Blanket statements exist for a reason.
Don’t condemn an entire generation. A young lady I know just finished paying off a huge set of student loans, $100,000 for an undergrad degree (!) in 6 years. She lived at home, worked 3 jobs, and was very very careful with her money. Another young couple I know had student loans for both of them (I don’t know how much) that they paid off in 2 years by leaving in his mom’s attic, being careful, and working very hard. They then saved up the down payment for their first house which they closed on a couple of months ago. Of course there are many young people out there who are clueless and undisciplined, but it irritates me when people slander an entire generation.
I love when people pretend like young people haven’t always been reckless with some things. Give me a break. Does anyone really believe that previous generations wouldn’t have had the same student debt problems as millennials if higher education had suffered from the same bloated tuition issues then that it does now?
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Many millennials don’t want to put our lives on hold for 10-20 years while we repay student loan debt.
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Very true. Likely because:
a) it’s hard to put life on hold when one’s contemporaries are getting married, having babies, buying homes, taking trips, etc.
b) too many have rarely ever had to put anything on hold longer than a New York Minute.
Student debt has reached critical proportions but I have several problems with this article. Debt for Americans is sadly nothing new and pointing the finger at an entire generation raised with the notion that a college degree, especially from an Ivy or highly selective institution, is the only way to succeed is hypocritical.
From birth these young people were exposed to an endless barrage of messages from television, media and the internet telling them to consume fast and furiously. Those lucky enough not to internalize this message have parents who are more financially astute. Our society grooms young people to voraciously consume and then condemns them when they do. Can’t have it both ways. And the message from a bank exec that they’ve only themselves to blame is laughable.
No one is condemning an entire generation. Some people are making general statements about millennials, which is not necessarily the same as condemning the entire generation. A generalization implies a typical, rather than an absolute outcome… “generally speaking”. These general statements are usually based on anecdotal observations/experiences, and they become “general statements” by the fact that many people have observed the same thing.
There are certain character traits and quirks more common among millenials than other generations, just like there are certain character traits and quirks common among generation X’ers, baby boomers, etc. Now, whether these character traits and quirks are a result of childhood upbringing, evolution, or environmental influences is to be debated, but to say that there are no differences between the various generations (on average) is simply ignoring reality.
Good point! Do you think it would make any difference it it was explained how much the monthly payments would be in order to pay off $41,000 in 10 years? (I wonder how many kids even consider the interest that has to be paid on these loans?)
The problem with blanket statements about millennials in the context of this conversation is that a huge percentage of millennials (2/3) never even went to college.
http://www.npr.org/2014/11/18/354196302/amid-the-stereotypes-some-facts-about-millennials
So the problem with debt is real for college graduates, but if everyone you know is living with college debt, you likely travel in pretty limited circles. We live pretty modestly, but our kids will have no debt when they graduate, at least not from college. And there are lots of kids all over for whom a college education isn’t an option. Trade schools, yes. But not a four-year bachelor’s.
@juillet 's post hit an important factor - Your post assumes a lifestyle and dream that many millennials and younger do not share. The birth rate is significantly down. So is home ownership - significantly. Even car ownership.
As someone who does not plan to have children, own a home, or own a car, student loan debt could make sense for me. I’m actually luckily able to graduate debt free, but if I wasn’t, I would be fine with some debt. An education is still often worth it if the debt is manageable (let’s ignore the 100kish or more loans for simplicity, those I think we can agree on).
Secondly, your second point is flat out not true. A lifetime is a finite length of time - decideing to not put your life on hold and extending the time you are in debt is just fine - it often makes sense from a long term perspective. This idea that young people are short sighted in general is often false. A high school student walking into 200k of debt, yes, for sure. But that does not discount plenty of other well thought out cases.
On top of all this, whenever generations are discussed, I like to note this: “Millenials” are a range of people from ages 16 to 36, depending on who you ask. That’s 20 years - how people manage to group those people together never ceases to amaze me. The 36-year old has gone through incredibly different circumstances than the 16-year-old. For one, the crash of '08 happened when they were in elementary school. For the other, they were fresh out of college by a few years. You don’t think that affected each differently in their goals and practical realities?
