Millennials certainly seem to be of a different breed than previous generations. So far, we’ve seen them actively kill numerous industries across the country. It was once thought that they just didn’t have the same taste for material goods. Maybe they learned different spending habits? The answer might be simpler than that: student loan debt.
“Millennials, long presumed to have less interest in the nonstop consumption of goods that underpins the American economy, might not be that different after all, a new study from the Federal Reserve says,” said Bloomberg’s Luke Kawa.
“Their spending habits are a lot like the generations that came before them, they just have less money at this point in their lives, the Fed study found. The group born between 1981 and 1997 has fallen behind because many of them came of age during the financial crisis.”
Certainly, one of the major crises points of this generation has been student loan debt. The millennial generation goes or student debt than the previous two generations have ever owed. 44 million Americans owe $1.53 trillion in student loan debt. And this number is a going down anytime soon.
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Student Loan Debt Cripples Young People
When the Great Recession hit, it was at a time when the millennial generation was starting to come up. Jobs are scarce and many fell into the lure of predatory advertisements from for-profit schools. The schools promised that they had high job placement rates. They really had nothing of the sort.
Many millennials, broke and jobless, effortlessly signed on the dotted line. They could afford college, so they took out loans. When they graduated, they still had no job but now were under mounds of student debt. How can anyone keep up with monthly payments if there’s no work? Going into default, their credit scores tanked.
“Millennials are less well off than members of earlier generations when they were young, with lower earnings, fewer assets, and less wealth,” the study said, adding, “Conditional on their age and other factors, millennials do not appear to have preferences for consumption that differ significantly from those of earlier generations.”
Student Loan Debt Changed Spending Habits
If there’s one thing you have to do, it’s to make a living. We all know the process. Graduate high school, go to college, start a family, get a new car, and buy the dream home. The problem is, student loan debt has changed this pattern. Now, millennials cannot afford to get married. They have so much student loan debt that they cannot buy a house.
Many studies have revealed the millennials are putting off major life decisions. And it’s undoubtedly wrecking our economy. We wrote an article a few days before about millennial’s not feeling that optimistic about the current economic recovery. It seems to have no impact on their spending habits.
“I think we have got a very significant psychological scar from this great recession,” Kimberly Greenberger, a Morgan Stanley analyst, told Business Insider in 2017. “One in every five households at the time were severely negatively impacted by that event. And if you think about the children in that house and how the length and depth of that recession really impacted people, I think you have an entire generation with permanently changed spending habits.”
Student loan debt is only going to continue to climb. Unless the government steps in now, future generations will be bogged down by an even worse problem. The cost of a college education only continues to get more expensive. The only way out of this crisis is for less people to go to college in the first place.