College Loans and Debt
September is College Savings Month. The new school year is upon us, and it’s time to consider college savings, loans, and the many things that this process of paying for one’s higher education entails. One aspect to consider is that college loans often place a burden of debt on the graduate, which could be carried long into the future.
According to the Federal Reserve Bank of New York, student loan debt has increased ($20,000 on average in 2003, as opposed to an average of $50,000 in 2015), but over the same period of time, young adults have decreased their holding of debt in almost every other category – credit cards, car loans, mortgage, and home equity loans.
The same study indicates that older Americans (over the age of 45) hold significantly more debt per capita than their younger counterparts, spanning every category except credit cards.
The New York Fed calls this trend "the graying of American debt." Part of the shift is simply due to an aging population. And some might speculate that this is partly because of the 2008 crash and that the younger borrowers weren’t able to get access to the same debt that older people were already saddled with, having had a longer credit history. Whether this is the primary reason or not, it still makes for interesting reading.
There is other evidence that Millennials are adjusting with the economic climate and how they deal with their money. In 2013, the market research firm Phoenix Marketing released results from a study showing strong year-over-year growth of prepaid credit cards among young adults.
This was actually an incidental finding indirectly related to pre-paid card ownership–a group of “hybrid” financial-services consumers who “fuse traditional banking services with a complement of new and alternative options for conducting transactions and managing finances.”
It is not a far stretch to suppose that the choices of today’s young adults will persist over time, and the “Millennial effect” could be quite significant. As they become a higher proportion of the U.S. consumer base, Millennials will influence how financial service providers will adjust their products and services to meet the needs and wants of this market.
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