A recent study found that 90% of millennials have some form of non-mortgage debt, with an average balance of $90,590.

Once considered young and carefree, millennials are aging into more responsibilities. The generation now finds itself between the ages of 27 and 42, with growing obligations at work and at home.

But the biggest obligation isn’t related to what they do - it’s what they owe.

The findings come from a survey of 1,000 millennials by Real Estate Witch, a real estate and personal finance education platform.

The report shows student loans account for a significant portion of millennials’ debt, along with credit cards, auto loans and medical debt.

Although some critics have blamed millennials for poor spending habits – citing everything from avocado toast to impulse shopping – the factors behind millennial debt are more complicated and far-reaching.

High cost of higher education

More millennials earn college degrees than any previous generation. The Pew Research Center reports that 39% of millennials hold bachelor’s degrees or higher, compared to 25% of baby boomers.

Accordingly, student loans account for a significant share of millennial debt. The study found that 25% of millennials report having student loan debt, owing an average of $56,538.

Social and professional factors have played a part in convincing millennials to reach for higher education. Graduating high school students have been encouraged to continue to college, as companies have increased the minimum education requirements for posted jobs.

The Great Recession also bears some responsibility for the amount of schooling – and the amount of student debt – millennials have, according to Daniel A. Collier, assistant professor of higher and adult education at the University of Memphis.

Before the 2008 downturn, going to graduate school was seen as a worthwhile investment to increase one’s job opportunities and achieve higher earning potential. But the recession eliminated many of those jobs, leaving some millennials on the hook for huge payments without the income to keep up.

“A fair portion of that debt portfolio would be attributed to graduate school,” Collier says. “Even in recovery, there were still disruptions in many people’s lives.”

Another disruption is on the way. After three years of a pandemic-related freeze on federal student debt payments, education officials say the payments are set to resume later this summer - adding a significant burden to graduates’ budgets.

“There are recent college graduates who haven’t paid a dime on their debt,” Collier explains. “They have created entire lifestyles and budgets around the conditions they currently live in. There’s going to be a lot of transitions.”

Although a college degree often comes with a high price tag, it’s worth noting that graduates still tend to earn higher salaries long term and have better chances of recovering from financial setbacks than non-college graduates.

Uncertain decision-making

After being welcomed to adulthood with the Great Recession and a pandemic-induced slowdown, millennials have faced a great deal of financial insecurity. According to Real Estate Witch, 86% of millennials reported that a major life event contributed to their debt. That includes medical emergencies, unexpected job loss and legal expenses.

“There’s so much uncertainty,” Collier says. “What student loan programs exist? What’s going to happen with the housing and car markets? People like having some kind of stability. Being even-keeled gives people comfort.”

That uncertainty, particularly when entering the job market, can make it difficult to create a budget that accounts for expenses, debt management and long-term savings.

According to the study, 70% of millennials, including 74% of millennial women, live paycheck to paycheck - leaving a slim margin for error when it comes to affording necessities, such as housing, groceries, medical expenses and other bills.

Traditionally, buying a home has been one of the most popular and effective ways to build wealth over time. But achieving home ownership hasn’t been easy for millennials.

After the housing market collapse in 2008, many millennials weren’t earning enough at their jobs to afford down payments or loans while the market was on their side. Since then, they’ve seen their earnings increase, but interest rates are stubbornly high, and housing prices are even higher.

High rent prices and mortgage rates mean millennials are more likely to use credit cards to pay for necessities, including utilities and groceries, along with nonessential purchases, such as entertainment, travel and dining out. About 57% of millennials are in credit card debt, with the average balance at $8,463. That’s up nearly $3,000 from 2022, according to the report.

The outlook

It’s not all doom and gloom for millennials financially speaking. Post-pandemic inflation is on a decline, and fears of a widespread recession haven’t yet come to pass.

There’s still more hope for millennials and Gen Z on the career front. The job market remains steady, with more open jobs than workers available now that baby boomers are retiring. That means 20- and 30-somethings looking to make more money have options available.

“Workers have more power than they’ve had in a long time,” Collier said. “Companies are trying to attract workers. With that comes better wages and more benefits than they’ve had in a long time.”

Although it’s taken them time to catch up with previous generations, Federal Reserve data shows that the average millennial’s net worth doubled between 2020 and 2022. Of course, many of those gains were concentrated among the wealthiest millennials. But it’s a start.

This article was produced by Real Estate Witch and syndicated by Wealth of Geeks.