Another Day Older. . .

Orion BellOctober 2024[email protected]

. . .and deeper in debt.

Merle Travis wrote the song Sixteen Tons about the life of a coal miner in eastern Kentucky. He first recorded the song in 1946. Travis attributed the chorus’ “another day older and deeper in debt” to a letter from his brother about being a coal miner. Written nearly a century ago, the tune is embedded in popular culture, including a chart-topping version by Tennessee Ernie Ford released in 1955. It has been covered by a variety of artists (including Stevie Wonder and Tom Morello of Rage Against the Machine) and translated into a dozen languages. It is featured in the soundtracks of movies, TV shows and video games, including the most recent season of Fargo. In a few short verses, the song captures the struggle of working to make ends meet.

“Another day older and deeper in debt” also describes a growing number of older adults in the US. More than half of adults aged 75 and older report having debt, a rate that has more than doubled since 1989.

A record number of Americans ages 60 and older report carrying significant levels of debt. The National Consumer Law Center (NCLC) recently reported on the growth in the number of older adults who are saddled with debt in retirement. Older adults “often have significant debt and reduced resources and are at risk of having their limited resources drained by uncovered medical bills, nursing home and other caregiving expenses (for themselves or loved ones), aggressive debt collectors, predatory lenders, scammers, and other financial exploiters.”

Medical debt, student loans and housing costs are leading causes for the increase in indebtedness.

Medical debt

KFF, an independent, nonprofit and nonpartisan source of health policy research, has reported extensively on the impact of medical debt on older adults. According to KFF, older adults carry a total of $53.8 million in unpaid medical debt. One person in three aged 65 and older reported having current medical debt, and of those, 29 percent reported their debt had been turned over to a collection agency for unpaid medical or dental bills. Families may resort to high-interest credit cards to pay a medical bill, which may add to their indebtedness. Unpaid medical bills and high-interest credit card debt have a negative impact on credit scores. Medical debt is a leading contributor to personal bankruptcy filings in the US.

Medical debt impacts people across the economic spectrum. KFF reported that in 2022, more than 100 million Americans held health care debt. Even individuals with health insurance, including Medicare, may face significant bills for treatment. A cancer diagnosis, or treatment for chronic health conditions (diabetes or hypertension, for example) may include expenses that are not covered, or that exceed coverage limits of health plans and overwhelm the resources of the person needing care.

Beyond the impact on finances and credit scores, financial strain also affects the health of persons with medical debt. In an analysis of credit credits and demographic data, the Urban Institute found that residents with multiple chronic health conditions “also tend to have the most debt.” Illness is a stronger predictor of medical debt than either poverty or insurance.

Student Loans

Another growing form of debt among older adults is student loans. The NCLC recently produced a fact sheet on student loan debt. They reported that 3.5 million older Americans have over $125 billion in student loans. The number of debtors has grown six-fold since 2004, and the amount of debt increased by 1,900 percent. A portion of the debt is due to loans taken out to help family members attend college (PLUS loans), but a majority of borrowers are carrying debt for their own education. More than 40 percent have been making payments for two decades or more.

Federal guaranteed student loans provide a source of funding for higher education. The cost of a college degree has risen much faster than the overall rate of inflation (increasing more than 50 percent since 2000). Students from lower income households, and those who are among the first generation in their families to attend college are more likely to have student debt, although the rate of debt is increasing among wealthier students. Many students opt for income-based payment plans for student debt. But the payment may not be enough to reduce the principle on the loan. Interest continues to accrue on the principle, even if the student is current on payments. The current interest rate on student loans ranges from 6.53 percent to 9.08 percent.

The Biden Administration offered student loan relief as part of its plan to address the financial impact of the pandemic. This included a “pause” on loan payments, as well as provisions for loan forgiveness for select borrowers. Judicial challenges have limited the implementation of parts of the plan. The Department of Education proposed revised rules for student debt relief on October 25. These rules, if implemented, would extend debt relief to up to 8 million borrowers.

