America is truly a debt nation. Our national debt is now $21 trillion on course to approach $29 trillion by the end of the next decade with more than $1 trillion in annual deficits according to the Congressional Budget Office (CBO). Debt held by the public will be driven to nearly 100% of GDP by 2028.
Consumer debt in America amounts to $14.9 trillion in mortgage debt. Other types of debt such as credit card, car loans all exceed $1 trillion. But the more troubling trend comes from the student or education-related loan.
Boomers Carry More Student Debt than The Millennial
Our entire nation has over $1.48 trillion in student loans, spreading out among about 44 million borrowers. However, a recent analysis of American debt revealed boomer borrowers now owe more money in education-related debt, on average, than do millennial college graduates. According to data from the Fed’s 2016 Survey of Consumer Finances, 65- to 74-year-old borrowers owe an average $35,400, while people under age 35 owe $32,900 on average in student debt.
A recent study by the Consumer Financial Protection Bureau (CFPB) also finds the number of consumers age 60 and older with outstanding student loan debt hit $2.8 million in 2015, a whopping 400% increase in 10 years from 2005 to 2015. (FIGURE 1).
During the same period, CFPB says the share of all student loan borrowers that are age 60 and older increased from 2.7% to 6.4%. That percentage is still relatively small, but the rate of acceleration is quite alarming. While some of those older borrowers may have carried their own student debt, the majority took out or cosigned loans to help pay for their kids or grand kids college education.
A separate report by Nerd Wallet paints a similar picture. The share of federal student loan borrowers holding a Parent PLUS loan—a federal student loan available to the parents of dependent undergraduate students—roughly quadrupled over the period between the 1989-90 and 2011-2012 school years.
There is also another compounding factor against older borrowers of the student loan. Loan experts say parent PLUS loans can carry higher interest rates, and a higher origination fee than other types of financing.
Default Risk Rising
Blame it on the spiraling cost of college education tapping out the parents and/or grandparents, the most convenient candidates, to take out these educations loans than they might have been in the past.
The conventional thinking is that typical student debtors are younger, in the 20s and 30s, with increasing earning power in the coming years so debt re-payments should become easier, therefore, the default risk is lower. The opposite is true for older borrowers.
One in three or 37% of federal student loan borrowers aged 65 and older are in default, according to a recent GAO report, much higher than the younger age brackets. Some of them even got their social security benefits garnished to repay a federal student loan.
I imagine a lot of parents and grandparents probably took out second mortgages or other funding means to finance the education of their young. The debt and default numbers are most likely far worse than the official books of student loan.
Solving Problems, the Millennial way
For decades, the millennial has been complaining about how their generation is so special, but instead so sadly strapped down by high student debt, rising rent and housing prices and poor job prospect.
One way to counter rising rent is to live with their parents or even grandparents. That maybe a diminishing possibility as parents of grandparents, saddled with additional student loan, could lose their homes. (The boomer generation also went through high inflation and recessionary periods without this "home with parents" phenomenon.)
I now realize it seems the way around high student debt is getting their elders to share the debt load with little regard how the debt would affect their older family members.
Of course, we all have seen the “poor job prospect” could be mitigated by long brainwashing corporations that the only way to save America is to replace older boomers in key managerial positions with inexperienced and barely qualified millennials.
“Shadow” National Debt, The Last Straw
The profile of the student debt portfolio has shifted dramatically towards the nation’s seniors on behalf of their next generations. It is a debt bomb across multi-generations and nobody seems able to pay it back. Eventually the government will need to come in and do another bailout. There is already a U.S. corporate debt crisis in the making, and now student debt has escalated close to another debt crisis in the making.
The $21 trillion nation’s debt is what’s on the books. President Trump just signed a $1.3 trillion budget earlier this year. His “tax cut” benefits primarily the corporations to pay less taxes. The short-fall “deficit” will still come from the taxpayers.
Student debt and corporate debt are two examples of “shadow” national debts that are off the books and eventually will fall on regular taxpayers. These additional debts the government may need to take on by issuing more Treasuries and bonds. With rising interest rates and interest payments, how long do we think our nation could go on financing debt with even more debt? The outlook is indeed grim, my fellow Americans. The quietly off-the-books "shadow" national debt would be the last straw breaking this camel’s back.