Back when the Millennials were born between the mid-1980’s and 2000, the future looked bright. Their parents and grandparents had enjoyed relatively cheap credit and student loans, many had invested in homes, and they raised their kids to dream big. But just as these kids were preparing to leave higher education or take on their first jobs, the Great Recession hit.
In 2002, the National Center for Education Statistics picked out a group of more than 15,000 Millennials to check back with in 2004, 2006, and 2012. The Great Recession took place just as many of these individuals were turning 22 years old and trying to enter the job market – when the timing couldn’t really have been worse. Those parents who taught their kids to reach for the stars and take advantage of all the opportunities around them were suddenly faced with children who couldn’t find work that would allow them to pay back their student debt, and many who were forced to move back home. The average Millennial in the US owes around $30,000 in student debt – a figure that’s difficult to chip away at with a low-paying job, especially considering the average Millennial salary is only around $35,000 per year.
The results of the NCES study show what you would expect – many individuals working more than one job, struggling to find employment that fits their field of study, putting off buying a home, marrying later and having fewer children of their own. Worryingly, ethnic minorities seem to be even worse off. In addition to all these complications, millennials are aware of the fact that bringing kids into this chaotic world might not be a moral choice, which is why many choose not to have children at all.
And according to the New York Fed, more than half of students who left college in 2009 had either defaulted, missed at least four months of required payments, or were in fact facing higher loan balances five years later.So how do Millennials tackle this student debt burden when they’re struggling to make enough just to get by? Unfortunately, the lure of personal loans and credit cards are often too big a temptation to pass up, creating a cycle of indebtedness that is near impossible to break free from, as interest on debt is accumulated on top of the existing debt.If you manage to get a job that pays decently, you may feel that you need to take out a loan on a car to get you there. If you’re about to default on your car payment, you may be tempted by credit card debt to cover the payment for a month or two, and so the cycle continues.
It’s vital that cash-strapped Millennials learn to avoid these temptations if they are to get out of debt for good. Taking on new debt, even to avoid defaulting on an existing one, is never a good long term strategy.
But it’s not all doom and gloom, and remember that not all Millennials had such unfortunate timing. The younger individuals of the group graduated after the recession had started easing, and while the job market has been slow to raise wages after the trying financial times of the past, things are beginning to look up. Being thrown in the deep end, many Millennials are determined that their kids don’t face the same situation they did. While they may put off buying a house, they are more likely to dedicate money towards a college or higher education fund for their own children. For many, engaging in an official debt review process can be a great tool to finally overcome the financial burden of their accumulated debt.
There are valuable lessons to be had from facing such a financial challenge – and Millennials tend to be a creative bunch with a good skill set for tackling problems with outside the box thinking. It’s a brave new world, after all, and Millennials aren’t afraid to take advantage of the opportunities that new technologies offer. Apps that help users budget, calculate potential savings and offer financial tips are a good starting point. Getting a hang on where your money is actually going is essential to formulating a plan to use it to its full potential.
To get out from student debt, you might have to accept that you’re going to have to live like a student for much longer! Another strength that Millennials have on their side is a desire for teamwork and group involvement in issues – using that to share the rent on an apartment or payments on a shared car can help reduce the burden on everyone who participates. Yes, the challenges that debt-ridden Millennials face are tough – but so are they.