Millennials and Debt

You may have heard the statistics: Americans owe over $1.3 trillion in student loan debt, spread out among about 44 million borrowers. In fact, the average Class of 2016 graduate has over $37,000 in student loan debt, up 6% from last year.

However, a 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.

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 prepaid 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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