On November 30, 2018, the Federal Reserve issued a formal report confirming what many young Americans already knew: millennials spend less on consumer goods than prior generations because they're poorer. The report compared their finances with every generation going back to the greatest generation, commonly defined as individuals born between 1910 and 1924, and found that millennials suffer from "lower earnings, fewer assets, and less wealth."
The report concluded that millennials were primarily impacted by the Great Recession, which delayed careers and altered spending habits, perhaps permanently. It also acknowledged that millennials bear a significant student debt burden, though on levels that approximate those of Generation X.
The burgeoning student debt crisis reached an all-time high of $1.5 trillion in May 2018, and doesn't appear to be slowing down anytime soon. Since 2006, student loans has become approximately double as a share of the U.S economy. The cause for student debt is a result of the growing tuition rates of private colleges across the country. Ironically, the growing debt crisis has inadvertently led to an increase in tuition. Student lending, whether from the government or private loan companies, causes the demand for college to increase, sparking further tuition rises. Millennials will thus also bear the burden of increased tuition when it comes time to support the education of their children.
A growing percentage of students also default on their loans. Education analysts predict that approximately 40% of borrowers will choose to default on their loans, further raising the overall unpaid debt to $560 billion. Although student loans were previously assumed to last for around 10 years, research has shown that only half of students who graduated college in the mid-90s had fully paid off their loans.
Rising costs and longer loan periods have caused millennials to delay buying homes, further impacting the U.S economy. Decreasing homeownership among recent graduates holds negative implications for spending and wealth accumulation for young adults, a population that will soon bear the burden of supporting the country's economy in the years to come. Less consumer spending is directly tied to slower economic growth. At a Federal Student Aid training conference earlier this week, Education Secretary Betsy DeVos noted that "the student-loan program is not only burying students in debt, it is also burying taxpayers and it's stealing from future generations."
She further attributed the debt crisis to the Obama administration's choice to replace support for private student loans with federal subsidies with direct loans from the government, though many education analysts believe her evaluation and proposed solutions show a poor understanding of the underlying problem and don't drastically alter Obama's plans. Given that student debt composes a large part of the U.S government's financial assets, many believe that it's unlikely that the government will begin to forgive student debt in the near future or otherwise take action to significantly reduce the burden.
Millennials also face other challenges, such as an expected increase in health care costs in the years ahead. The report noted that because millennials are still relatively young, it's still possible that their consumer spending habits and wealth levels will take a turn for the better.