We should also ask ourselves, what is the potential affect on our economy by having a generation plagued by financial strain?
The Federal Reserve Board recently published their 2013 survey on consumer finance. It highlights the financial health of families across the United States including income, wealth, debt and education. Most (un)surprisingly, were the results for families under the age of 35. This group earns less (about 6%) than any other generation surveyed before them.
One reason for low income could be from unpaid internships. Many companies offer the opportunity to work for a company arguing that the ‘skills’ learned will compensate interns for their hours and therefore, they do not need to pay interns. Despite that most of these jobs build skills like making coffee and copies, this form of free labor has dragged the potential incomes of a generation already burdened with the highest education costs in history.
Although this generation is also the most educated group, they are burdened with an average education debt of $29,400 reported by CNN. Depending on what year you entered college, the interest rate on student loans can be as low as 1.5% to as high as 7%, and these unequal rates are only applicable to federal loans. Private education loan rates can be even higher. Furthermore, this debt can never be discharged if one files for bankruptcy. It will be on the backs of this generation for the next 20-30 years no matter if an individual is in financial ruin. Total student debt is $1.2 trillion in the USA, which is 6% of total national debt as published by Forbes. Defaults are increasing with a potential to disrupt and cause another cataclysm in the economy. With a generation making less money, how can we expect them to pay off their loans? Politicians and economists fooled an entire generation promising them that they will make more money with a college degree and can therefore pay back their debt and have enough leftover to build assets. This promise is proving to be a myth.
We should also ask ourselves what is the potential effect on our economy by having a generation plagued by financial strain? The money spent on education loans is equivalent to a down payment for a home or investment to build a budding small business. Education costs could be put into productive capital to build our economy rather than finance administration costs of universities. It’s no wonder that the same generation doesn’t buy cars or homes, because financially, it is not feasible which is discussed in detail by The Atlantic.
Additionally, if a whole generation has no opportunity to earn more than their predecessors, they will also consume less causing a decline in demand for many goods that have traditionally increased economic growth. The great consumer society of America will stagnate.
While older generations scold millennials for being “self-centered” and demanding better positions, they refuse to admit there is a good reason; millennials are just not earning the same amount as the previous generations once did (see Time article that sparked a big debate).