, Generation X — those born between 1965 and 1980 — are on track to be even more indebted. As a group, they’ve reduced their mortgage debt in recent years, but the average Generation X-er still has $88,000 in debt. And now, Elliott says, they face their own kids’ college costs, which raises another question — will they be able to propel their children in the way that they would like to?
So it may seem refreshing that the younger adults, known as millennials, are on track to have less debt because fewer of them are taking on mortgages. But, Elliott says, lower debt does not necessarily mean they’re better off.
“Around half of them have less than $1,000 in liquid assets. So it really suggests that these low-debt millennials are not doing as well financially as their high-debt peers,” Elliot says.
Sarah Wolff, a researcher for the Center for Responsible Lending, says one key determinant of whether a loan is good or bad often comes down to affordability.
“The report puts a heavy emphasis on just looking at the raw amount of debt, and I think that it’s important to also consider the terms and conditions,” she says.
Wolff says the fallout from the subprime mortgage crisis may have made younger generations more skeptical about taking on debt.