NEW YORK (Credit.com) — The economic downturn forced many consumers to reassess how they handle everyday finances, and that included making significant efforts to scale back credit card use and debt. One group that seems to have taken to that tack in particular is young people.
Today, Americans under 35 are making significant strides to cut their reliance on debt in general, and consequently have slashed not only their outstanding balances but also their debt-to-income ratios, according to data from the Pew Research Center. Through the end of 2010, consumers up to the age of 34 had debt-to-income ratios averaging 1.46, down significantly from their 1.63 in 2007, right around the onset of the recession. The most recent levels were still high compared with 2001 (1.04) and 1983 (0.73).
It seems older consumers took on more debt in the recession, perhaps as a consequence of having to rely on credit cards and other types of financing after prolonged bouts of unemployment, the report said. In 2010, the average debt-to-income ratio for those 35 and over was lower than those for younger consumers, at just 1.22, but also higher than the 1.08 seen in 2007. Further, that was a significant increase from the 0.75 seen in 2001 (and only 0.65 in 1983).
Part of the reason younger people might have more debt than income in general than their older counterparts is their student loan bills, which made up 15% of all debt held by those under 35 in 2010 (up from 9% just three years earlier), the report said. That compares with student loan balances of just 3% for everyone 35 and up. On the other hand, older borrowers also had credit card balances making up 3% of their obligations, as opposed to just 2% for those 34 and younger.