Christian Mitchell, chief customer officer at Northwestern Mutual, said these borrowers faced unappealing choices: Work longer, or live on less in retirement.
“Retirement is theoretical, until it’s not,” he said. “What likely exacerbates it here is all the economic turmoil we’ve had over the past few years.” For a generation in its peak earning years, the disruption of that momentum, when millions of jobs were lost during the pandemic, can create a financial shortfall from which it can be difficult to recover.
The reality is that a certain number of these borrowers will likely have to both work longer and live more frugally, especially because student loans, unlike other types of unsecured debt like credit card and medical debt, can’t be easily discharged in bankruptcy.
Juggling kids’ costs with their own
Overall, Generation X was already carrying a lot of debt: The online lending platform LendingTree found that this age group had the most mortgage as well as nonmortgage debt, averaging more than $167,000 per borrower. The higher interest rates borrowers are paying today, a function of the Federal Reserve’s battle against inflation, makes it harder to pay off variable-rate debts, since a greater amount of each monthly payment goes to servicing the debt itself rather than paying down the principal.
“It has more of an impact on their overall budget, which means a more difficult time covering other expenses,” Mr. Graham said.