Life and Debt: A Survey of Data Addressing the Debt Loads of Older Persons and Policy Recommendations

Abstract

The budgets of a growing number of older Americans are stressed by mounting debt loads as elders struggle to pay for necessities such as groceries, prescription drugs, and urgent home repairs. Debts levels of the elderly have taken a sharp turn for the worse since the early 1990s. Older persons are going into debt, filing bankruptcy, and, in many cases, losing their homes in greater numbers than ever before. The authors analyze the causes of rising debt loads, including declining income, growing expenses, a shrinking safety net, and easier access to high cost credit. The preemption of usury and other state laws and deregulation of the credit marketplace are identified as causes of the high cost loan products and marketplace abuses that seriously injure the financial condition of older Americans. The article also examines the consequences of higher debt loads on the lives of the elderly.

The authors conclude with proposed strategies to address the issues raised. These recommendations are separated into seven main groupings: repairing the social safety net; eliminating abusive credit practices; rigorously enforcing current laws; strengthening support systems to manage legitimate debt; expanding effective education and prevention measures; increasing the availability of alternative products; and encouraging additional research by requiring ongoing evaluation and data collection.

Using credit as a source of income may have blinded society to the growing lack of security after retirement. In the short term, easy credit allows many elders to buy necessary services and products even when their monthly incomes are insufficient to cover the charges. In the long term, this trend likely is not sustainable for any American, not just those most vulnerable or living on the edge.

Keywords: elder, senior, debt, credit, usury, retirement, aging, saving, mortgage, predatory lending, credit card

JEL Classification: A13,D31,D63,E21,E51,E61,I1,I3,J14,J26,K00