If you’re a millennial in the US, chances are, you owe more in student debt than previous generations.
A study from the Federal Reserve Board has found that “the average student loan balance for millennials in 2017 was more than double the average loan balance for Generation X members in 2004.”
The Pew Research Center describes millennials as individuals born between 1981 and 1997 while Generation X comprises of those born between 1965 and 1980.
The report highlighted that only 20 percent of Generation X members had a student loan balance in 2004, while more than 33 percent of millennials had one in 2017.
It further notes that “the average student loan balance for millennials in 2017 was more than double the average loan balance for Generation X members in 2004.
“The rise of student loan borrowing among young consumers reflects, in part, the rising real cost of higher education, the increase in college enrollment due to the Great Recession, and the increasingly limited capacity of parental contribution,” it says.
Their financial difficulties have little to do with their supposed obsession with avocado toast.
According to researchers, “the spending patterns of millennial households are not very different from those of previous generations. In particular, we find that the taste and preferences parameter of a consumption function that includes age, income, and other demographic and economic factors is not different for millennials than for members of earlier generations.”
The report adds that millennials own fewer assets than earlier generations and have less debt at the individual level than Generation X. However, millennial households appear to have roughly the same debt as Generation X and higher debt than baby boomers (those born between 1946 and 1964).
Meanwhile, a study by AARP and the American Youth Association says student debt is preventing many Americans from saving for major life milestones, with millennials hit the hardest.
— Student Strikes (@studentstrikes) December 2, 2018
The study notes that “at least a quarter of millennials said they are struggling with saving for retirement, buying a house and car, and moving out of their parents’ homes. With 70% of current grads walking away from college with $37,172 in student loans, the debt burden felt by future generations will continue to grow.”
Speaking to Yahoo! Finance, Ben Brown, founder of The Association of Young Americans, explained that as more young and older people continue to graduate with more debt, the ripple effect is expected to become wider and more significant.
Meanwhile, MarketWatch reported that “millennials have more difficulty saving than other generations”, adding that factors such as the rising cost of education, stagnant wages and lack of financial understanding negatively impacts their ability to save.