Studies find higher debt loads among younger generation, indication of economic collapse

If debt wasn’t more ubiquitous in the collapse of the United States economy amongst private citizens then the following research statistics and figures may suggest the nation’s future is rather bleak as many may perhaps perish in debt.

Americans in their 20s and 30s not only have tremendous student loan debt, they also have an enormous amount of credit card debt and more than older consumers, according to a new study by the Ohio State University. The study authors also showed that younger Americans are repaying the debt back more slowly and face the risk of even dying in debt.

The research found that individuals born between 1980 and 1984 have approximately $5,689 more debt than their parents had at the same stage of their life and $8,156 more than their grandparents.

By comparing consumers in different age demographics with similar education, income and marital status, the researchers found that the payoff rate of younger credit card users was 24 percent less than their parents and 77 percent lower than their grandparents.

“If what we found continues to hold true, we may have more elderly people with substantial financial problems in the future,” said Lucia Dunn, a co-author of the study and a professor of economics at Ohio State University, in a statement.  “Our projections are that the typical credit card holder among younger Americans who keep a balance will die still owning money on their cards.”

Dunn added that since credit is widely available, interest rates are low and there is even less social stigma of possessing credit card debt, more young people are willing to get into debt. “If our findings persist, we may be faced with a financial crisis among elderly people who can’t pay off their credit cards.”

The study was published in the journal Economic Inquiry.

Meanwhile, another study conducted by Rent.com found that more than three-quarters of renters between the ages of 18 and 24 spend more than they earn each month. Nearly a quarter of respondents said they overspend by $100 every month and a significant amount of youth blame “socializing” as an obstacle to save money and spend less.

Nearly half (42 percent) listed rent as their top expense; while less than a quarter (22 percent) noted food takes up a significant portion of their monthly budget. Transportation costs were also named as a major expense.

In the end, the study concluded that more and more young people are using credit cards to make it until the next payday. This could affect the economy in a substantial way in the future as young consumers will still be paying the interest on the carton of milk, the latest iPad and a trip to the movie theater.

As the youth of America use credit cards to sustain their lifestyle, older Americans are found to be using credit card as a safety net rather than personal financial obligations. According to AARP’s Public Policy Institute and Demos survey, the average credit balance for middle class Americans aged 50 and older is $8,278 (2012).

One-third of older households used credit cards to pay for things like rent or mortgage, groceries and utilities. Half of respondents have medical expenses on their credit card and 18 percent admitted using their retirement funds to pay down their credit card debt.

Household debt in the U.S. now totals about $13 trillion, which is approximately $2 trillion short of the nation’s annual economic output. Total borrowing has risen to a record $2.75 trillion, credit card debt is roughly $858 billion, $956 billion in student loan debt and $8.03 trillion in mortgage debt.

Not only is the federal government suffering from an astronomical debt load so are average Americans. Although the establishment and mainstream media view the rise in borrowing and consumer spending as positive indicators to economic growth, others argue that saving and investment will lead to prosperity and genuine growth in the economy.