It’s always been there.  Debt.  Even though the Pennsylvania Divorce Code does not really mention it by name.  If you speak to the hearing officers who draw the assignment of effecting equitable distribution, they respond that debt is the most nettlesome thing to deal with.  In some cases, it is the only thing they deal with because none of the assets had “equity”.

We found some interesting data on the topic in Experian’s recent analysis of 2019 debt.  Some of it is not very useful.  When you see a statistic that tells you the average 18-23 year old has $142,000 in mortgage debt, you have to ask how many people 23 and under actually have a mortgage.  However, there is useful information as well.  This writer grew up in the 1960s.  A world when auto and mortgage debt were about the only debt available.  Back then; even credit cards were actually “charge cards” where the balance was supposed to be paid off monthly.  It was the age of the 20-year mortgage.  You bought a house at age 30 and “burned” the mortgage when you paid it off at age 50.  The residence was now your “nest egg.”

The world has changed and the data show it.  Mortgage balances for folks in my baby boomer bracket average just under a quarter million dollars.  That value gets closer to $300,000 if we consider HELOC (home equity) debt.  In 1986, the entire student loan portfolio in the U.S. totaled $10 billion.  Thirty-five years later that total is $1.7 trillion.  Note that those defined by actuaries as “elderly” (over 55) are averaging $40,000, which suggests to me that this is not boomer debt, rather, a debt they took on for their kids.  In addition, despite a robust economy from 2015-2019, every class of Americans except the Gen X ers witnessed marked increases in debt.

  Baby Boomers (56-74) Generation X (40-55) Millennials (24-39) Generation Z (18/23)
Average Debt 2019 $135,841 $96,984 $78,396 $9,593
2015-2019% Change In Debt 10% (7.5) 58% 22%
Average Credit Card Balance $8,215 $6,949 $4,889 $2,230
Average Mortgage Balance $238,344 $175,865 $224,500 $142,600
Average Auto Loan Balance $21,570 $18,759 $18,201 $14,272
Average Personal Loan Balance $17,175 $19,253 $11,819 $4,526
Average Student Loan Balance $39,981 $34,957 $34,795 $12,495
Average HELOC Balance $49,221 $45,006 $41,239 $32,854

IF there is good news to be found in this block of data, it is related to interest rates on mortgage and HELOC indebtedness.  Thirty-year mortgage rates were about 6% on average in 2008 and have only twice bubbled up above 4% in the ensuing years.  Unfortunately, personal debt, especially credit card debt, has been sticky with minimum rates in the 14-15% range and 23-24% as the average maximum rate.  Those rates can cripple a household in a financial sense and make real savings almost impossible to attain.

The days of the HELOCs where the interest component was deductible are now behind us, but we still see many people who eschew these loans for that reason.  Truth is that a nondeductible HELOC rates at 3-4% still beat the pants off nondeductible credit card debt at 14-24%, or pulling money out of retirement as either a loan or a distribution.  The same is true for automotive debt, although our experience has been that the price of cars today is often tied tightly to the lending arrangement.

Divorce lawyers today and in the future are going to have to devise plans that address debt in constructive ways.  We are living through a period where many clients need our services in what is dubbed “The Golden Years.”  The Experian chart suggests that all generations are coping with increasing debt and that the “gold” may be more plated, than real.