Report: Young Families More Educated, But Earning Less

The newly released 2013 Survey of Consumer Finances reveals that the median family with a head who is under 35 years old earned $35,509 in 2013 dollars.  When adjusted for inflation that amount is 6% less than similar families reported in the first survey like this one in 1989.  Floyd Norris, writing for The New York Times, says that though young families are better educated, but they are earning lower incomes.

These surveys take place every three years and include questions concerning the families’ income, wealth, debt, education, and attitudes toward financial issues.

The results show that young families’ incomes are falling behind older families’ as time has passed.  Families headed by  people born after 1954, baby boomers, came up in a time of stronger economy and, for the most part, were not under the weight of school loan debts.  Families headed by those born after 1984 have not done as well early in their careers and have had to battle the weight of student loans.

The newest survey covered 2012 incomes, which were being earned three years after the recession, and shows that the median income for all age groups, except those 35-44 group, declined from 2010-2013.

In 1989, the median income for families headed by young college graduates was twice as much as similar families headed by high school graduates who did not attend college.  Now, the difference is just 52%.  There are more college graduates in the group, but they have a lower median income than those before them.  At this time, a little over a quarter of young families are in the top 40% of high-income families, and the age group with the income that has grown the most in the last quarter of a century are those aged 65-74.

This could be because of higher pension incomes or that people of this age are working well past retirement age of 65.

In a study by Beth Akers and Matthew Chingos, “Is a Student Loan Crisis on the Horizon?“, the data showed some surprising findings.  Akers and Chingos discuss the findings in a Brookings Institution article that shows the increase in student debt is because of increased educational costs.

Next, increases in average lifetime incomes have paralleled increases in debt loads between 1992-2010. Third, the monthly payment faced by student borrowers stayed the same or lessened between 1992 and 2010.  They also say that higher education is still a good investment, but this is not an excuse for high and rising college costs.

The Government Accountability Office (GAO), in a recent report, Survey of Consumer Finances, found that federal student loan debt for people 65 and older has ballooned from $2.8 billion in 2005 to about $18.2 billion in 2013.  This group is relatively small, but the amount they owe is increasing to a point that is jeopardizing their financial security during their retirement years.

The number of households with heads ages 65 to 74 that have student debt increased about 1% in 2004 to 4% in 2010, according to the Association of Credit and Collection Professionals International (ACA).  About 29% have some mortgage debt and about 27% may carry credit card debt. According to the report:

 “Student loan debt held by older Americans can be especially daunting because unlike other types of debt, it generally cannot be discharged in bankruptcy,”

This means that it is possible for their Social Security payments to be garnished. Most Social Security recipients do not have access to a lot of money, according to Sandy Baum, a senior fellow with the Urban Institute.