Go to school. Work hard. Go to college. Work hard. Get a good job. Work hard. Buy a home.
That was the promise of the American Dream. But for millions of recent and soon-to-be college graduates in the U.S., that “dream” seems more like the stuff of ancient folklore.
That’s because the 75 million American ‘Millennials’ between the ages of 18 and 34 are far more in debt than their parents’ — or even their older siblings’ — generations. In fact, the Class of 2015 has earned the distinction of being the “Most Indebted Class Ever” — an “honor” that will soon be bestowed upon the Class of 2016.
And Georgia is “leading” the nation with a higher average debt per borrower than any other state1.
Around 71 percent of college students nationwide now take out student loans and borrow an average of around $30,000. Compare that to just 10 years ago, when 64 percent of college students took out an average of around $20,000.
Being burdened with so much debt means that far fewer Millennials are buying homes than their counterparts just a decade or two ago.
“They’re just not able to come up with the down payments, or they don’t have that capacity to take on more debt to be able to pay for a mortgage,” explains CNBC’s Kelli Grant.
“If you have a lot of student debt, that could mean you qualify for a smaller mortgage or maybe don’t qualify at all,” Grant notes.
It’s not the case, as some have suggested, that Millennials are “too cool to buy” or that they simply embrace the freedom of the “renting lifestyle.”
According to a recent MacArthur Foundation survey, 53 percent of Millennials said homeownership is a priority, while only 43 percent of all survey respondents placed so much stock in home ownership. But when paying off debt is the number one financial concern for young people, big purchases like buying a home are delayed, sometimes indefinitely.
What’s Led to Georgia’s Student Loan Crisis?
In Georgia, college tuition and fees have risen by 75 percent in just the last five years. Combine those increases with massive cuts to the HOPE Scholarship and real wages that have stagnated at 1979 levels, and most college-bound Georgians are left with no choice; if they want a college education, they must be prepared to take on huge amounts of debt and often forgo big purchases.
Realtors aren’t happy. Neither are mortgage brokers, car salespeople or small business loan officers. Because at 75 million people and counting, Millennials have recently overtaken Baby Boomers as the largest living generation in America. And the largest generation is also the most indebted.
Until we’re willing to address our student loan debt crisis at its root — by taking measures to decrease students’ out-of-pocket college costs — we can expect to feel the ripple effects of the $1.2 trillion student debt crisis throughout all parts of the economy. We’re going to continue to see a lot more young people making fewer big purchases, investing less and starting fewer new businesses.
Despite the bleak economic outlook for the “debt generation,” Millennials aren’t giving up on the American Dream. But with every tuition spike, every HOPE Scholarship cut and every day that passes without a clear plan of how to make college affordable, that dream is slipping further and further away for far too many.
Do you have ideas on how to solve the student loan debt crisis? We’d love to hear from you. Weigh in with your thoughts here.
1 Only Washington D.C. has a higher average debt per borrower