In reality, generations are much smaller than we categorize by. I am one on the border - I in no way consider myself a millennial. Technically, I believe I’m “Generation Y” or “Gen Z” or “Gen Alpha” - they have yet to even decide on a name for us. The point is, when I hear people use the word “millennial” with any sort of generalization, I feel frustrated. I haven’t even gotten halfway through college, and people apparently think my “generation” has done all these things. So, who is my generation actually? I would say those 3-4 years on me either side - most of those are not millennials, and do not fit most of those stereotypes.
When people use the word millennial, they often fuse the characteristics of many generations into one - they can use all the technology, they don’t have an attention span, they’re impatient, they take too much student loan debt, add more here in your head as you read this, etc. If you go back to the 16-year-old and 36 year old, you will find that often, every single stereotype only really fits one of the two.
From all of this, here is what I argue should be the takeaway - the generation names we have given are neither accurate nor helpful. Each group of people within each generation can have entirely different goals, conceptions, practicalities, and realities. To judge all with the same brush with any sort of analysis is inherently flawed.
So, in this situation, who are we really talking about? Let’s say 24-30 years olds or so, right? So, let’s look at how they grew up, and them only. Let’s use the median age of 27, which is close enough to hit similar life makers for all of them.
Important Markers (subjective, for reference):
2000 - Age 11 - The grew up with technology readily available, but not integrated into younger years.
2008 - Age 19 - The economy was looking up as they entered college. The idea that anyone could do anything and make a living was selling like wildfire. Overnight, that was gone. For some, it was too late. Most had already picked a college - that meant staying put, or changing everything, and fast.
2012 - Age 23 - With most just entering the workforce, the economy is looking better in the US. However, the crash of '08 changed a lot of plans. This is where the lower birthing, house ownership, and car ownership rates come in. Those changed plans often cut out those parts, many by choice, not necessity. This group no longer saw owning a home and a family as “the american dream” - but yet, as we see here, people still judge based off of that.
Consider this closer look.
For more consideration: https://www.youtube.com/watch?v=bSGqz_SE1uM
@NJRoadie @NUwildcat92 Personal Finance is a required course in NJ for all high school students to graduate.
Well, not exactly. There is a half-year Personal Finance & Literacy Requirement in NJ, but in our local HS, students can courses like “Intro to Computer Applications” and “Intro to Business” in order to satisfy the requirement. Those courses do not teach personal finance and do not prepare kids to deal with the financial realities of graduating from college with debt.
I can’t tell from the article how much the people surveyed were actually spending on “luxuries” - or how statistically reliable the survey methodology was. (All it says is that subjects were found “online.”)
Maybe 40 percent were not willing to spend less on rent/mortgage, but honestly in some markets, there is very little low cost housing to be had, and many millennials have roommates or live with parents anyway. Just because you are spending money on housing doesn’t mean you are spending money on “luxury housing.”
Unless you are looking at their budget - what percent of income goes to paying student loans and what percent is going to eating out or other things , you really don’t know if their choices not to cut back are reasonable. (The survey does say about 20% of their income is going towards debt, but not what percent of income goes to the other expenses.)
Also, when you click on the press release from Citizens Bank, versus the “moneytalk” article about it, the percentages are all reversed. In other words,
Citizens Bank: 50% of millennials limit their spending on clothes, 46% of millennials have limited their spending on entertainment…
Money Talk: 50% of millennials still buy luxury clothes, 54% of millennials still waste money on entertainment…
It’s not clear how many millennials, if any, have not limited any discretionary spending at all. I suspect the answer is very few, but that people are making different decisions about what their priorities are.
I think this is a really important point, and it’s one reason why articles about generations irritate me so much. Many of them seem to have little clue what they’re talking about wrt what a generation even is. For example, when they talk about a generation who is so used to social media who grew up with smartphones and staying connected 24/7 I have to wonder who the heck they are talking about. Facebook was started when I was a freshman in college, and smartphones didn’t become ubiquitous until I was halfway through graduate school. All but the youngest of us wouldn’t have started using social media until high school or college.
