The U.S. population structure is changing as the baby boomer generation ages and fertility rates decline. What impact might this have on municipal credit?
While politics and headlines often grab our attention, there are meaningful credit undercurrents brewing: the structure of U.S. population is changing. The most significant shifts are driven by the aging baby boomer generation as well as a sustained decline in fertility rates below replacement levels. These trends are more frequently discussed in the context of rising Medicaid and Social Security costs, but today we will delve into its impact on municipal credit.
Boomers Are Aging
The baby boomer generation refers to Americans born between 1946 and 1964, a period marked by a significant post-World War II increase in birth rates. The youngest boomers are currently 61 years old, and the eldest are 79. This population spike is expected to work its way down the population pyramid which will result in an older population with less people in the workforce relative to retirees.
The U.S. is Having Fewer Children
Since the Great Financial Crisis, the fertility rate has fallen below the natural replacement rate (2.0). Over the last decade, this gap has been offset by immigration which may also decrease in the face of federal policy changes.
School Districts
School Districts are already feeling the demographic pressures. Enrollment, the primary driver of state funding, has declined while competition from charter schools and voucher programs has increased. From Fiscal Year (FY) 2018 to FY2023, total enrollment in "traditional" public elementary schools declined by 2.1%. Over the next four years, that decrease is expected to accelerate, with enrollment declining by an additional 4.0% by 2027.
These top-line enrollment pressures, combined with relatively large fixed costs and increased competition, create significant headwinds for the sector and further emphasize the importance of active security selection. We favor school districts that have strong reserves, conservative budgeting, strong revenue raising capabilities, and high wealth.
Higher Education
The pool of college-bound students is also shrinking. The number of 18-year-olds graduating from high school nationwide reached its peak in 2025 at approximately 3.9 million. Due to declining birth rates, this figure is projected to decrease steadily through 2041, resulting in a ~13% cumulative drop in eligible students.
This demographic decline is increasing enrollment pressures on colleges, especially smaller, private, and less selective institutions, leading to more closures. Further closures, mergers, and challenges for less selective schools are likely, while elite institutions like Harvard should remain resilient. On the bright side for those with young children, it may become easier to get them into schools!
Senior Living
The relative winner is Continuing Care Retirement Communities (CCRCs), a nuanced and riskier sector known for its elevated levels of defaults. The eldest boomers are currently 79 years old, and the average age of move-in to independent living is 82, meaning there is an influx of potential customers aging into the market soon. This, coupled with a notable lack of new developments (as a result of rising capital and construction costs) present an interesting supply / demand dynamic.
Boomers will have more options to age than any other generation as a result of tech advancements like telehealth (yes – there is even Artificial Intelligence in senior living). Staffing will always be a challenge, and complicated entrance fee contracts drive a cautiously optimistic tone towards a sector that may finally have some tailwinds.
To Wrap Up
The U.S. population is getting older as the boomer generation ages. People have been having fewer children, and immigration has acted as an offset but may start to decline. It will be important monitor these trends and take them in concert with more local factors when evaluating municipal credit. Certain areas of the country are younger (i.e. Denver), some are having children at higher rates (like Utah), and some benefit from net domestic migration of older adults (i.e. Florida). Understanding these trends and having proactive management will be key differentiators in the municipal market as our population continues to change.