Millennial (individuals born between 1981 and 1996) make up the most considerable portion of the consumer group in the United States of America. They are the first generation to grow up with technology (teenagers have access to cellphones and the internet). However, they are also the most affected by the new financial system – the fiat U.S. Dollar.
Already laden with student loans after graduating college, the Millennial are adding a new kind of loan to their credit sheet – personal loans. This type of loans have a three- to five-year set term and charge a fixed interest rate. People use personal loans for several reasons ranging from small emergencies to financing weddings.
They are easily accessible at credit unions, consumer banks, and the most used – online lenders. Personal loans are convenient because they are unsecured. However, if you default, your lender can add late payment fees to whatever amount you own. This, however, has not deterred this growing generation from being responsible for at least 12% of all personal loan debt since 2015. This loan amount has increased tremendously over the years.
Millennials And The U.S. Economy
The consequences of mismanagement of the world’s fiat currencies can be seen all over America. Homelessness levels are rising; poverty is ravaging the citizens and a $22 trillion national debt that someone has to pay.
For millennials, credit is everywhere, and it’s affordable. Moneylenders are more than willing to throw money at everything – from student loans to personal loans to credit cards and auto loans. Presently, there is over $23 billion outstanding consumer debt, and Millenials are at the core of it – owing to the most significant portion of it.
At this point, the American economy is on the verge of collapse. During economic downturns, companies close down or stop expanding; hence, jobs dry up, wages remain the same, and the credit available for spending keeps reducing. These factors put a strain in millennials’ pockets, burying them deeper in debt.
Millennials Debt Increase
The millennial debt is increasing. Across all debt types, the Y generation’s average personal debt balances have spiked. This shows that millennials are pretty open to taking up new debt.
For example, the Millenials in South Dakota registered the highest average personal loan balances. They owed at least $ 19, 794 in the second quarter of this year. This is 67 % higher than the average generation Y personal loan balances across the states and 22% higher than the national average.
According to Experian data from the 2nd quarter of this year, the millennial’s average personal loan balance has increased by 44% in just five years. This is double the growth of any other age group.
Even though this generation’s loan debt is quickly growing, their average balance remains low when compared to the other generations.
State Credit scores and Millenial personal loan debt balances
The average generation Y’s loan debt varies from state to state. However, the top five states with the highest personal loan balances have one thing in common. They have higher credit and FICO scores. For example, millennials living in Washington and South Dakota have average FICO scores, which are in the top 20% across the country. For those living in states with the lowest personal loan debts, their FICO scores were in the bottom 20% of the scores In the U.S.
Over the last two decades, the cost of getting a decent college education has tripled. However, the government has faith in its youth, so they offer potential college student loans to give everyone a chance to get a higher education.
This has led to many American college graduates leaving school with a degree and over $36 000 in student loan debts. Student loans are federal loans. If the student defaults on the loan, it doesn’t go away after a while, like the other forms of consumer debts. The debt stays active for as long as you are an American citizen.
After student loans, payday loans are another factor that contributes to the rapid growth of millennials’ average loan debt. They are easy to access, have a low credit check and are available via several money lenders.
The main concern here is that these loans are used to cater to their everyday living costs – buying groceries, transportation, and other necessary personal living expenses.
All this is driven by a lack of sufficient and secure income to pay off the loans. Not only that, but they also have no assets to help them cushion the debt blow and refinance their loans.
Studies show that swelling levels of debt have a significant impact on millennials and their adulthood. They find it challenging to start their adult lives without financial security. They put off having families and buying homes. Most of them just rent or live with their parents for longer as they look for ways to sort out their financial issues.
Millennials and The Job Market
A good percentage of millennials are college graduates. With readily available student loans, higher education is a priority.
More than 3 million Americans graduate every year, and they head straight into the job market, hoping to kick start their careers.
Unfortunately, finding a job is not easy for millennials – mainly because their preferred fields of study are not science, tech, engineering, or medicine (STEM). Because of this, most millennials opt to join the “gig family” – selling their services online to the highest bidder.
With all these in mind, it is easy to understand why millennials find it hard to get out from under their loan blanket and save whatever little they earn. The Low job opportunities, the student loan debacle and the quick growing consumer debt loans aren’t helping. They grind day today for minimum wage, which isn’t enough to cover their existing loans and pay their bills. So, they find themselves even deeper in debt with no way of getting out, and no promise of the economy improving soon.