Older Americans Faced Early Pandemic Credit Constraints

Research by Meta Brown, J. Michael Collins and Stephanie Moulton offers insights into what happened to consumer credit for different age groups early in the pandemic. The authors do this by looking at Experian credit bureau data on different types of traditional credit (e.g., student loans and mortgages), as well as alternative financial services (e.g., payday loans). They found that:

• While younger adults saw debt levels increase in 2020 relative to 2019, older Americans saw debt levels decrease.
• Reduced spending and debt repayment likely helped lower older Americans’ debt. However, another important mechanism appears to have been reduced credit supply: Older Americans saw their existing credit curtailed and new credit denied at relatively greater rates.
• Despite reduced access to traditional credit, it doesn’t appear that older borrowers increased their use of alternative financial services (e.g., payday loans), and debt accommodations (e.g., forbearance) were less common among this group.
• There is evidence of a K-shaped recovery among older Americans, where advantaged households had relatively lower levels of debt during the early pandemic and disadvantaged households saw relatively higher levels of debt.