Student Loan Debt Makes Growing Up Tough

Growing up today is tough if you can’t find a job and are saddled with student loan debt. In a recent study from the Pew Research Center, nearly 22% of young adults age 25-34 are living with their parents. That is up from 11% in 1980. Similarly, young people are pushing back other life goals like marriage, buying a home and having children. Is it because young people today are spoiled, lazy or stupid like many of our critics argue? I doubt it. When you look at the numbers, it seems like the reasons young people are delaying adulthood have more to do with the economy and their personal finances, and less to do with their characters.

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Unemployment for Generation Y (a.k.a. Millennials) is higher than the national average. And to get a job, Millennials need a college degree. Unfortunately, the price of tuition at U.S. colleges has increased over 127% since 1980 after adjusting for inflation, and students are footing the bill by taking out excessive amounts of student loans. Late last year, student loan debt passed the $1 trillion mark. That is more than all credit card debt and auto loans combined!

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According to the Project on Student Debt, the average student loan debt per borrower is more than $25,000, and nearly 30 percent of all student loans have past-due balances of more than 30 days, according to the Federal Reserve Bank of New York. What does that mean? People can’t afford to repay the money they borrowed to go to school. Some people are starting to ask the question of whether or not student loans may be the source of the next financial crisis in America. It isn’t a crazy thought.

Last year, student loan default rates were nearly 8.8%. By comparison, the mortgage default rate in America is closer to 2%. The bigger problem is that student loans can’t be discharged in bankruptcy unlike mortgages, credit cards and other types of consumer debt. So if you don’t repay, you are screwed for life. What is the result?

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For some, bankruptcy is the only solution, if only to clear their other debts. Additionally, many young people are delaying adulthood by moving back in with their parents, pushing back marriage and waiting until later in life to have kids and buy a home. According to the U.S. Census Bureau, the average age of first marriage has increased by four years since 1980. Similarly, mothers are waiting three years longer to have their first child and young people are waiting until age 31 to buy their first home. While some of these shifts are the result of demographic shifts in our culture, there is plenty of evidence to suggest that young people simply can’t afford the cost of living the American dream.

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Image: CJ Sorg, via Flickr