According to Raul Hernandez who works for Business Insider, total United States consumer debt is at an almost record level of 20% of gross domestic product. A surprising fact about this staggering number of debt is the fact that the millennial generation is the biggest ownership group of this massive debt. The millennial generation which includes the ages of 21 to 34 year old holds about $1.1 trillion dollars of debt compared to the $3.6 trillion total debt held by all consumers in the country. This figure is provided by the UBS Group.
The big factor responsible for the massive surge in consumer debt, especially among millennial has to do with the fact that student loans are increasing astronomically. Auto loans are also rising and making up a bigger chunk of the total consumer debt. Naturally, student and auto loans tend to be congregated around the young millennial generation who are graduating from college and leasing their first cars. Despite a decrease in mortgages, consumer debt is still rising which shows that we might just be living in a massive consumer debt bubble.
The rising student loans and auto loans as well as credit card debt has another side effect. As debt continues to rise, so does the risk of people defaulting on those loans. Defaulting means that the person is unable to pay back the loan in full. A UBS Group survey determined that more than half of the consumers who say they are afraid of defaulting on a loan within the next year are in the millennial generation or between the ages of 21 to 34.
For the home industry and auto industry such a high amount of debt and such an increased risk of defaults is not good. This is because the millennial generation is supposed to be the biggest buyer of automobiles and homes. If they are unable or unwilling to take out loans on these items, these industries can and will surely suffer in sales.
All of this debt and the rising costs of getting a college education is changing the habits of millennials says Drucker Mann of Goldman Sachs. Many millenials are now looking for the lowest priced items on small purchases. For bigger purchases, many are also now waiting for good deals or sales before they purchase. It is yet to be seen whether these habits will translate into a change in the overall economy and whether it will reduce total debt.