Millennials are already aging out of higher ed. The class of 2019 is the last of the generation to graduate college.
Like many of their generational peers, this year’s grads are walking into an affordability crisis for young Americans. It’s triggered by several factors, including rising living costs, increasing student debt, and the ongoing fallout of the recession.
Multiple studies show that millennials have less purchasing power than previous generations did at the same age. While millennials have benefited from a 67% rise in wages since 1970, according to Student Loan Hero, that increase isn’t enough to keep up with inflating living costs.
The Pew Research Center defines millennials as those born between 1981 and 1996, or those turning ages 23 to 38 in 2019. While younger millennials are entering into a stronger economic situation than older ones did, a range of factors may keep them from reaching some of adulthood’s key milestones.
Student loan debt is at record levels
College tuition has more than doubled since the ’80s. Consequently, millennials have taken on at least 300% more student debt than their parents, per Michael Hobbes of The Huffington Post. Baby boomers only had to work 306 hours of minimum wage to pay off four years of college, he finds, while millennials have to work 4,459.
As of 2019, student loan debt is at an all-time high with a national total of $1.5 trillion. Per Student Loan Hero, the average student-loan debt per graduating student in 2018 who took out loans was a whopping $29,800.
The weight of this debt is hindering millennials’ ability to save. More than half of indebted millennial respondents in an INSIDER and Morning Consult survey said attending college wasn’t worth the student loans.
Debt makes it hard to afford increasingly expensive housing
When in debt, it’s harder to save for milestones like buying a house – especially when the cost to do so is rising.
Homes are 39% more expensive than they were nearly 40 years ago. It would take the median earner in the 25 largest US cities between four and 10 years to save enough cash for a 20% down payment on a median-priced home or so, a recent SmartAsset study found. That’s assuming they’re saving 20% of their annual income for the down payment, but most probably aren’t.
Consequently, millennials are renting longer and buying later.
But saving up for a home can be hard to do when shelling out money for climbing rents in the meantime. In 1960, the median gross rent was $71, or $588 in today’s dollars. The current median US rent is $1,700.
Healthcare and childcare costs are also on the rise
Millennials are also shelling out what could be savings for rising childcare and healthcare costs.
It costs more than ever to raise a child in the US. Finances are one of the top reasons why American millennials aren’t having kids or are having fewer kids than they considered ideal, reported Business Insider’s Shana Lebowitz.
The amount the average worker paid for a family health insurance plan increased by 3% to $5,417 from 2012 to 2017. That’s contributing to a generation gap of a different sort: In 1960, the average annual health insurance cost per person was $146 – in 2016, it hit $10,345. As CNBC reports, that’s a full nine times higher when adjusted for inflation. Costs are expected to increase to $14,944 in 2023.
Simple solutions to the affordability crisis
These affordability problems make it harder to save for a generation that’s already lagging from economic events. Many millennials don’t yet have the capacity to put away meaningful savings. More than half of millennials don’t have a retirement account, and more than half also have less than $5,000 in their savings account.
Millennials are financially behind, but experts say it’s possible they’ll catch up thanks to things like low unemployment rates, their risk-averse behavior, and for those fortunate enough to have it, the possibility of a baby boomer inheritance.
Leaders in both public and private sectors are making inroads to alleviate the affordability crisis.
Consider Democratic presidential candidate Elizabeth Warren’s student-loan debt proposal. If enacted, it would forgive $50,000 in student-loan debt for every American whose family makes up to $100,000, and households that make between $100,000 and $250,000 would get a sliding portion of their debt canceled. The plan would also make all public higher education, including community colleges, tuition- and fee-free.
On a more entrepreneurial level is Kairos. Founded by 29-year-old Ankur Jain, the venture fund invests in organizations facing down affordability problems. To date, Kairos has incubated five companies and invested in 24 more, putting $20 million into solutions that tackle the rising costs of student loans, housing, childcare, student loans, and healthcare.
Kairos has implemented several solutions for housing affordability. June Homes is a housing network that saves renters thousands of dollars on rent in major cities – its fully furnished rentals require no long-term commitments or fees. Rhino helps rid security deposits – rather than tie up thousands of dollars when signing a lease, the startup replaces the security deposit with a $5-per-month insurance plan that allows renters to save money while still protecting landlords. It’s already helped save tens of millions in security deposits, Jain explains.
“But to really make a dent in the affordability crisis,” Jain told Business Insider, “we need more millennials helping to rethink the business models that hold our generation back.”