- Millennials are facing an affordability crisis triggered by student-loan debt, the Great Recession, and inflation.
- Many millennials face what one researcher called a "millennial Catch-22": You need a college degree to get a good job, but degrees are so expensive that you'll likely go into debt, which will set you behind in other ways.
- For example, graduating into a recession can hamper your career prospects for more than a decade.
- Yet living costs ranging from housing to healthcare have skyrocketed, meaning that life milestones and wealth creation get deferred.
- Research cited in this feature is from Business Insider Intelligence, which surveyed 2,007 adults ages 19 to 37 in November for the "
Master Your Money : Learn & Plan Survey."
- The takeaway: Millennials aren't financially behind because they're frivolous. But they are creating their own recovery.
- This is the opening feature in Master Your Money, a yearlong series on personal finance for
millennials .
The day Daniela Capparelli graduated, a letter was waiting in her mailbox.
But it wasn't a congratulatory card. It was a notice from the loan agency Sallie Mae. Capparelli would owe $1,498 in monthly payments on her student loans that would, after reconsolidation, take 30 years to pay off.
The 35-year-old graduated from the University of Hartford in 2007, just as the Great Recession hit, with a degree in economics and finance and $150,000 in debt. She'll have paid $309,000 with interest over the loans' life.
"My student loans have been the center of my financial world," she told Business Insider. "I have always felt a huge weight on my shoulders because of this astronomical financial burden."
For the first five years after graduation, a full half of her income went directly into making loan payments. To afford them, she lived with roommates and racked up additional debt through paying for gas and groceries on credit. Until 2019, any money not put toward student debt went to living expenses and bills.
Since finishing school, Capparelli has dutifully put a $60,000 dent in her mountain of student loans. Her payments now take about a quarter of the income she earns as a remote clinical quality coordinator for a radiology company. This past year, she started saving to buy a home outside Orlando, Florida, with money from a side job in remote customer service.
It's a situation familiar to many people her age: juggling debt, meeting daily expenses, and pushing into homeownership, even if it means plugging into the gig economy to get there.
Unsatisfied with the many news articles that didn't capture the actual millennial experience, Kenan Fikri, the director for research at the Economic Innovation Group, wanted to separate empirical fact from popularized fiction when it came to the generation. A millennial himself, born in 1985, he told Business Insider he also had a personal interest in understanding what was happening to his peers.
After analyzing trends and research on "The Millennial Economy" for EIG, he realized that millennials had, unwillingly, been thrust into uncharted territory, and as they creep toward middle age, the results are only beginning to bear out.
"In a way, millennials are part of a vast and accidental social experiment. We've never launched an entire generation with so much financial baggage," he said, adding that they're unique because they graduated into the throes of the recession. "Prior generations started building wealth right as they hit the labor market. By contrast, college-bound millennials spent the first decade of their careers digging out of debt."
The story of the financially battered millennial is a tale at least as old as Instagram, but its significance is deepening in the new decade. Millennials are aging: They'll be 20 to 38 in 2020, and the oldest are entering the precarious, expensive life stage of settling down with a home and family. Student-loan debt has in turn become a hot-button issue in the 2020 presidential campaign, and many candidates have proposed policies to offset college costs. And while recession fears have at least somewhat abated, economic pundits spent much of 2019 debating whether one would occur in the next year or two — bad news for a set of 71 million people already financially behind the generations that came before.
In six months of reporting, I've spoken with dozens of millennials about their financial situations, from delaying life milestones under crippling student debt to opting out of the workforce because of job frustrations. Economists, sociologists, and other researchers have walked me through how large-scale trends like a weak job market and soaring inflation can dampen how people build their wealth — and their lives along with it. The Insider Intelligence team surveyed 2,000 millennials to assess their
All together, millennials are facing an affordability crisis triggered by three factors: student-loan debt, the ongoing fallout of the Great Recession, and rising living costs.
These aren't just abstract trends. Across America, millennials are living through — and adapting to — an unprecedented economic reality.
Debt and regret: Education was supposed to vault millennials ahead, but college costs put them behind
A marketing manager in Garrett, Indiana, said she was having "extreme anxiety" about her $30,000 in student-loan debt. The 26-year-old spoke with Business Insider on the condition of anonymity, worried that the interview may hurt her job prospects in the "extremely conservative area" she lives in.
She graduated from Purdue University last year with a bachelor's degree in management after eight years of part-time study and full-time work.
She recalled being told to go to college no matter what — but not what debt could do to her trajectory. "Here I am, starting life with what feels like an anchor tied to me," she said.
That's the human toll of economic forces. College tuition has more than doubled since the 1980s, and student-loan debt reached a national high of $1.5 trillion in 2019. In the Insider Intelligence survey, 60% of respondents took out a student loan for undergraduate or graduate education — and 43% owed between $10,000 and $49,999 at graduation.
