Millennials Face $1 Trillion Debt as Student Loans Pile Up

Tan KW

Publish date: Tue, 26 Feb 2019, 10:44 AM

(Feb 26): More than a decade has passed since young Americans faced debt levels this high.

Debt among 19 to 29-year-old Americans exceeded $1 trillion at the end of 2018, according to the New York Federal Reserve Consumer Credit Panel. That’s the highest debt exposure for the youngest adult group since late 2007.

Debt levels play a role in how young adults view their spending conditions, according to a University of Michigan survey Friday. Younger adults -- those under age 35 -- have reduced their spending compared with previous generations possibly because of weakened job prospects, delayed marriage and educational debt.

Policy makers have recognized that lower spending limits economic growth. As a result, a number of policies to boost younger adults spending such as forgiving student debt have entered the political arena, according to Richard Curtin, director of the University of Michigan consumer survey.

Student loans make up the majority of the $1,005,000,000,000 owed by this cohort, followed by mortgage debt. New mortgages among young adults today remain quite a bit below levels incurred in the early 2000s. This may suggest adults are waiting longer to buy homes and may opt to rent for a longer period of time than previous generations.

Mortgage debt makes up the vast majority of overall consumer debt but it’s not growing nearly as fast as student loan debt. Since 2009, mortgage debt increased 3.2 percent while student loan debt grew 102 percent.

Student loans are the second largest consumer debt segment and surpassed home equity revolving debt, auto loans and credit card debt balances shortly after the recession ended.

At the end of last year, auto loans were the third largest portion of debt composition in the U.S. followed by credit card debt. Overall consumer debt reached a record $13.5 trillion.

Americans tend to experience their peak debt during mid-life years and debt should decline as individuals age. A more striking piece of data is that the implied debt that is 90-plus days delinquent for student loans dwarfs other loan type categories.

Once a person is the subject of third party collections from their student loan delinquencies, their credit profile will be hindered for years. Missing a student loan repayment can also harm an individuals chances of getting a mortgage. The implied debt in arrears from student loans represents about 40 percent of the total debt balance 90-plus days delinquent.

Total Debt Share by Product Type and Age (U.S. $ billions)

Mortgage HE Revolving Auto Loan Credit Card Student Loan Other Total 18-29 $362.9 $2.7 $166.5 $58.6 $378.9 $30.2 $1,005 30-39 $1,839.8 $24.6 $280.7 $150.3 $476.1 $72.3 $2,858 40-49 $2,456.7 $71.8 $296.3 $191.3 $300.4 $91.7 $3,426 50-59 $2,248.8 $120.8 $268.2 $209.1 $195.5 $97.7 $3,155 60-69 $1,446.8 $113.1 $172.4 $156.2 $77.7 $73.3 $2,049 70+ $722.1 $76.6 $83.7 $100.3 $16.2 $39.7 $1,044 Total $9,124.0 $412.0 $1,274.0 $870.0 $1,457.0 $407.0 $13,544 Percent 90+ Days Delinquent 1.06% 1.16% 4.47% 7.77% 11.42% 6.96% 3.10% Implied debt in arrears $96.71 $4.78 $56.95 $67.60 $166.39 $28.33 $420

- Bloomberg

Discussions

Be the first to like this. Showing 4 of 4 comments

speakup

this is happening all around the world.
yet our PTPTN borrowers think they are soooooo special and deserve their loans to be cancelled. WTF!

2019-02-26 10:50

teareader818

Malaysian students are lucky. In US there is no forgiveness, even if the borrowers declare bankrupt! Usually the parents are made to guarantee the loans. One reason why millennials still continue to stay with parents is because they can't afford to buy their own homes.

2019-02-26 14:18

targetinvest

Ntg to blame. Blame those education charging so high like fxxx until everything becomr haywire.

2019-02-26 17:43

targetinvest

Greedy business man all around the world making world suffer. But that cant be changed.. it will continue until it cant roll anymore and blow up

2019-02-26 17:44

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