Millennials & Gen Z Mired in Debt, Oblivious to Reasons Why

Alice Salles Comments

Millennials are blamed for a lot these days. But when it comes to debt, they are not the only group of young Americans suffering. They are also not the only group negatively impacted by the government’s actions.

Data released by Northwestern Mutual shows that both millennials and young Americans known as Generation Z carry large amounts of personal debt.

While millennials owe an average of $27,800, members of Generation Z owe $14,000 on average. Millennials also have less accumulated wealth than baby boomers did at the same age, despite being better educated than their elders.  But while young Americans feel guilty about their debt, and many believe they have no choice due to the high cost of higher education, they might not be aware of all the factors contributing to their situation.

Starting on the Wrong Foot

Millennials came of age during a time of intense government involvement in the economy.

As many were being born in the early 1990s, the federal government was increasing the amount of money students could borrow from the federal loan program. Additionally, students categorized as “in need” were also given greater access to college funding. This helped boost the cost of higher education, as it created a greater, yet artificial, demand for college. By the time millennials reached college age, the cost of higher education skyrocketed.

But while student debt accounts for the majority of debt held by millennials, that’s not the only issue keeping them from becoming richer.

With the Great Recession, the Federal Reserve took steps to warm up a crumbling economy with cheap credit and the expansion of its balance sheet. This created a greater supply of cash that, over a very short period of time, helped to further devalue U.S. currency. And it is this devaluation that helped to “[squander] real wealth” in America, as economist Frank Shostak explained. Furthermore, as these young Americans were entering the workforce, America had already gone through years of slow income growth brought about by the recession. This set up an environment that made wealth accumulation difficult.

As you can see, millennials and members of Generation Z had the odds stacked against their favor from the very beginning.

While it is important for young Americans to learn about the dragging effect of debt over time, and to take steps to lower the amount they need to borrow to get on with their education, it is also true that actions taken by the government made their lives harder. Unfortunately, we see few if any young people discussing these matters. Many even urge the federal government to become more involved in the process so that more young people can access higher education. Others support policies that effectively price out young and unskilled workers from the job market.

It is high time that those who are more harshly impacted by the government’s mindless meddling in the economy become advocates for sound markets.

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