I’m also amused by some of the articles I read because half of them lament that millennial student loan debt is preventing us from consuming and we’re not buying anything and that is Bad, while the other half accuses us of spending too much. Most are light on any kind of statistical evidence or spending data. First of all, we weren’t buying anything because until recently we were in school (and some of us still are). We don’t have any money, lol.
But secondly - and importantly - I think the current holders of capital are really failing to understand how those in my generation have a really different “American dream” than in the past, which @PengsPhils alluded to. I know I’m in a sort of small and privileged class of millennials because most of my friends are graduate-educated at elite schools, but by and large we’re not all dreaming of owning a massive house in the suburbs with 2.5 kids and a yard. Most of my friends talk about wanting to live in an urban or semi-urban walkable neighborhood with mixed-used spaces. Many of us own no cars, or just one for a married couple. A few of my friends have kids but most don’t, not yet anyway, and several of us aren’t sure that we’ll ever want them. However, if we do have them, it’s likely it won’t happen until the very late 20s to late 30s, since most of us are already in our late 20s to early 30s now! The way we live our young adult lives is just really very different from the way our parents did (and they way they maybe expected us to). So paying off loan debt slowly and delaying home-buying and auto-purchasing until we’re more financially stable (if at all) doesn’t seem like a big deal.
Well, no, that’s also my point - I think it’s the exact opposite. I admit that I’m in a smaller class of millennials because I have a graduate education and most of my friends do as well. But these are people who have typically gone through 6 to 10 years of higher education (and residencies, in the case of my doctor and dentist friends) - during which time we were making very little money, living with several roommates in small apartments in sketchy neighborhoods, buying rice by the pound, wearing the same clothes year after year, not going anywhere, etc. It’s not because we’ve never had to put anything on hold; it’s because we followed “the rules” and delayed gratification for 6-10 years of higher education and now people are coming around trying to tell us to delay it even more for another 10+ years so…what, so Sallie Mae can have more of our money in its pocket more quickly?
Nah, hard pass.
Actually, people lacking a bachelor’s degree could have gone to college:
a. Went to community college and earned an associates degree or vocational certificate.
b. Went to college, but dropped out before earning any degree or certificate.
It is certainly possible that some of (b) started college, did fine academically, but ran out of money to complete their degrees. So they may have student loan debt but no degree, a worst-of-all-worlds situation from a career standpoint.
Indeed, the same article says:
Since 34% have at least a bachelor’s degree and 26% have just a high school diploma, that leaves 40% in either of the two categories listed above (associates degree or certificate, or went to college and dropped out before earning any degree or certificate), or did not graduate high school. Since those who did not graduate high school make up about 10% of the young adult population, that leaves about 30% with college, but not a bachelor’s degree.
I.e. nearly two thirds of the millenial generation attended college, but only a little more than half of them completed bachelor’s degrees.
Is rice by the pound significantly less expensive than in 5 or 20 pound bags?
Couple things to mention here.
First, as others have mentioned, the article does not indicate what levels of spending “millenials” are unwilling to reduce relative to the minimum viable spending. For example, I work in a client-facing industry, which means that I need to wear professional-looking clothing every day. If I were to show up in thrift-shop garb, which won’t fit someone of my stature (6’4" with a 78" wingspan and 16" neck), my career would be stunted. I may spend about $600 a year on new work clothing, but if I were to spend much less than that, I’d be sacrificing potential future raises and promotions. That few hundred bucks is not as discretionary once understood in context.
Second, although this article doesn’t do so, it is common in similar articles to emphasize the importance of paying down loans as quickly as possible, including paying down loans before investing in retirement. What a terrible idea! If you are 22 and have a federal student loan on a graduated payment plan - 20 years, let’s say - and come up with an extra $100, with which you could invest in your student loan or in an IRA. If you put it toward your student loan at 6.8% interest, you could save $288 in interest, which becomes $245 after figuring that you can write it off and pay 15% less in federal taxes; if you put that same $100 into a Roth IRA, average 8% return for 40 years, it becomes more than $2,400. So in the zeal to pay down some debt a little faster, you sacrifice far, far more.
