Consumers have markedly changed the ways in which they carry debts, and this is particularly true of younger people who may have become adults during or immediately following the recent recession. However, even as many have cut their balances significantly during this time, much of what they still carry is largely composed of student loan balances.
Between October 2007 and the same month in 2012, the average amount of money owed to lenders on various types of credit by people between the ages of 18 and 29 years old slipped to $32,586 from the previous $39,408, according to new data from the credit scoring company FICO’s Banking Analytics Blog. However, while that constituted a 17.3 percent decline in debt for these young borrowers, the way those balances were composed was somewhat surprising.
For instance, the amount of student loan debt this age group took on ballooned to $11,444, up from $6,490 just five years earlier, representing an increase of 76.3 percent. Meanwhile, all other kinds of balances — including credit cards, mortgages and car loans – dipped appreciably. For instance, auto financing experienced the smallest drop, falling just 14.9 percent to $4,226, while credit card debt dropped by slightly less than $1,000 to just $2,087. Mortgage balances also dropped 38.1 percent to $14,100 (though this was likely due to the lack of financial freedom many younger people experienced during this time).
At the same time, all other age groups saw their student loan debts balloon in terms of percentage, though their burdens were still far smaller than those experienced by the youngest demographic for fairly obvious reasons, the report said. The smallest of these increases was the 93.4 percent climb experienced by people between 50 and 59 years old, who saw student loan balances rise to $3,077 from $1,592. At the same time, the largest proportional increase came for those 60 years old or more, at 155.3 percent, though their actual obligations in this area only rose to $714 from $280.
Student loans can significantly endanger the ability of young people these days because the balances can stretch into tens of thousands of dollars with relative ease, and in many cases they come due within just a few months after graduation despite the still-tough job market for young people.