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Millennials and Debt Collection: What Does the Data Show?

Oct 24, 2022

Millennials and debt collection statistics

Millennials are the most indebted generation in the United States. They look like they’ve got a lot going on, but they live in numerous debts. According to a survey by Real Estate Witch, an average American millennial has more than $100,000 worth of debts.   

Only 8% of these millennials foresee repaying their debts within a year. 63% of millennials believe they can offset their debts over the next five years. The real problem? It shows that many millennials living in the U.S. have long-term debts.   

And one out of ten millennials estimates that it will take more than ten years to offset their debts. Due to their earning power, 1 out of 16 millennials believes that they will never be able to finish paying off their debts.   

With the rising cost of mortgages, car prices, starting a family, and the whole economic situation, it doesn’t look like the number of millennial debt will drop anytime soon. A survey by Real Estate Witch reports that 47% of millennials’ monthly income is spent on housing. But that’s not all — the stats from every other debt aren’t looking promising either.   

Let’s walk through the major causes of millennial debts and how these debts affect them.

  1. Starting a family  

There has been a spike in the cost of raising a family in recent years. Raising a child in the U.S. costs a family an average of $233,610 from 2015 till the child clocks 18. Take note that the average millennial’s yearly income is slightly above $47,000.   

The cost of millennials starting a family is a big reason why 90% have non-mortgage debts. Everything is rising except for millennials’ income, which is why millennial households are more impoverished than any other generation.   

  1. Purchasing a home 

It’s normal for people aged 26 – 41 years to want to own a home. At that age, people tend to work towards owning a home because of their growing or changing families. CNBC reports that the average mortgage for millennial homeowners is $232,372.   

With this statistic in mind, it begs the question: How can a millennial household afford to pay a $232,372 mortgage while raising a family? The financial burdens related to owning a home on millennials are more than on Gen X and Boomers.  

  1. Offsetting student loans 

Student loans are one of the most common debts millennials struggle to pay off. According to statistics, 48% of millennials owe student loans of about $126,993. An Experian consumer debt study reports that $38877 is the average student loan owed by millennials.   

Another survey claims that 36% of American millennials admitted that student loans keep them from buying a house. A third study by Legal & General backed this stat by revealing that 26% of millennials prioritize paying off their student loans before owning a home.  

  1. Credit card debts  

Credit card debt is the most common loan debt owed by millennials. A survey shows that two-thirds of millennials owe credit card debts. Another survey on 1000 millennials shows that 69% admitted having credit card debts.   

The average amount millennials owe as credit card debts is about $5349.   

  1. Personal loans 

In 2019, Experian said that millennials have the fastest growing personal loan debts. Although having the lowest personal loan debts, the number increased by 44% in 2019. The rising cost of living will see this number skyrocket because millennials will continue to take on more loans to stay afloat.  

As of 2014, the average personal loan of millennials was $8210. The amount jumped to $11,819 in 2019. Recently, 42% of millennials are said to owe personal loan debts.  

  1. Medical debts  

Statista’s survey shows that 48% of American millennials owe medical debts, and 66% have debts due to medical bills. A poll by HealthCare.com on millennials and Gen Z shows that 23% of millennials forego mortgage payments or rent an apartment due to repaying their medical debts.  

Medical debts also affect credit scores. 52% of millennials disclosed that their medical debt is ruining their credit scores. Like every other generation, millennials pass on purchases due to medical loan debts.  

For millennials with medical debts, home improvement with 43% tops the list of things on which they would rather allocate money towards spending. Medical debt is ripping millennials’ savings apart because 67% of millennials worry that medical loan debts affect their ability to save.  

  1. Auto loans  

According to Lendingtree, auto loans are the second largest non-mortgage loans millennials owe. Despite owing lesser auto loan debts than the national average, millennials still have fast-growing auto debts. The prices of cars and interest rates keep increasing, directly impacting auto debts.  

Experian data from the second quarter of 2019 shows that millennials have auto loans of about $18,201. The same report also indicates that millennials owe the third-highest average auto debt compared to other generations.  

Key Takeaways   

  1. Millennials’ debt is on a massive spike.  
  2. More millennials will plunge into poverty.  
  3. Millennials will stick to renting rather than buying a house.  
  4. Many more millennials will delay starting a family due to the rising cost.  
  5. Credit card debt among millennials will increase if the economy doesn’t improve.  
  6. Millennials’ annual income needs to be increased.  
  7. More millennials will have a low credit score.