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The Stealthy Problem of Elder Debt
by   Mark Wade  

Recent research from the New York Federal Reserve has shed some light on a persistent but little-discussed problem: The heavy debts owed by many of Americanís retired population. This is an issue that has skyrocketed in recent years. Debt held by borrowers between the ages of 50 and 80 increased by roughly 60 percent from 2003 to 2015.

Whatís even more concerning for older Americans is that much of this indebtedness arises rather stealthily. Itís not because of wanton use of credit cards, but generally because of borrowing that occurred much earlier in life. In fact, the New York Fed older borrowers hold higher per capita balances in every debt category except for credit card debt. Even auto loans have been soaring for older Americans: The average 65-year-old borrower held 29 percent more auto debt than the same cohort had in 2003.

Here are the key factors that the New York Fed found:

Student Loans Itís counterintuitive to think that older Americans would carry more student debt than they did years earlier, but thatís exactly where we find ourselves. The amount of student debt held by Americans age 65 and older reached $18.2 billion in 2014, up from just $2.8 billion in 2005, according to the†Government Accountability Office. Itís not the case that people have been burdened by taking out loans to help their children or grandchildren attend school, either. More than 80 percent of that debt consists of loans taken for the borrowerís†own†education.

Roughly 150,000 Americans had a portion of their Social Security garnished last year to pay down their student loans. And itís not just people who are struggling financially who are saddled with all this debt. Bloomberg News uncovered a 67-year-old man named Eric Merklein, who was stunned to discover that $300 was garnished from his first Social Security check. Merklein had thought his grandmother had paid off his student debts, but the government thought otherwise.

Even worse: The debt that Merklein had originally owed to Southern Illinois University, $3,750, had grown to $21,118 over the years because of interest and default fees.

If you are unsure whether you are trailing any student debt, the Department of Education offers a National Student Loan Data System at, where anyone can search for student loans and balances, as well as find the names and locales of the loan servicers.

Mortgages The customary trajectory says that by the time someone reaches retirement, they will have paid off their mortgage, but that no longer holds. The housing bubble that developed in the early part of the last decade led many people to buy much more house then they needed, and the subsequent recession left many of those people unable to pay for them. Older Americans were affected as much as anyone Ė maybe more so.

As a result, the median mortgage held by Americans 65 and older more than doubled between 2001 and 2013, to $88,000 from $43,400, according to the Consumer Financial Protection Bureau. Thirty percent of homeowners 65 and older were paying a mortgage in 2013, up from 22 percent in 2001. Itís an issue for those even past retirement: Federal Reserve numbers show that the percentage of people 75 and older with home loans rose from 8 percent in 2001 to 21 percent in 2011.

Even for those who have the assets to continue paying off these mortgages, it doesnít always make financial sense. Back in 2007, for example, mortgage rates were nearing 7 percent, which means itís likely that someone could be paying mortgage interest thatís higher than the expected rate of return from that portfolio. Look into the financial benefits of paying off any remaining mortgage balance Ė even with a potential prepayment penalty, it may well be worth it.


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