Deeper in Debt? You are Not Alone
Millions of older Americans are caught in the debt trap
It is hardly an understatement that we are experiencing a debt surge in our nation. Older and younger generations alike grapple with debt, but for those of us who are older, the consequences are more significant. And the debt has more time to accumulate. The share of older people who incur "high-risk" debt — credit cards, medical bills and student loans — has soared 50% in two decades.
According to the Center for Retirement Research at Boston College, the majority of older Americans, an astounding 60% of adults age 65 or older, carry debt. More than one-third are financially constrained and unable to meet basic needs. The debt trap is a systemic problem. People get into debt because many don't have the means to meet basic expenses, resort to using credit and then get buried under crushing interest rates. The degree to which U.S. policymakers improve our consumer information and protection systems, or do not, impacts our ability to stem the tide of rising debt for older adults.
With significant debt and reduced income, many older people are at risk of having their already limited resources drained by uncovered medical bills, aggressive debt collectors, predatory lenders, scammers and other financial exploiters. Here are a few shocking statistics and a wake-up call to action:
- Older adults carry more than $53.8 billion in unpaid medical debt, despite the myth that Medicare and supplemental health care coverage avoids debt. The U.S. Consumer Financial Protection Bureau reports that more than 20% of older adults carry medical debt, and nearly one-third report being contacted by a collection agency, which negatively affects their credit score and their ability to get loans at reasonable rates. Many have put off medical care to avoid the consequences of debt. Some have resorted to medical credit cards with predatory terms to finance necessary care.
For example, Mrs. Johnson, who lives on a fixed income, needs an emergency root canal. She may opt to finance the work through a medical credit card — since Medicare, in most cases, does not cover dentistry — which has predatory financing terms. When she can't pay off the debt and mounting interest, her credit score goes down. While Mrs. Johnson owns her own home, which is mortgage-free because she has worked hard her whole life, she is denied a home equity loan to replace her roof.
- According to the 2022 Federal Reserve Survey of Consumer Finances, the percentage of older adults with credit card debt is twice what it was two decades ago. The median balance is more than $2,700 for family heads older than age 75. Many older adults use multiple cards, not for luxury items, but to meet basic needs and pay down medical bills. And, by revolving payments and covering only the minimum balance, cardholders get deeper into debt because of mounting interest and fees.
- A National Consumer Law Center and New America Foundation report about “The Growing Impact of Student Debt on Older Americans,” finds that 3.5 million older Americans, age 60 or older, hold more than $125 billion in student loans. This number grew six-fold in two decades, and the amount of debt grew 19-fold. More than 40% have spent at least two decades trying to pay off their loans. In many cases, the government made loans to older adults for their children's education, knowing they could not afford it, and then excluded them from the most affordable payment plans.
Nearly one in three of these older borrowers have little income available to pay off their loans. Subsequently, they default and risk poor credit scores, seizure of tax refunds, wages or large portions of their Social Security income.
Fortunately, advocates for older Americans are heeding the call to address rising debt. Nonprofit organizations such as the National Consumer Law Center, working with partners like New America Foundation, Justice in Aging, the National Center on Law and Elder Rights, AARP, the Student Borrower Protection Center and others, are working at the national level on such policy reforms as barring medical debt from credit reports, protecting against abuse of medical credit cards and reducing Social Security penalties. They are also educating legal aid attorneys so they can help older people prevent and mitigate debt. Advocates are working at the state and municipal levels to protect unlawful property sales, increase exemptions from collection, and curb predatory lending practices. Given the rapidly changing landscape of federal initiatives, advocates are working even harder to protect the gains that have been made and impact so many.
What can we, as consumers, do to help?
If we all work collectively, we can build awareness of unfair debt and abusive debt collection practices and advocate for debt practice and policy reforms. We can use our voices to share our own experiences with debt or those of our neighbor, friend or family member who may be suffering the burden of debt in silence.
Advocates are most effective when they have real-life stories to share with policymakers. We can follow advocate-sponsored websites for call-to-action alerts and submit public comments when we learn of proposed regulations, both those that are favorable and those that are harmful. We can join with groups like the Debt Collective, a first-time union of debtors whose motto is "Alone our debts are a burden. Together, they make us powerful."
Debt remains a significant threat to the economic security of older adults. And while RRF Foundation for Aging's advocacy and research partners continue as champions for related policy reforms, more work is needed to mitigate rising debt among older adults. Let's work together to ensure that as we age, we all live our later years with dignity and not with debt.
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RRF Foundation for Aging (RRF) is a national grantmaker focused on improving the quality of life of older adults — and one of the first private foundations in the U.S. devoted to aging issues. RRF is committed to supporting 501(c)3 organizations and their programs — to minimize the threat that carrying debt poses in undermining economic security in later life.