Unlike medical debt (and most other debt in the US), student loan debt cannot be relieved via bankruptcy. The NCLC projected that 800,00 borrowers aged 62 and older are in default on their student loans, and if collections resume in October 2024, these individuals will see lower credit scores. Borrowers in default could see their tax refunds, wages or Social Security payments seized.

Property Tax Foreclosures

A variety of factors contribute to housing costs for older adults. A shortage of quality affordable housing and increased demand leads to higher home prices and rental rates. Higher costs for home repairs and maintenance also challenge retirees living on fixed incomes. In Ohio, attention has been focused on rising property taxes.

Ohio law requires reappraisal of real estate every six years. Properties are assessed based on their reasonable value. In Cuyahoga County, property values increased an average of 32 percent in the reassessment conducted this year. Property tax rates vary widely across the county, reflecting the budgets of the municipality or government unit. Most homeowners anticipate a “single digit increase” in their tax bill.

Benjamin Rose’s Housing and Homeownership counselors sometimes encounter clients who have a property tax bill that is higher than the mortgage payments made when they purchased the house 30 years earlier. The home is “free and clear,” but the tax bill creates a burden for the older resident and a potential risk to their ability to age in place.

Strategies to Address Debt

Medical debt, student loans and property taxes present challenges to the financial stability of older adults, but there are opportunities to provide relief. Here are some examples:

  • Debt portfolios purchases: this past year, Cleveland joined a growing number of communities that purchased medical debt portfolios from collection agencies. Using a grant from federal pandemic relief funds, RIP Medical Debt purchased more than $200 million in medical debt. The debt, purchased at steep discount (“pennies on the dollar”) allowed for erasure of debt for approximately 300,000 people. This reduces debt and raises credit scores, which in turn helps these individuals obtain lower interest rates, get better terms for housing rentals and lower insurance premiums (which consider credit scores in underwriting policies.)
  • Changes in credit reporting: the Consumer Financial Protection Bureau has recommended that medical debt should not be considered in credit scores. National credit agencies have agreed to remove medical debts of less than $500 from credit scores. This is a start, but many Americans with medical debt owe more than $5,000.
  • Discourage use of collection agencies: hospitals and health care providers can be discouraged from turning over debt to collections agencies. The nonprofit status of these hospitals is based, in part, on their public benefit to provide care for vulnerable populations. Reporting the practice of “extraordinary actions” to collect payment can help encourage medical providers to fulfill their charitable care obligations for low income and under-insured patients.
  • Student loan forgiveness: changes in policy regarding student loan debt requires federal action. Advocacy on the issues, including a realistic assessment of who has student loan debt and why, can help address the causes of student debt, and provide reasonable solutions to the issue. A variety of proposals have already been put forward, including those proposed by the Biden Administration.
  • Address the costs of education: a major factor in the rise in student loan debt is the cost of post-secondary education. At a time when there are shortages of skilled workers in many fields, including health care and skilled trades, finding a way to promote skills training and career development is essential. Lower tuition for training in high-demand fields, expanded vocational and apprenticeship programs will help reduce the level of student borrowing, and build the workforce to strengthen the economy.
  • Property taxes: real estate and property taxes are under the purview of state governments. Earlier this year, the Ohio Senate Select Committee on Housing conducted a series of hearings around the state and issued a report on its findings. The discussion of affordable housing for older adults included ways to minimize the impact of rising property taxes on lower income, older homeowners. An expanded homestead exemption, as well as measures to protect homeowners from tax increases due to rapid appreciation in property values, can help preserve home ownership and help ensure people are able to age in place.
  • Expand the pool of public and private funds available for housing options counseling and assistance with tax bills. Cuyahoga County recently announced a pilot program offering debt relief and counseling for older adults with outstanding property taxes.

 The rising level of debt among older adults is a threat to their financial well-being and their ability to age-in -place. It is a challenge that deserves our attention, and one that requires multiple approaches and perspectives to resolve. For a concise overview of the issue, read Curbing Rising Debt for Older Adults: A Call to Action from the RRF Foundation for Aging.