Jul 18, 2013 Sean Albert
For many millennials, the weight of student loan debt is becoming unbearable. Having graduated college owing significant amounts of money, these individuals are increasingly finding that taking on so much debt is hindering their ability to live their lives the same way other generations did. One of the greatest challenges that these 20- and 30-somethings will need to surmount is finding a way to build strong consumer credit reports and gain the access they need to certain important financial services.
Goals put on hold
While taking on student loan debt in order to attend college may have been a way for many young people to achieve one of their most central goals - receiving higher education - millennials have suffered from the unfortunate timing of their decisions. Attempting to form careers - and thus pay back what they owe - during the recession and in its aftermath has proven extremely difficult, even as an economic recovery begins to take hold. USA Today recently reported that the effects of student loan debt are devastating for people of this generation, as it holds them back from becoming full adults.
For example, the source interviewed several millennials to see what things they were putting off because of the money they owe. Shayna Pilnick, who got a Master's degree in corporate communication in order to find a higher-paying job, said that because of her monthly payments, she can't afford to move out on her own and buy a home or apartment. While the degree did get her a better job, she now pays $1,000 each month to stay ahead of her loans, which require a minimum monthly payment of $540.
One married couple, Jacob and Jennifer Childerson, told USA Today that they would like to start a family, but they can't because they are still living with Jennifer's parents. They also cannot qualify for a second car loan, limiting their job opportunities because they share a single vehicle. Their combined debt is approximately $92,000.
Mark Zandi, chief economist at Moody's Analytics, told the source that situations like these are likely contributing to the faltering economy. The fact that millennials aren't buying homes has a massive impact on more than just the housing market: When people buy homes, they also need to furnish them, maintain them and more, and these purchases contribute to many areas of the economy. Zandi worries that the effects of Millennials' slow start will have a ripple effect on America for years to come.
"It's not one of those things that matters a lot in any given year, but over a couple decades or generation or two, it matters a great deal," Zandi said, according to the source. "It means that they'll have less spending power. It means that they'll be less financially prepared to send their own kids to college or for their own retirement down the road. It just makes for a less healthy economy and a more vulnerable one."
Can alternatives help?
In a separate USA Today article, the source asserted that in many cases, millennials are coping with their debts by looking beyond the realm of traditional financial services to meet their needs. For example, many are using ACH cards instead of traditional credit cards or utilizing short term lending resources to address any unexpected situations.
Additionally, it may be possible for those who already owe money to build their credit without putting themselves into more debt. Increasingly, merchants in many industries are recognizing the value of the alternative credit score, which allows people to use data on non-credit payments to reflect their reliability.