The amount of debt that Americans have is staggering. The total outstanding consumer debt climbed to almost $15 trillion in 2020, and the average American owes an estimated $25,112 in non-mortgage consumer debt. Mortgage, personal loan, auto loan, and student loan debt are up across all generations
But how do these figures differ among age groups? Well, the numbers may surprise you.
The most common types of debt are credit cards, auto loans, student loans, and mortgages.
“Good debt” often refers to debt that allows someone to purchase assets or improve their circumstances. Student loans and mortgages tend to fall in this category.
“Bad debt” often refers to revolving debt or debt with high-interest rates. This includes credit cards and auto loans. Bad debt is typically associated with depreciating items that don’t retain their value.
Type of debt by age
Below is a summary of Experian’s 2020 consumer debt report, including credit cards, student loans, mortgages, auto loans, personal loans, and home equity lines of credit (HELOC) among Americans with debt by age and type:
Generation Z (ages 18-23)
- Credit cards: $1,963
- Student loans: $17,338
- Mortgage: $169,470
- Auto loan: $15,724
- Personal loans: $6,004
- HELOC: $36,107
- Change in debt since 2019: $16,043 (up 67.2%)
Millennials (ages 24-39):
- Credit cards: $4.322
- Student loans: $38,877
- Mortgage: $237,349
- Auto loan: $19,011
- Personal loans: $12,306
- HELOC: $40,496
- Change in debt since 2019: $87,448 (up 11.5%)
Generation X (ages 40-55):
- Credit cards: $7,155
- Student loans: $45,095
- Mortgage: $247,564
- Auto loan: $22,307
- Personal loans: $17,733
- HELOC: $46,660
- Change in debt since 2019: $140,643 (up 3.5%)
Baby boomers (ages 56-74):
- Credit cards: $6,043
- Student loans: $40,512
- Mortgage: $178,688
- Auto loan: $19,306
- Personal loans: $19,700
- HELOC: $41,498
- Change in debt since 2019: $97,290 (up 0.3%)
Silent Generation (75 and up):
- Credit cards: $3,177
- Student loans: $28,052
- Mortgage: $133,827
- Auto loan: $14,750
- Personal loans: $17,123
- HELOC: $35,929
- Change in debt since 2020: $41,281 (down 4.6%)
The age group with the most debt
Although Generation Z saw the most significant increase in debt (+67.2%), Generation X had the highest average debt across all categories. A survey by AARP found that 52% of Generation X surveyed were not confident about retirement, and 38% reported that student loans limited their savings for retirement.
Generation X and baby boomers had more student loan debt than other age groups. This is likely the result of rising costs in higher education as they pay for their children’s educations through parental loans or seek a midlife career change. Student loans begin to fall by the silent generation, but they don’t entirely disappear.
Surprisingly, baby boomers were a close second with the highest average debt, beating out millennials in everything except mortgages. Mortgages represent the largest type of debt across all age groups, with Generation X carrying the highest balances.
The age group with the least debt
As you probably expected, Generation Z and the silent generation have the lowest debt. Generation Z is slowly starting to build debt as they enter adulthood, and the silent generation is working to pay off debt as they live in retirement with a fixed income.
Although the silent generation saw the most significant decrease in debt (+4.6%), they continue to carry substantial debt in retirement. They have mortgage balances of more than $130,000, HELOC balances of more than $35,000, and auto loan balances of more than $14,000.
What does this mean for me?
The average debt for your generation may be lower or higher than yours, but don’t let that distract you. These numbers are intended to show trends among people who currently have debt. If you’re debt-free, flying high, and on the way to early retirement, no need to worry. You’re golden. For everyone else, this article highlights the mounting debt that accompanies many people through retirement.
This is a wake-up call. More than half of all baby boomers, who are entering retirement, by the way, are still paying a mortgage. It’s time to avoid bad financial habits and start saving and planning for retirement today.
How much debt is too much?
The first thing you should know about debt is that it’s not always a bad thing. Debt can be used to purchase assets such as a home or to finance your education, and it extends your purchasing power and allows you to buy things you otherwise wouldn’t have been able to.
The key is managing it responsibly. Lenders will say keep debt to less than 40% of your income. But there’s no magic number.
“It’s easy for debt levels to get out of control quickly,” said Alex Mooradian, CEO of the debt management platform Resolve. “Credit cards are offered at stores, on airplanes, and in the mail multiple times a day, and people start to feel like this is just free money. The reality, however, is that paying 25% interest rates can spiral into financial distress very fast.”
If you feel overwhelmed by your debt, you probably have too much. Work to reduce the amount of bad debt you carry, such as high-interest credit cards and auto loans. It sounds simple, but it’s often easier said than done: The goal is to limit the amount of money you are giving someone else (i.e., creditors) and maximize the amount of money you save and invest.
Don’t let debt keep you from retirement. As a general rule, the closer you get to retirement, the less debt you want to have.
How do you manage debt?
Start by defining your financial goals. Make goals that are specific, measurable, and feasible. For example, what do you want to have? When do you want to retire? Where? How much money will you need to be comfortable?
Then make a list of all of your debts. That includes their balances, interest rates, and minimum monthly payments. Next, create a plan to pay down debt using the debt snowball or debt avalanche methods. The debt snowball method starts with the smallest debt to build momentum to pay off the larger debts. The debt avalanche method begins with the biggest debt to quickly build momentum to pay off the smaller debts.
Use a budget. Tell your money where to go instead of wondering where it went later. Be honest with yourself and how much money you have. Cut extra spending that isn’t adding value to your life, and don’t be scared to look for creative ways to make a little money on the side.
Lastly, don’t forget to plan for retirement. Investing or paying off debt is a common dilemma facing millennials and Generation Z. However, you can analyze your financial situation to make the best decision. Only you can choose the right path for you. Just know that having a plan and understanding your financial situation is sure to help.
Debt isn’t a problem for just one generation — it’s a problem for people of all ages. So it’s essential to understand how people think about money at different stages of life, not just the baby boomers who are retiring, but the Gen Xers with kids still living at home, the millennials struggling to get out of student loan debt, and everyone else.
For many, debts start accruing at a young age and keep rising till you hit 60 before they start to decline. Sadly, for some, it never entirely goes away. Debt can be stressful, and building good money habits early is one of the best things you can do for yourself and the generations that follow.