Americans’ Debt Styles by Age and over Time

HOUSING FINANCE POLICY CENTER

RESEARCH REPORT

Americans' Debt Styles by Age and over Time

Wei Li November 2015

Laurie Goodman

ABOUT THE URBAN INSTITUTE The nonprofit Urban Institute is dedicated to elevating the debate on social and economic policy. For nearly five decades, Urban scholars have conducted research and offered evidence-based solutions that improve lives and strengthen communities across a rapidly urbanizing world. Their objective research helps expand opportunities for all, reduce hardship among the most vulnerable, and strengthen the effectiveness of the public sector.

Copyright ? November 2015. Urban Institute. Permission is granted for reproduction of this file, with attribution to the Urban Institute. Cover image by Tim Meko.

Contents

Acknowledgments

iv

Americans' Debt Styles by Age and over Time

1

Age Patterns of All Debts

3

Middle-Aged Consumers Bear the Highest Debt Burden

3

Debt Patterns and the Life-Cycle Model of Consumption

6

Age Patterns of Five Major Types of Debts

6

Debt Types by Age Groups

6

Amount of Debt by Debt Type and Age Groups

7

Consumers' Credit Scores and Debt Types

10

Debt Styles: Combinations of Different Types of Debts

11

17 Debt Styles

11

Debt Styles by Age Groups

11

Conclusion

13

Appendix A: A Closer Look at Debt Styles by Individual Debt Types

15

Auto Debt

15

Mortgage Debt

17

HELOC Debt

19

Student Loan Debt

21

Credit Card Debt

23

Appendix B: Detailed Results

26

Notes

37

References

38

About the Authors

39

Statement of Independence

41

Acknowledgments

The Urban Institute's Housing Finance Policy Center (HFPC) was launched with generous support at the leadership level from the Citi Foundation and the John D. and Catherine T. MacArthur Foundation. Additional support was provided by the Ford Foundation and the Open Society Foundations.

Ongoing support for HFPC is also provided by the Housing Finance Council, a group of firms and individuals supporting high-quality independent research that informs evidence-based policy development. Funds raised through the Housing Finance Council provide flexible resources, allowing HFPC to anticipate and respond to emerging policy issues with timely analysis. This funding supports HFPC's research, outreach and engagement, and general operating activities.

This report was funded by these combined sources. We are grateful to them and to all our funders, who make it possible for Urban to advance its mission.

The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders. Funders do not determine our research findings or the insights and recommendations of our experts. Further information on the Urban Institute's funding principles is available at support.

Americans' Debt Styles by Age and over Time

This research report, the first in a series, reviews five years of consumer credit data to better understand the debt styles of American consumers: how those styles differ for different age groups, and how those styles have evolved. Subsequent reports will explore other aspects of the data, as well as raise, and attempt to answer, some questions about why the data look as they do.

Our data consist of a random 2 percent sample of five years of depersonalized consumer data (2010?2014) from a major credit bureau. Consumers were chosen based on the last two digits of their personal identification number (assigned by the credit bureau for internal use). This generated a total of 5.314 million consumers for the August 2010 draw. The same information for each consumer was collected each August from 2010 through 2014, creating panel data with five snapshots for each consumer in the panel. If a consumer dropped out of the data (for example, because he or she passed away), a new consumer was added in a manner that retains randomness in the sample. All records were stripped of personally identifiable information, and no data on race/ethnicity, gender, or income were included. The data included zip code, age,1 Vantage score,2 information on debt in collection, and balance and payment information for each of the following trade types: auto loan, credit card, student loan, home equity line of credit, first mortgage, and second mortgage.

Test how much you know about consumer debt by taking our quiz on the next page.

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