Location is an overlooked factor in all this. The media narrative mostly focuses on the urban millennial who has a heavy debt load but a high-paying job where they earn enough to "brunch at will," Fikri said. The national conversation pays less attention to the millennial who stayed in their hometown for college and paid for a lower-quality degree they didn't finish, making it difficult to find a job or move away.
"The burden of student debt relative to income and available opportunities keeps them trapped in a sort of limbo that's financially, emotionally, socially, and economically damaging," Fikri said. It was from this bind that he drew the concept of the "millennial Catch-22": Many feel that the ticket to a decent standard of living is a college degree, but going into debt makes it a rather expensive ticket and undermines the value of the degree itself.
There's social pressure to get a degree — and personal consequences for doing so. The marketing manager said she would love to relocate to a better job market but can't afford to move because she has only $1,000 in savings. "I live in a rural area. My degree will probably not enhance my life enough to have made it worth the cost," she added. "I have many friends with no degree or debt who make much more than me. This degree has saddled me with debt, regret, and the feeling that even when I pay this off, I'll be so far behind my peers."
It's a common sentiment — 85% of Insider survey respondents said they had some level of regret about taking out student loans.
When Capparelli graduated from Hartford, the friends who didn't attend college had already worked their way up in her industry. "I felt that what I would be making was overpromised," she said. "I was making almost $15,000 less. Debt and making less money than friends put me financially behind."
Student-loan debt is even more problematic for those who didn't graduate, and it can balloon from there, said Patricia Buckley, the managing director for economics at Deloitte and one of the authors of the Deloitte report "A New Understanding of Millennials: Generational Differences Reexamined." She added that "you worry about their ability to ever dig out from under" the burden.
Since 2012, student debt has had the highest rate of delinquencies of any type of debt. The repercussions of this, Buckley said, can trickle into other areas of life that might require a credit check, like homeownership or a job — two milestones that millennials are already having enough difficulty achieving.
The Great Recession blighted the job market — and forever changed the nature of work
Student debt intensifies the challenge for those still climbing their way out of the Great Recession.
In 2012, Hassan Masroujeh, now 28, wasn't getting much sleep: He was juggling 80 hours a week working at an eye clinic, a restaurant, and a medical-device startup he began as a side hustle. Instead of putting his biology and chemistry degree to use, he spent seven months looking for work before "landing less-than-ideal jobs to stay afloat," he told Business Insider.
After realizing a bachelor's degree wouldn't cut it, Masroujeh enrolled in dental school.
A bachelor's degree in today's climate, he added, is what a high-school degree was to baby boomers. For Masroujeh, it wasn't enough to sustain a lifelong career. "The job market was saturated with experienced people, and it was only compounded by the recession," he said.
Millennials' experience has been affected "by different economic conditions and realities" from either boomers or Gen Xers, said Ernie Tedeschi, a managing director and policy economist for Evercore ISI. Coming of age in an era of slower economic growth has made it less possible for millennials to establish a solid career foundation and build wealth.
"This has consequences for individual career prospects and affects their sense of dynamism," Tedeschi said. "The Great Recession really shifted people's sense of risk in the labor market. They came out saying devastating downturns are still possible and I need to take out insurance on my career prospects" by getting more education.
Millennials have experienced more job-market difficulties than previous generations. Entry-level work and education requirements are higher, meaning it takes longer to find a career foothold — something made even more difficult when finding a job after a recession.
Research has found that entering the workforce during a downturn can harm wage growth, with people who do so earning less for up to 15 years compared with people who graduated during times of prosperity. Since first jobs are often markers for future jobs, less advantageous roles tend to stick with people. Instead of springboarding millennials into greater responsibility and higher income potential, early roles launched many into lower-wage trajectories and career uncertainty.
Frustrated with this debilitating path, several millennials told Business Insider they'd given up on the workforce altogether.
Jack, a 30-year-old who didn't want his last name used for privacy reasons, spends some of his days rafting and hiking his way through Colorado, where he lives. Other days, he teaches and practices yoga, which earns him about $20 a class, but he doesn't do it for the money. And others still he spends building things — most recently a hydroponic system for strawberries. What Jack doesn't spend his days doing is applying for jobs.
He was laid off from his environmental-services managing role in October 2018. He applied to more than 150 jobs over eight months and landed just three interviews. After the disheartening process, he eventually stopped looking for work. "After thousands of hours searching, networking, and applying, I'm just over trying to contribute," he said. Jack gets by on savings and investments but said he doesn't expect it to last much longer.
It doesn't help that income for young adults has grown by just $29 since 1974 when adjusted for inflation; the paltry increase hasn't kept up with staggering rises in living costs like healthcare, childcare, education, and housing. It's a tough combination for millennials struggling in the job market.
"I see that inflation has outpaced wage increases and do not see much hope in the future," Jack said. "This economy has little to offer me. I've been hoping it collapses for more opportunities to open up. Until then, I'm on the sideline."
And the increased cost of living rolled back life milestones like buying a house
Student-loan debt, income losses, and increased living costs create a cocktail that no aspiring homeowner would have mixed themselves.
