Millennials hold large amounts of student debt, but in general, debt levels for young Americans are at their lowest since 2003.
“At the same time, young people lowered their holdings of every other major type of debt: credit cards, auto loans, mortgages and home equity loans. The result, according to the New York Fed, is that millennials have less debt overall now than they did in 2003,” Ylan Q. Mui wrote for The Washington Post.
Whether it’s good or bad for the American economy, however, isn’t clear.
In a perfect world, borrowers who could pay off their debt would continue to borrow, and those who couldn’t would lower their debt holdings or stop borrowing.
With the Fed data, it’s only clear that aggregate debt has fallen, and student loan debt has crowded out the rest. That could be due to lenders denying loans, young Americans being wary of taking more debt, or more Americans being realistic about their financial ability to repay loans.
Debt can be an opportunity for something better, or a limitation on a millennial’s life. Given that student loan debt has crowded out the rest, it could be a bad sign for the economy. Millennials don’t feel secure enough economically to take out a car loan, buy a house, or carry more debt because it doesn’t appear manageable.
Financially illiterate millennials don’t much exist because they can’t. They’re hyperaware about the effects of debt, and have cut back accordingly.
The silver lining is that they don’t want to over-extend themselves like their parents and grandparents. “Living within your means” is a philosophy, not a phrase, among young workers.
