nless they happen to be tagging along with their families or theyâve won an all-inclusive paid trip through their local radio station, the chances of you seeing a Millennial take a (probably well-deserved) holiday are pretty slim. Despite being the most educated generation, Millennials as a whole are still massively overworked, underpaid, and simply unable to afford the luxuries that their parents might have been able to at the same age.
In this article, weâll break down just why it is that Millennials are struggling so much financially with the following:
- The soaring costs of Millennial student debt;
- the state of the housing market;
- the rising cost of living;
- and the higher-stakes demands of the workforce.
Millennial Student Debt
Clocking in with 39% of its people who have achieved a minimum of a Bachelorâs degree, Millennials are more educated than any generation before them. But greatness always comes at a cost--and the cost of a great education is higher than itâs ever been.
At one point in time, it would have been possible for someone to pay for their higher education with two part-time jobs. This was the way for most Millennialsâ parents in Generation X. As long as they were able to stay on top of their studies and hold down a couple of part-time jobs, most GenXers were guaranteed a low-to-no debt degree and a job waiting for them at the end of the tunnel.
Millennials arenât quite so lucky today. The average cost of just tuition across all colleges and universities today is just over $26,000. Discounting the fact that the price of tuition is rising every year, if you multiply that number by 4 for the number of years it usually takes to complete a Bachelorâs degree, the total cost of higher education adds up to over $100,000.
Comparably, the average cost of that same four-year degree would have added up to just under $27,000 thirty years ago. If you account for the inflation that occurred right around this time, the cost jumps up to a little over $50,000, but even still, this means that student debt has doubled in the last thirty years.
There are, of course, some proposed methods for helping to alleviate debt, such as federal student aid and scholarships from in and outside of the school someone attends, but even these donât really do much to stand up to the big bully that is student loan debt.
Most aid from the government is really just a loan that will have to be paid back in the future--and itâs usually based on a studentâs parentsâ income. While many Millennialsâ parents will help out where they can when it comes to their childâs education, most of them canât actually afford to front all of the remaining costs once federal loans are applied.
And so, this is how the debt has been created. Millennials have been forced to take out massive external loans from banks to help them afford an education. And a lot of the time, they donât just need money for tuition.
Many schools require students to live on campus for at least one year, so room and board, as well as textbooks and lab fees can also drive up the total of their loans. Unless theyâre headed straight into careers that guarantee them hundreds of thousands of dollars per year, many Millennials are going to be paying these loans off for decades.
Housing Market for Millennials
Student loan debt comes second only to housing debt--although Millennials donât actually make up much of the percentage of those who have housing debt. This latter debt stems from the fluctuating nature of the housing market, which is out of the hands of anyone whoâs looking to buy in. While Millennials are not big shareholders in housing debt, the housing market, in all of its nonlinear unpredictability, still affects their lives.
Housing Market 101
Before we can tell you why the state(s) of the housing market is important to Millennials, we should probably first explain how it works. At the basic level, the housing market operates just like any other bartering-based market does: the more people there are who are interested in buying into the market, the higher the prices will rise. Similarly, the less interest there is in the market, the lower the prices will fall.
This is why sellers despair and buyers rejoice when the housing market crashes. Thereâs very rarely a happy balance between the buying and selling prices of a home. Someone will usually come out of it unhappy.
But buyers donât only need to worry about the price of the home because, for most of them, theyâll need to take out a loan to complete the purchase. Theyâll need to consider interest rates as well, which can be even more unpredictable. Interest rates rise and fall with inflation, which is largely influenced by the federal funds reserve. The purpose of the reserve is to try to help quell any inflation, but it also has a big impact on the housing market.
Since the federal reserve essentially determines how much money banks are allowed to lend within a specific period of time, this means that the number of loans a bank can give out during that time frame will be limited accordingly. Banks want to make sure that theyâre getting the money theyâve lent back, which means that as the reserve gives them less money, theyâre pickier about who they give loans to.
Borrowers who have already taken out loans through them, especially those who are still paying off the loans theyâve taken out, are a bigger risk for the banks who lend to them--which is precisely why the housing market is such a financial struggle for Millennials. Most will probably tell you that theyâd like to own a house at some point but that itâs just not in the cards right now.
In fact, a home may not be in the cards for some Millennials for quite some time. Depending on how quickly theyâre able to pay back their student loans (interest is going to set them back a few years at the minimum), the prospect of taking out a mortgage might not be possible until their late thirties or early forties.
Millennial Cost of Living
The thought of owning a home has its appeals. Once youâre a homeowner, youâve essentially eliminated the need for a lease, which tends to restrict some of what you can and canât do. Your home is yours. You can get a dog if you want and not have to worry about that pet security deposit and you can start a family knowing that you wonât be moving your child(ren) around from place to place. For some Millennials, this is the dream.
It isnât as simple as just wanting it, though. If you have a mortgage, youâre still going to have to pay the same--if not more--that you would have to put down on your monthly rent. The only thing someone really stands to gain from buying a home is the freedoms it allows you. And todayâs Millennials have a lot more extra expenses to deal with that set them back when it comes to thinking about being a homeowner.
Most of them settle for renting--whether that be a studio apartment or a house--and whatever they pay for that is just the price it is to have a roof over their heads. With renting from another person however, more expenses start to add up--utilities, such as water and electricity, internet if itâs provided, and even a parking space fee.
And Millennials are also at the mercy of technology. They need a phone because they canât really get by in this world without one. They need the internet to stay in touch with the world around them. They need entertainment in the form of movies and TV. In a capitalist world, all of this costs money, and all of it adds more and more to their monthly expenses.
Some Millennials need a car to get to work if they live somewhere that doesnât have accessible public transportation. Thatâs another monthly payment they have to make, plus gas and maintenance. Some have pets that they need to feed, on top of feeding themselves, which altogether can start to cost upwards of $250 a month--and thatâs on a frugal budget.
The unfortunate truth is that for many Millennials, itâs just more practical to rent than it is to try to take out a mortgage. A mortgage is a long-term commitment that a lot of people--especially those who are still trying to navigate the workforce--arenât quite ready to make.
