America’s most indebted generation? Gen X

August 27, 2014, 9:14 PM UTC
Photograph by Bart Sadowski—Getty Images

Millennials may owe more in student loans than any American generation, but their Generation X elders are actually the most in debt.

That’s according to a study released Wednesday by Federal Reserve Bank of St. Louis economists William Emmons and Bryan Noeth. The study showed that the single most indebted birth cohort in the nation are 44 year olds, who owe on average $142,077, most of that composed of mortgage debt.

This figure is actually a marked improvement, as every generation, including Generation X, has made progress paying down or discharging debt. For its part, Gen X has reduced what it owes by between 10% and 15% since 2008. But even on this score, they were beaten out by the much-maligned Millennial generation. These folks, also known as Generation Y, reduced debt even more aggressively than Gen Xers, discharging or paying down upwards of 25% of what they owed in 2008. Emmons and Noeth point out that “millennials were very young during the housing boom and presumably had more limited access to borrowing than members of Gen X.”

But the most striking aspect of the report is just how much more in debt Gen X is than previous generations are now or were when they were the same age that Gen Xers are today. Write Emmons and Noeth:

The average household debt of the 1970 Gen X cohort was $142,077 in the first quarter of 2014 (that is, approximately at age 44), while the average household debt of the 1956 baby-boomer cohort was $88,553, adjusted for inflation, in the first quarter of 2000 (when this cohort would also have been age 44). This represents about 60 percent more debt for the 1970 cohort compared to the 1956 cohort. Meanwhile, average real household income of the 1970 cohort was only about 5 percent higher than that of the 1956 cohort in the most recent data.

So, while Gen Xers aren’t making much more money than the generation that preceded them, they have taken out way more debt and are reducing it at a slower pace than any other generation. These trends likely reflect just as much about the broader economy than they do about Generation X itself. With incomes rising much more slowly over the past 20 years than at any time since the end of World War II, the average earner needs to borrow if she wants to replicate the steadily increasing standards of living that her parents enjoyed.

The fact that Generation Y has successfully discharged or paid down debt faster than Gen X suggests that, despite the Millennials’ reputation for being vapid and materialistic, today’s young adults may have taken the lessons of the Great Recession more to heart than their immediate elders. After all, Gen X came of age during the prosperous 1990s and were nearing middle age as the real estate bubble hit its peak.

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