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Student Debt Crushing Millennials From Home Purchasing

Millennials range in age from 18-34 and represent around 75 million Americans.  They are the biggest generation to date for America.  With today’s economy and the financial burden created by getting a upper level school degree, they are struggling to be able to live the lifestyle that their parents enjoyed at their same age.  Comparatively speaking, Millennials are making 20% less than baby boomers did at the same age.  In the past, children were able to achieve greater financial success than their parents.  Typically this financial success included purchasing a home. This is no longer the case.

 

This is affecting Millennials in many ways including having to wait longer to acquire the “American Dream” of owning a home. One report states that it is delaying home ownership by as much as seven years.  Student loan debt is the major factor involved in this trend according to the recent report, “Student Loan Debt and Housing Report.”

The Degree Dilemma

Getting a college degree doesn’t guarantee graduates will get a job.  Many students that are graduating frequently don’t even end up with a job in their degree field. Also, they face a job market that is changing yearly.  A report in the DailyMail.com states how it is estimated that 50% of current jobs won’t even exist in the next ten to fifteen years. This is due to the various leaps and bounds in the growing field of artificial intelligence. Data in the report suggests that technology is already destroying more jobs than it creates, as GDP has been able to grow faster than employment since 2000. Millennials and the generations after are going to school not knowing if the degree they are paying for and working towards will be applicable when they graduate. Or if those jobs will even be around when they graduate.

However, in order to get even a basic entry level job; employers are requiring employees to have an upper level degree now. Where, in the past, a high school diploma was sufficient. This dilemma is creating a vicious cycle for our youth and their financial future.

Financial Burden of Millennials

 

The study showed that for most Millennials their income is also lower than previous generations and their debt is higher. They are shouldering a burden prior generations have never had to carry.  This huge amount of debt affects their debt to income ratio which disqualifies them for a home loan.  Compared to past generations, Millennials are having to wait longer to purchase a home.

With this inequality in their financial situation being the case, this also means that Millennials are not able to put as much money in savings.  They just don’t have the income to do so.

This too affects their ability to purchase a home.  If they are able to use a program that helps with their down payment, they have to use funding such as a FHA loan which requires them to pay for mortgage insurance during the loan.  This additional fee can price them out of a home payment. It also increases the burden of debt for the home.  On the other hand, it does enable them to be able to purchase a home that they otherwise wouldn’t have been able to qualify for with a conventional loan.

Earnings vs. Degree Cost

From 1991 to 2010 the earnings increase was 10.46 percent.  However, the cost of a Bachelor’s Degree during that same time frame increased a staggering 89.57%.  Our children are suffering financially because of this trend.  Not only Millennials, but all children coming up through the educational system.

Lenny Credit reported, “Unfortunately, increased qualifications does not automatically lead to more income to service the debt. Compared to their earlier counterparts the average college graduate in 2013, in relative dollars, is only earning the equivalent of a high school graduate’s income back in 1989.”  Yes, you read that right.  Someone who graduated in 1989 from high school was making as much money back then as someone that graduated with a college degree in 2013.  Sound a little backwards?

This is the unfortunate situation many college grads find themselves in. Forced to go to college to get a degree so they can get a job. They have to get the job in order to be able to pay for the degree they had to get – in order to get that job.  Did you follow that?  And they will have to work at that job for how many years to pay off that debt that they incurred just to get that job? And that debt the incurred is holding them back from purchasing a home.

Add to that the increasing price of homes and the cost of living increasing greater than the raises they are getting…..makes for the perfect storm for financial trouble. It’s like they are being set up.

Millennial Unemployment Rates

If that weren’t enough, the unemployment rate for Millennials is 40% higher than Generation X.  Part of that may due to the sheer number of how many Millennials there are versus how many Generation X are in the group.  The Census Bureau projects that the Gen X population will peak at 65.8 million in 2018. Millennials represent around 75 million Americans.  That is almost a 14% difference.  So that doesn’t explain the additional 26% difference in unemployment.

The great American Dream

It is becoming more and more of a dream versus a reality for many of our youth, not only Millennials.  Those that are able to turn the dream into a reality are having to wait longer to build it.  Is there any ways to correct this?  What do you think we can do to change the financial tide for our youth?

If you would like to read more of the Daily Mail’s article you can do so by clicking here.

As always, thanks for reading and we welcome any additional information or comments you may have.

 

www.EverStarPropertyManagement.com

www.EverStarRealty.com

509-735-4042

1920 N. Pittsburgh St., Suite A

Kennewick, WA 99336

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Posted by: everstar on September 20, 2017
Posted in: Uncategorized