Four or five years ago, having breakfast at the counter in a popular Annapolis, Md., eatery, I struck up a casual conversation with a stranger sitting next to me. I remember it as if it happened yesterday. This father, for all the right reasons, had pushed his son to get a college degree and counseled him to borrow money to do so. The son had incurred a loan in excess of $100,000 and graduated into an economy of few job openings. He had no good job and no money to pay his debt. The father’s pain, guilt and sense of regret were palpable. This is what happened to millennials following the 2008 Great Recession.
Millennials are generally defined to be those born from 1981 to 1996, now 22-37 years old. Some refer to them as the generation who refuses to grow up: no mortgage, no career plan, no marriage, no children. Why is this? Why have they not done as well as their parents?
Millennials came of age during a time of dramatic technological change, the proliferation of social media, globalization and economic disruption. For a better life, a bachelor’s degree became all but prerequisite for an adequate wage. The Great Recession unloaded on millennials. They have lived through a slow 10-year recovery of a weak labor market and declining wages.
College tuition had risen sharply, and the federal loans incurred to repay it have been a considerable burden. Students can no longer work their way through college while taking classes the way they once could. Two-thirds of students who earned a four-year degree in 2017 borrowed to pay for school. Growing numbers of these loan debts are in arrears or in default. Among the total 45 million Americans signed up for the federal student loan program, the debt is now $1.6 trillion.
Those in charge of these programs — aging politicians and policy-makers — favor the corporations, the wealthier and those over 65, the most reliable voters. This year’s expected $1 trillion deficit will add to the national debt of $22 trillion. In America’s rapidly aging society, every day about 10,000 individuals become eligible for Medicare. The children and grandchildren of today’s adults are on the hook for these obligations.
We now face another possible recession, which would be the second to hit the millennials. To be employed in a stagnant and falling economy, a college education and technical training will be required, but these qualifications will not necessarily return an adequate salary.
According to a Deloitte study, millennials are doing far worse financially than generations before them. Their average net worth is below $8,000, a 34% drop in average net worth since 1996. The study found millenials’ incomes have largely flatlined.
To pay off the lasting burden of the $1.6 trillion student debt could take many borrowers a lifetime. These debts sap their life and career dreams. A Bloomberg Businessweek analysis found that U.S. student loan borrowers as a group are paying down only about 1% of their federal student loan debt every year.
The fundamental problem is that tuition has far outpaced inflation while wages have mostly stagnated. In recent years, the federal government has actually encouraged borrowers to stretch out their payments. According to the Bloomberg analysis, 60% of the balances of student loan borrowers rose in the first year of their repayment period.
The Great Recession created a particularly daunting challenge for millennials entering the job market. It has left a hangover of uncertainty and lost opportunity. It has affected their future earnings and wealth. Millennials live in a world much less safe, predictable and prosperous than did their parents. Their work is much less secure and the pay less certain. Neither the U.S. economy nor the government has delivered a better world for them than that experienced by their parents, the post World War II generation.
Millennials have displayed different attitudes toward ownership. They support the idea of a sharing economy. Is it any surprise they enthusiastically support presidential candidates Bernie Sanders and Elizabeth Warren?
ABOUT THE WRITER
Perry L. Weed, attorney and founder/director of the Economic Club of Annapolis.
©2019 The Baltimore Sun
Visit The Baltimore Sun at www.baltimoresun.com
Distributed by Tribune Content Agency, LLC.
PHOTO (for help with images, contact 312-222-4194):