Third, student loan debt has truly become ubiquitous among college graduates. If you and your group of friends have no debt, that’s great, but it does not reflect the average graduate, including the graduate who went to community college for two years before going to a state affiliate school for the remaining two, all in the interest of saving money. Loan debt. in conjunction with what we saw happen to our parents throughout the 2000s, has fundamentally changed millenials’ outlooks on finance.
Our parents took on debt - they had mortgages, some purchased with 18%+ APR (speaking of, my highest interest credit card, on which I have never carried a balance, has APR of 16.29%, just for frame of reference). They also had cars, typically two per household, both financed. Though they did not have student loans, they did have substantial debt; very much like millenials, they treated themselves to the finer things of life: cable TV, cell phones, extravagant clothing (does anyone remember the clothing in style in the '80s?). Before they had kids, they also went out to eat with relative frequency, assuming both spouses worked.
More importantly, life was cheaper - even relatively speaking - for our parents than it is for us. When our parents were in their 20s, monthly non-discretionary expenses probably looked like this: Mortgage, car (and related expenses), home utilities, groceries. For millenials in the exact same situation, owning a home and a car, their monthly non-discretionary expenses look something like this: Mortgage, car (and related expenses), health insurance, 401(k), student loans, cell phone (before you say a cell phone isn’t necessary, consider how difficult it would be to work a white collar job, where you are expected to be available 24/7, without a cell phone; if you consider how quickly phones become obsolete and stop functioning as intended, you also get to why millenials need to buy newer phones), home utilities (including the internet but excluding landline phone), groceries.
Fourth, millenials are making active decisions. The idea that someone would want to travel for a year instead of saving for a home, a car, or retirement sounds ludicrous to many from older generations. But is it so ludicrous? My parents always talked about how they wished they could travel, and when they first got married, they did just that, though not to the extent they wish they had. The biggest barrier to travel is airfare, which was roughly twice as expensive (adjusted for inflation) in the 1980s as it is today. Put to paper, if you took an extended trip around the world, logging 35,000 miles in the early 1980s, you’d probably have to pay the equivalent of $10,500 - a sum unattainable for most. If you took that same trip today, you’d probably have to pay $4,550 - nothing to sneeze at, but certainly more attainable for a twentysomething today. If someone plans out their trip right, they could save for three years out of college before traveling for a year, and they could come back with a hell of a story with no long-term consequences. Before you talk about retirement, don’t forget that our parents started saving for retirement, on average, ten years later than our generation does.
I’m fairly certain that our parents’ parents thought the same thing about our parents’ generation as our parents’ generation thinks about ours; it’s just easier to get information out to massive numbers of people today.
But, you see…when you stretch out repayment of your student loans, Sallie Mae gets even more of your money. This is how interest works. Assuming you’re not delinquent, their preference would be for you to make the minimum payment for the longest time.
Paying down debt is only a bad idea if you’re planning to not have any unforeseen circumstances that would preclude paying it off in a timely manner, thereby increasing the debt + interest. The thing about unforeseen circumstances is that they’re unforeseen. So the curve balls life can throw at you – illness, divorce, job loss – can be devastating when you also have thousands of dollars of debt.
My daughter graduated from nursing school in 2012 with NO Debt. We all our whole family buckled down and paid as she went. She is now in graduate school and the hospital pays her tutition. She works full time at night and takes classes during the day. It will take her another 2 years to get her NP license however again she will have no debt at the end. During her undergraduate schooling she did not go on fancy trips or have spending sprees. I told her if she needed to do that then she would need to take out a loan. She decided that she would pass on all that. College with NO Debt can happen!!
These kind of comments remind me of:
This depends on whether the investment rate of return is higher than the interest rate on the loan, after adjusting for income tax effects. An assumption of 8% return is somewhat optimistic, and involves taking somewhat more risk with fluctuating rates of return (including possible losses in some years).
@Zinhead, that link was hilarious!
Who was that actor (the guy who plays Trevor)? I’ve seen him before, but can’t place it…it’s been driving me nuts.