NEW YORK (MainStreet)—Generation Y - those born between 1981 and 1995 - carry less debt than the national average. But it isn’t necessarily a good thing. Most of Gen Y’s members hold “bad debts” – like credit card debt and other loan products that don’t build assets. No one can conclusively answer why. Maybe it’s the job market. Maybe impulse buying and a digitalized consumer-driven society are to blame. Whatever it is, experts are wary those debt woes aren’t going to get better anytime soon.
While more than 60% of Gen X’s debt is good debt, such as student loans and mortgages, Gen Y is heading in a different path - 48.4% of Gen Y debt comes from non-asset building loans – bad debt –according to a recent study of over 20,000 users by the financial reward site, Saveup.com.
Results found Generation Yers had an average total debt load of $28,930, including $4,113 in credit cards, $7,358 in lines of credit and $12,410 in car loans on average.
Some experts blame Gen Y’s losing debt battle on a slow-to-recover job market. Paul Golden, CEO of the nonprofit organization the National Endowment for Financial Education, says, “More education typically translates to more pay. However, the job market has been hard on Gen Y and has forced some to delay repaying their student loans, take a lower paying job, or remain in school longer.”A recent analysis of government and university data for the Associated Press backs up Golden’s concerns. In 2011, 53.6% of workers under the age of 25 who held bachelor’s degrees were jobless or unemployed.
Changing patterns in education could also be to blame.
“Generation Y has accumulated more bad debt than good debt, because they spend more time in the higher education system,” says Greg Brooks, founder of Textbook Assault. Brooks believes Gen Y’s tendency to pursue education beyond a bachelor’s degree delays the beginning of careers and “creates a severe imbalance, because the individual isn’t making money, but also spending a ton on education.” To finance their cost of living, “they rely on credit cards and loans as a way to pay the bills,” according to Brooks.