"I still haven't been able to save enough to put a down payment on a house and commit to another 30-year loan," said Capparelli, the remote clinical quality coordinator who graduated with six figures in debt. "I often feel like I already have a mortgage without the house."
Several Insider survey respondents also likened their student debt to a mortgage, and nearly 32% percent of indebted respondents said they'd delayed or avoided homeownership because of their student debt.
Attaining homeownership is even harder given how few affordable homes are available. While millennials are set to drive the US housing market in 2020, the majority of newly constructed homes in 2019 cost $500,000 or more. And in 2018, starter homes — those priced in the bottom third of the market — represented just 20.9% of available housing inventory in the US.
The median price of home sales has increased by 39% since 1974. Even if millennials earn enough to afford a mortgage, many don't have enough saved for a down payment because they've put so much money toward student debt.
Housing is typically more affordable in rural areas — but even then, some can't afford the standard 20% down payment. Two years ago, the marketing manager in Indiana we spoke with was able to buy a $91,500 house with a 3% down payment of $2,745. After sitting down with a calculator, she realized she would barely be able to afford the house if she didn't share the mortgage with her live-in fiancé: If she were living on her own, she'd have $90 left over every month after paying off her student loans, mortgage, and other bills.
It all explains why homeownership has declined for households under age 35, from 41% in 2004 to 33% in 2016. Becoming a homeowner is even harder considering that entry-level homes aren't being built at the level they were before the recession, Buckley said.
The recession also made millennials more risk-averse when it comes to housing, Tedeschi said. "Without that massive shock, millennials would be more willing to purchase a house, which would reverberate into other household decisions like getting married and having kids," he added.
The result of financial trauma: Millennials avoid risk at the cost of wealth
The recession, debt, jobs, housing: Add them together, and you've got changed or delayed life courses compared with earlier generations.
"I'm at a point in my life where I should have savings, I should start thinking about a family," the Indiana marketing manager said. "But I cannot imagine having a child with this debt."
Achieving other short-term milestones can mean sacrifice, further delaying longer-term wealth goals. To afford the down payment on her house, she had to drain her only 401(k).
It was an option not every millennial would even be able to consider. Nearly 30% of student-loan-indebted millennial respondents in the Insider survey had delayed saving for retirement. Only one-quarter said they had a retirement account, and nearly 22% said they had no savings at all.
It's indicative of what Fikri considers a big finding in his research: Financial insecurity has shaped how millennials approach their economic situation. More than three-fourths of the millennials he polled said they were worried they wouldn't have enough saved for retirement. But scared of losing what little wealth they have, they may be less attracted to financial products more likely to get them a higher return rate over time, like mutual funds or stocks.
"That means millennials will have less time to watch their nest eggs appreciate and reap less of that magic known as compound interest," he added. "Millennials are on track to retire with dramatically weaker safety nets than baby boomers or Gen Xers."
To adapt, millennials like Masroujeh turn to side hustles to help play financial catch-up. It helped Masroujeh — he was able to save the funds from his startup, which he later sold, to help pay off his student debt. By saving 60% of his earnings a month, he also was able to purchase two real-estate properties to generate income.
Minus the $300,000 in debt he's racking up for dental school, Masroujeh seems financially successful compared with his peers. But he's also proof that, with the right resources, millennials actually can make up lost financial ground.
Millennials were handed an economy in crisis, but they're creating their own personal and financial recovery
Masroujeh's hustle is the opposite of how millennials are typically portrayed: as frivolous spenders who don't know how to save and manage money. It's this depiction that Insider survey respondents overwhelmingly said the media gets wrong about their generation.
"The media thinks millennials aren't saving money or leaving their parents' house because they're lazy, but the economy has changed," one respondent wrote. "We weren't taught how to manage money, and we were told we had to go to college to do anything," another added. "We can't afford anything because there are no decent jobs and we're strapped with debt."
And they need tools to correct the story they've been told about themselves.
Jack, the yoga teacher who disengaged from the workforce, has since found a part-time job in shipping and transportation, but he had told Business Insider that he was "primarily frustrated and stressed."
"I feel let down or betrayed by the promise of prosperity or the lie of the real world," he said. "What good does seeking meaningless work achieve?"
But the $12,000 he still owes in student loans will force him to seek full-time work eventually. Today, he's trying to start his own company doing the environmental-services work he was doing before being laid off.
Student debt is at the foundation of millennials' financial problems; it's only hardened the blow dealt by the Great Recession and inflation, and many millennials weren't adequately prepared for the burden — 29% percent of Insider survey respondents said they didn't understand the terms and policies of their student loan.
Everyone puts into your head the idea "that you need to go to college to get a good job," said Capparelli, the Hartford graduate. But as a first-generation student, she didn't have guidance on her loans. "If I knew I would pay back more than double, I may have chosen a different school. The compound-interest factor and the actual payback was a huge surprise."